Would it be worse for a country to have massive unemployment or severe labour shortages? From all viewpoints, not just economically.
Thanks in advance for your answers!
It depends on your criteria for “worse”, no doubt. However, some historians believe the main reason the Rennaisance occurred was as a result of the reduction of European population starting around 1400 due to the Black Death. Suddenly many things are overabundant and nobody sits idle.
There are many ways to approach this question. Here’s one.
Massive unemployment leads to decreased demand of goods and services which leads to deflation. Labor shortages leads to wage inflation which leads to inflation in general. Which is better, deflation or inflation? High inflation is not good, but even a little deflation is devastating to an economy. (Deflation reduces demand and reduced demand leads to deflation–a vicious feedback loop.)
So, a low inflation rate is best. And that usually means a moderate unemployment rate. But details are highly dependent on the specifics of a given economy.
When the answer to a question depends upon the viewpoint, it’s not a factual question.
Off to Great Debates.
DrMatrix - GQ Moderator
One would think that at least with labour shortages, no one would starve.