Unemployment represents wasted resources. Unemployed workers have the potential to contribute to national income but are not doing so. Those searching for jobs to suit their skills are happy when the search is over, and those waiting for jobs in firms that pay above-equilibrium wages are happy when positions open up.

Unfortunately, neither frictional unemployment nor structural unemployment can be easily reduced. The government cannot make job search instantaneous, and it cannot easily bring wages closer to equilibrium levels. Zero unemployment is not a plausible goal for free-market economies.

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Yet public policy is not powerless in the fight to reduce unemployment. Job-training programs, the unemployment-insurance system, the minimum wage, and the laws governing collective bargaining are often topics of political debate. The policies we choose are likely to have important effects on the economy’s natural rate of unemployment.