User:FrLijonirappelbls/sandbox
Definitions, types, and theories== Economists distinguish between various overlapping types of and theories of unemployment, including cyclical or Keynesian unemployment, frictional unemployment, structural unemployment and classical unemployment.[1] Some additional types of unemployment that are occasionally mentioned are seasonal unemployment, hardcore unemployment, and hidden unemployment. The U.S. BLS measures six types of unemployment, U1–U6. A recent alternative classification is into obstructional, developmental, and contractional unemployment.[2]
Though there have been several definitions of voluntary and involuntary unemployment in the economics literature, a simple distinction is often applied. Voluntary unemployment is attributed to the individual's decisions, whereas involuntary unemployment exists because of the socio-economic environment (including the market structure, government intervention, and the level of aggregate demand) in which individuals operate. In these terms, much or most of frictional unemployment is voluntary, since it reflects individual search behavior. Voluntary unemployment includes workers who reject low wage jobs whereas involuntary unemployment includes workers fired due to an economic crisis, industrial decline, company bankruptcy, or organizational restructuring.
On the other hand, cyclical unemployment, structural unemployment, and classical unemployment are largely involuntary in nature. However, the existence of structural unemployment may reflect choices made by the unemployed in the past, while classical (natural) unemployment may result from the legislative and economic choices made by labour unions or political parties. So, in practice, the distinction between voluntary and involuntary unemployment is hard to draw. The clearest cases of involuntary unemployment are those where there are fewer job vacancies than unemployed workers even when wages are allowed to adjust, so that even if all vacancies were to be filled, some unemployed workers would still remain. This happens with cyclical unemployment, as macroeconomic forces cause microeconomic unemployment which can boomerang back and exacerbate these macroeconomic forces.
Classical unemployment
[edit]![Graph of Labor Market](http://upload.wikimedia.org/wikipedia/commons/thumb/c/cc/Wage_labour_2.svg/250px-Wage_labour_2.svg.png)
Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level, causing the number of job-seekers to exceed the number of vacancies.
Many economists have argued that unemployment increases the more the government intervenes into the economy to try to improve the conditions of those without jobs.[citation needed] For example, minimum wage laws raise the cost of laborers with few skills to above the market equilibrium, resulting in people who wish to work at the going rate but cannot as wage enforced is greater than their value as workers becoming unemployed.[3][4] Laws restricting layoffs made businesses less likely to hire in the first place, as hiring becomes more risky, leaving many young people unemployed and unable to find work.[4]
However, this argument is criticized for ignoring numerous external factors and overly simplifying the relationship between wage rates and unemployment — in other words, that other factors may also affect unemployment.[5][6][7][8][9] Some, such as Murray Rothbard,[10] suggest that even social taboos can prevent wages from falling to the market clearing level.
It should be noted that market equilibrium is not without its consequences and compromises. For example, repairmen in a city can initially have a monthly wage of 3,000$. At this salary, the appliance stores of the city can hire 100 repairmen. However, there are 300 repairmen looking for jobs. 200 of these repairmen are left unemployed and the job market loses its equilibrium. To regain it, the wage is dropped to 1,000$ and the stores open the job market to 100 more repairmen. Only 100 of the 200 unemployed repairmen are willing to accept the reduced salary, so the applicant/vacancy ratio reaches equilibrium. The consequence is that 100 people are left unemployed and employees must cope with reduced wages.
In Out of Work: Unemployment and Government in the Twentieth-Century America, economists Richard Vedder and Lowell Gallaway argue that the empirical record of wages rates, productivity, and unemployment in American validates the classical unemployment theory. Their data shows a strong correlation between the adjusted real wage and unemployment in the United States from 1900 to 1990. However, they maintain that their data does not take into account exogenous events.[11]
Cyclical unemployment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/b/b9/Islm.svg/200px-Islm.svg.png)
Cyclical or Keynesian unemployment, also known as deficient-demand unemployment, occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. Demand for most goods and services falls, less production is needed and consequently fewer workers are needed, wages are sticky and do not fall to meet the equilibrium level, and mass unemployment results.[12] Its name is derived from the frequent shifts in the business cycle although unemployment can also be persistent as occurred during the Great Depression of the 1930s. With cyclical unemployment, the number of unemployed workers exceeds the number of job vacancies, so that even if full employment were attained and all open jobs were filled, some workers would still remain unemployed. Some associate cyclical unemployment with frictional unemployment because the factors that cause the friction are partially caused by cyclical variables. For example, a surprise decrease in the money supply may shock rational economic factors and suddenly inhibit aggregate demand.
