The natural rate of unemployment equals frictional unemployment plus structural unemployment.
The following will increase the natural rate of unemployment:
Reducing workers' collective bargaining rights increase decrease
Extra financial benefits for the unemployed
A large number of young people entering the labor force.
The following will decrease the natural rate of unemployment:
Increasing the minimum wage increase
The natural rate of unemployment is the unemployment rate that would exist when there is no cyclicality in the economy. It is the lowest level of unemployment that can exist in an economy. The natural rate of unemployment is the sum of frictional unemployment and structural unemployment.
Structural unemployment is an unemployment that occurs as a result of changes in the economy. Frictional unemployment is the period of time a person is unemployed from the period he leaves his current job and the time he gets another job.
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