Policies to lower the Natural Rate of Unemployment I 60 Second Economics

Added: 2026-05-21

[00:00:00]This revision short looks at policies to bring down the natural rate of unemployment.

[00:00:05]Now, the natural rate comprises frictional and structural unemployment and occurs when the labor market is in equilibrium.

[00:00:12]Frictional unemployment is mainly caused by search and matching frictions and information asymmetries in the labor market. Employers, businesses, don't instantly find the right workers and workers don't always quickly or easily locate the best vacancies.

[00:00:26]So, for example, you might introduce digital job portals such as the UK's Find a Job Service. Employ work coaches to optimize job hunt techniques.

[00:00:34]Uh increase tax allowances, for example, to encourage people to take work and perhaps offer relocation and commuting subsidies.

[00:00:42]There's also the impact of welfare reforms such as benefit conditionality and sanctions to encourage active job search whilst people are unemployed.

[00:00:50]Structural unemployment is often long-term and >> [clears throat] >> deep-rooted. And it happens when there's a mismatch between labor supply and labor demand, often linked to occupational and geographical immobility.

[00:01:03]So, policies might include subsidies for apprenticeships and retraining schemes, housing market reforms to increase the supply of housing and improve and boost property affordability, and significant infrastructure spending on transport links to improve geographical mobility of labor.