Classical economists reject the conception of cyclical unemployment and alternatively suggest that the invisible hand of free markets will respond quickly to unemployment and underutilization of resources by a fall in wages followed by a rise in employment. Similarly, Hayek and others from the Austrian school of economics argue that if governments intervene through monetary policy to lower interest rates this will exacerbate unemployment by preventing the market from responding effectively.[13]
Keynesian economists on the other hand see the lack of demand for jobs as potentially resolvable by government intervention. One suggested interventions involves deficit spending to boost employment and demand. Another intervention involves an expansionary monetary policy that increases the demand of money which should reduce interest rates which should lead to an increase in non-governmental spending.[14]
Marxian theory of unemployment
[edit]It is in the very nature of the capitalist mode of production to overwork some workers while keeping the rest as a reserve army of unemployed paupers.
— Marx, Theory of Surplus Value, [15]
According to Karl Marx, unemployment is inherent within the unstable capitalist system and periodic crises of mass unemployment are to be expected. The function of the proletariat within the capitalist system is to provide a "reserve army of labour" that creates downward pressure on wages. This is accomplished by dividing the proletariat into surplus labour (employees) and under-employment (unemployed).[16] This reserve army of labour fight among themselves for scarce jobs at lower and lower wages. At first glance, unemployment seems inefficient since unemployed workers do not increase profits. However, unemployment is profitable within the global capitalist system because unemployment lowers wages which are costs from the perspective of the owners. From this perspective low wages benefit the system by reducing economic rents. Yet, it does not benefit workers. Capitalist systems unfairly manipulate the market for labour by perpetuating unemployment which lowers laborers' demands for fair wages. Workers are pitted against one another at the service of increasing profits for owners.
According to Marx, the only way to permanently eliminate unemployment would be to abolish capitalism and the system of forced competition for wages and then shift to a socialist or communist economic system. For contemporary Marxists, the existence of persistent unemployment is proof of the inability of capitalism to ensure full employment.[17]
Involuntary unemployment
[edit]In The General Theory, Keynes argued that neo-classical economic theory did not apply during recessions because of excessive savings and weak private investment in an economy. In consequence, people could be thrown out of work involuntarily and not be able to find acceptable new employment.
This conflict between the neoclassical and Keynesian theories has had strong influence on government policy. The tendency for government is to curtail and eliminate unemployment through increases in benefits and government jobs, and to encourage the job-seeker to both consider new careers and relocation to another city.
Involuntary unemployment does not exist in agrarian societies nor is it formally recognized to exist in underdeveloped but urban societies, such as the mega-cities of Africa and of India/Pakistan. In such societies, a suddenly unemployed person must meet their survival needs either by getting a new job at any price, becoming an entrepreneur, or joining the underground economy of the hustler.[18]
Involuntary unemployment is discussed from the narrative standpoint in stories, and novels of social suffering.
Full employment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/e/e3/NAIRU-SR-and-LR.svg/200px-NAIRU-SR-and-LR.svg.png)
In demand-based theory, it is possible to abolish cyclical unemployment by increasing the aggregate demand for products and workers. However, eventually the economy hits an "inflation barrier" imposed by the four other kinds of unemployment to the extent that they exist.
Some demand theory economists see the inflation barrier as corresponding to the natural rate of unemployment. The "natural" rate of unemployment is defined as the rate of unemployment that exists when the labour market is in equilibrium and there is pressure for neither rising inflation rates nor falling inflation rates. An alternative technical term for this rate is the NAIRU or the Non-Accelerating Inflation Rate of Unemployment.
No matter what its name, demand theory holds that this means that if the unemployment rate gets "too low," inflation will get worse and worse (accelerate) in the absence of wage and price controls (incomes policies).
One of the major problems with the NAIRU theory is that no one knows exactly what the NAIRU is (while it clearly changes over time). The margin of error can be quite high relative to the actual unemployment rate, making it hard to use the NAIRU in policy-making.
Another, normative, definition of full employment might be called the ideal unemployment rate. It would exclude all types of unemployment that represent forms of inefficiency. This type of "full employment" unemployment would correspond to only frictional unemployment (excluding that part encouraging the McJobs management strategy) and would thus be very low. However, it would be impossible to attain this full-employment target using only demand-side Keynesian stimulus without getting below the NAIRU and suffering from accelerating inflation (absent incomes policies). Training programs aimed at fighting structural unemployment would help here.
To the extent that hidden unemployment exists, it implies that official unemployment statistics provide a poor guide to what unemployment rate coincides with "full employment".
Structural unemployment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/7/77/Okuns_law_quarterly_differences.svg/220px-Okuns_law_quarterly_differences.svg.png)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Bundesarchiv_Bild_183-R77582%2C_Hamburg%2C_arbeitsloser_Kraftfahrer.jpg/130px-Bundesarchiv_Bild_183-R77582%2C_Hamburg%2C_arbeitsloser_Kraftfahrer.jpg)
Structural unemployment occurs when a labour market is unable to provide jobs for everyone who wants one because there is a mismatch between the skills of the unemployed workers and the skills needed for the available jobs. Structural unemployment is hard to separate empirically from frictional unemployment, except to say that it lasts longer. As with frictional unemployment, simple demand-side stimulus will not work to easily abolish this type of unemployment.
Structural unemployment may also be encouraged to rise by persistent cyclical unemployment: if an economy suffers from long-lasting low aggregate demand, it means that many of the unemployed become disheartened, while their skills (including job-searching skills) become "rusty" and obsolete. Problems with debt may lead to homelessness and a fall into the vicious circle of poverty. This means that they may not fit the job vacancies that are created when the economy recovers. Some economists see this scenario as occurring under British Prime Minister Margaret Thatcher during the 1970s and 1980s. The implication is that sustained high demand may lower structural unemployment. This theory of persistence in structural unemployment has been referred to as an example of path dependence or "hysteresis".
Much technological unemployment,[19] due to the replacement of workers by machines, might be counted as structural unemployment. Alternatively, technolDefinitions, types, and theories== Economists distinguish between various overlapping types of and theories of unemployment, including cyclical or Keynesian unemployment, frictional unemployment, structural unemployment and classical unemployment.[20] Some additional types of unemployment that are occasionally mentioned are seasonal unemployment, hardcore unemployment, and hidden unemployment. The U.S. BLS measures six types of unemployment, U1–U6. A recent alternative classification is into obstructional, developmental, and contractional unemployment.[21]
Though there have been several definitions of voluntary and involuntary unemployment in the economics literature, a simple distinction is often applied. Voluntary unemployment is attributed to the individual's decisions, whereas involuntary unemployment exists because of the socio-economic environment (including the market structure, government intervention, and the level of aggregate demand) in which individuals operate. In these terms, much or most of frictional unemployment is voluntary, since it reflects individual search behavior. Voluntary unemployment includes workers who reject low wage jobs whereas involuntary unemployment includes workers fired due to an economic crisis, industrial decline, company bankruptcy, or organizational restructuring.
On the other hand, cyclical unemployment, structural unemployment, and classical unemployment are largely involuntary in nature. However, the existence of structural unemployment may reflect choices made by the unemployed in the past, while classical (natural) unemployment may result from the legislative and economic choices made by labour unions or political parties. So, in practice, the distinction between voluntary and involuntary unemployment is hard to draw. The clearest cases of involuntary unemployment are those where there are fewer job vacancies than unemployed workers even when wages are allowed to adjust, so that even if all vacancies were to be filled, some unemployed workers would still remain. This happens with cyclical unemployment, as macroeconomic forces cause microeconomic unemployment which can boomerang back and exacerbate these macroeconomic forces.
Classical unemployment
[edit]![Graph of Labor Market](http://upload.wikimedia.org/wikipedia/commons/thumb/c/cc/Wage_labour_2.svg/250px-Wage_labour_2.svg.png)
Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level, causing the number of job-seekers to exceed the number of vacancies.
Many economists have argued that unemployment increases the more the government intervenes into the economy to try to improve the conditions of those without jobs.[citation needed] For example, minimum wage laws raise the cost of laborers with few skills to above the market equilibrium, resulting in people who wish to work at the going rate but cannot as wage enforced is greater than their value as workers becoming unemployed.[22][4] Laws restricting layoffs made businesses less likely to hire in the first place, as hiring becomes more risky, leaving many young people unemployed and unable to find work.[4]
However, this argument is criticized for ignoring numerous external factors and overly simplifying the relationship between wage rates and unemployment — in other words, that other factors may also affect unemployment.[5][6][7][8][9] Some, such as Murray Rothbard,[23] suggest that even social taboos can prevent wages from falling to the market clearing level.
It should be noted that market equilibrium is not without its consequences and compromises. For example, repairmen in a city can initially have a monthly wage of 3,000$. At this salary, the appliance stores of the city can hire 100 repairmen. However, there are 300 repairmen looking for jobs. 200 of these repairmen are left unemployed and the job market loses its equilibrium. To regain it, the wage is dropped to 1,000$ and the stores open the job market to 100 more repairmen. Only 100 of the 200 unemployed repairmen are willing to accept the reduced salary, so the applicant/vacancy ratio reaches equilibrium. The consequence is that 100 people are left unemployed and employees must cope with reduced wages.
In Out of Work: Unemployment and Government in the Twentieth-Century America, economists Richard Vedder and Lowell Gallaway argue that the empirical record of wages rates, productivity, and unemployment in American validates the classical unemployment theory. Their data shows a strong correlation between the adjusted real wage and unemployment in the United States from 1900 to 1990. However, they maintain that their data does not take into account exogenous events.[24]
Cyclical unemployment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/b/b9/Islm.svg/200px-Islm.svg.png)
Cyclical or Keynesian unemployment, also known as deficient-demand unemployment, occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. Demand for most goods and services falls, less production is needed and consequently fewer workers are needed, wages are sticky and do not fall to meet the equilibrium level, and mass unemployment results.[12] Its name is derived from the frequent shifts in the business cycle although unemployment can also be persistent as occurred during the Great Depression of the 1930s. With cyclical unemployment, the number of unemployed workers exceeds the number of job vacancies, so that even if full employment were attained and all open jobs were filled, some workers would still remain unemployed. Some associate cyclical unemployment with frictional unemployment because the factors that cause the friction are partially caused by cyclical variables. For example, a surprise decrease in the money supply may shock rational economic factors and suddenly inhibit aggregate demand.
Classical economists reject the conception of cyclical unemployment and alternatively suggest that the invisible hand of free markets will respond quickly to unemployment and underutilization of resources by a fall in wages followed by a rise in employment. Similarly, Hayek and others from the Austrian school of economics argue that if governments intervene through monetary policy to lower interest rates this will exacerbate unemployment by preventing the market from responding effectively.[25]
Keynesian economists on the other hand see the lack of demand for jobs as potentially resolvable by government intervention. One suggested interventions involves deficit spending to boost employment and demand. Another intervention involves an expansionary monetary policy that increases the demand of money which should reduce interest rates which should lead to an increase in non-governmental spending.[26]
Marxian theory of unemployment
[edit]It is in the very nature of the capitalist mode of production to overwork some workers while keeping the rest as a reserve army of unemployed paupers.
— Marx, Theory of Surplus Value, [15]
According to Karl Marx, unemployment is inherent within the unstable capitalist system and periodic crises of mass unemployment are to be expected. The function of the proletariat within the capitalist system is to provide a "reserve army of labour" that creates downward pressure on wages. This is accomplished by dividing the proletariat into surplus labour (employees) and under-employment (unemployed).[27] This reserve army of labour fight among themselves for scarce jobs at lower and lower wages. At first glance, unemployment seems inefficient since unemployed workers do not increase profits. However, unemployment is profitable within the global capitalist system because unemployment lowers wages which are costs from the perspective of the owners. From this perspective low wages benefit the system by reducing economic rents. Yet, it does not benefit workers. Capitalist systems unfairly manipulate the market for labour by perpetuating unemployment which lowers laborers' demands for fair wages. Workers are pitted against one another at the service of increasing profits for owners.
According to Marx, the only way to permanently eliminate unemployment would be to abolish capitalism and the system of forced competition for wages and then shift to a socialist or communist economic system. For contemporary Marxists, the existence of persistent unemployment is proof of the inability of capitalism to ensure full employment.[28]
Involuntary unemployment
[edit]In The General Theory, Keynes argued that neo-classical economic theory did not apply during recessions because of excessive savings and weak private investment in an economy. In consequence, people could be thrown out of work involuntarily and not be able to find acceptable new employment.
This conflict between the neoclassical and Keynesian theories has had strong influence on government policy. The tendency for government is to curtail and eliminate unemployment through increases in benefits and government jobs, and to encourage the job-seeker to both consider new careers and relocation to another city.
Involuntary unemployment does not exist in agrarian societies nor is it formally recognized to exist in underdeveloped but urban societies, such as the mega-cities of Africa and of India/Pakistan. In such societies, a suddenly unemployed person must meet their survival needs either by getting a new job at any price, becoming an entrepreneur, or joining the underground economy of the hustler.[18]
Involuntary unemployment is discussed from the narrative standpoint in stories, and novels of social suffering.
Full employment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/e/e3/NAIRU-SR-and-LR.svg/200px-NAIRU-SR-and-LR.svg.png)
In demand-based theory, it is possible to abolish cyclical unemployment by increasing the aggregate demand for products and workers. However, eventually the economy hits an "inflation barrier" imposed by the four other kinds of unemployment to the extent that they exist.
Some demand theory economists see the inflation barrier as corresponding to the natural rate of unemployment. The "natural" rate of unemployment is defined as the rate of unemployment that exists when the labour market is in equilibrium and there is pressure for neither rising inflation rates nor falling inflation rates. An alternative technical term for this rate is the NAIRU or the Non-Accelerating Inflation Rate of Unemployment.
No matter what its name, demand theory holds that this means that if the unemployment rate gets "too low," inflation will get worse and worse (accelerate) in the absence of wage and price controls (incomes policies).
One of the major problems with the NAIRU theory is that no one knows exactly what the NAIRU is (while it clearly changes over time). The margin of error can be quite high relative to the actual unemployment rate, making it hard to use the NAIRU in policy-making.
Another, normative, definition of full employment might be called the ideal unemployment rate. It would exclude all types of unemployment that represent forms of inefficiency. This type of "full employment" unemployment would correspond to only frictional unemployment (excluding that part encouraging the McJobs management strategy) and would thus be very low. However, it would be impossible to attain this full-employment target using only demand-side Keynesian stimulus without getting below the NAIRU and suffering from accelerating inflation (absent incomes policies). Training programs aimed at fighting structural unemployment would help here.
To the extent that hidden unemployment exists, it implies that official unemployment statistics provide a poor guide to what unemployment rate coincides with "full employment".
Structural unemployment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/7/77/Okuns_law_quarterly_differences.svg/220px-Okuns_law_quarterly_differences.svg.png)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/5/55/Bundesarchiv_Bild_183-R77582%2C_Hamburg%2C_arbeitsloser_Kraftfahrer.jpg/130px-Bundesarchiv_Bild_183-R77582%2C_Hamburg%2C_arbeitsloser_Kraftfahrer.jpg)
Structural unemployment occurs when a labour market is unable to provide jobs for everyone who wants one because there is a mismatch between the skills of the unemployed workers and the skills needed for the available jobs. Structural unemployment is hard to separate empirically from frictional unemployment, except to say that it lasts longer. As with frictional unemployment, simple demand-side stimulus will not work to easily abolish this type of unemployment.
Structural unemployment may also be encouraged to rise by persistent cyclical unemployment: if an economy suffers from long-lasting low aggregate demand, it means that many of the unemployed become disheartened, while their skills (including job-searching skills) become "rusty" and obsolete. Problems with debt may lead to homelessness and a fall into the vicious circle of poverty. This means that they may not fit the job vacancies that are created when the economy recovers. Some economists see this scenario as occurring under British Prime Minister Margaret Thatcher during the 1970s and 1980s. The implication is that sustained high demand may lower structural unemployment. This theory of persistence in structural unemployment has been referred to as an example of path dependence or "hysteresis".
Much technological unemployment,[19] due to the replacement of workers by machines, might be counted as structural unemployment. Alternatively, technological unemployment might refer to the way in which steady increases in labour productivity mean that fewer workers are needed to produce the same level of output every year. The fact that aggregate demand can be raised to deal with this problem suggests that this problem is instead one of cyclical unemployment. As indicated by Okun's Law, the demand side must grow sufficiently quickly to absorb not only the growing labour force but also the workers made redundant by increased labour productivity.
Seasonal unemployment may be seen as a kind of structural unemployment, since it is a type of unemployment that is linked to certain kinds of jobs (construction work, migratory farm work). The most-cited official unemployment measures erase this kind of unemployment from the statistics using "seasonal adjustment" techniques. The resulting in substantial, permanent structural unemployment.
Frictional unemployment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/8/8f/US_beveridge_2004_through_fall_2010.gif/220px-US_beveridge_2004_through_fall_2010.gif)
Frictional unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another. It is sometimes called search unemployment and can be voluntary based on the circumstances of the unemployed individual. Frictional unemployment is always present in an economy, so the level of involuntary unemployment is properly the unemployment rate minus the rate of frictional unemployment, which means that increases or decreases in unemployment are normally under-represented in the simple statistics.[29]
Frictional unemployment exists because both jobs and workers are heterogeneous, and a mismatch can result between the characteristics of supply and demand. Such a mismatch can be related to skills, payment, work-time, location, seasonal industries, attitude, taste, and a multitude of other factors. New entrants (such as graduating students) and re-entrants (such as former homemakers) can also suffer a spell of frictional unemployment. Workers as well as employers accept a certain level of imperfection, risk or compromise, but usually not right away; they will invest some time and effort to find a better match. This is in fact beneficial to the economy since it results in a better allocation of resources. However, if the search takes too long and mismatches are too frequent, the economy suffers, since some work will not get done. Therefore, governments will seek ways to reduce unnecessary frictional unemployment through multiple means including providing education, advice, training, and assistance such as daycare centers.
The frictions in the labour market are sometimes illustrated graphically with a Beveridge curve, a downward-sloping, convex curve that shows a correlation between the unemployment rate on one axis and the vacancy rate on the other. Changes in the supply of or demand for labour cause movements along this curve. An increase (decrease) in labour market frictions will shift the curve outwards (inwards).
Hidden unemployment
[edit]Hidden, or covered, unemployment is the unemployment of potential workers that is not reflected in official unemployment statistics, due to the way the statistics are collected. In many countries only those who have no work but are actively looking for work (and/or qualifying for social security benefits) are counted as unemployed. Those who have given up looking for work (and sometimes those who are on Government "retraining" programs) are not officially counted among the unemployed, even though they are not employed. The same applies to those who have taken early retirement to avoid being laid off, but would prefer to be working. The statistic also does not count the "underemployed" — those working fewer hours than they would prefer or in a job that doesn't make good use of their capabilities. In addition, those who are of working age but are currently in full-time education are usually not considered unemployed in government statistics. Traditional unemployed native societies who survive by gathering, hunting, herding, and farming in wilderness areas, may or may not be counted in unemployment statitics. Official statistics often underestimate unemployment rates because of hidden unemployment.
![](http://upload.wikimedia.org/wikipedia/commons/thumb/d/db/US_average_duration_of_unemployment.png/250px-US_average_duration_of_unemployment.png)
Long-term unemployment
[edit]This is normally defined, for instance in European Union statistics, as unemployment lasting for longer than one year. It is an important indicator of social exclusion. The United States Bureau of Labor Statistics (BLS) reports this as 27 weeks or longer. Long-term unemployment can result in older workers taking early retirement; in the United States, taking reduced social security benefits at age 62.[30] ogical unemployment might refer to the way in which steady increases in labour productivity mean that fewer workers are needed to produce the same level of output every year. The fact that aggregate demand can be raised to deal with this problem suggests that this problem is instead one of cyclical unemployment. As indicated by Okun's Law, the demand side must grow sufficiently quickly to absorb not only the growing labour force but also the workers made redundant by increased labour productivity.
Seasonal unemployment may be seen as a kind of structural unemployment, since it is a type of unemployment that is linked to certain kinds of jobs (construction work, migratory farm work). The most-cited official unemployment measures erase this kind of unemployment from the statistics using "seasonal adjustment" techniques. The resulting in substantial, permanent structural unemployment.
Frictional unemployment
[edit]![](http://upload.wikimedia.org/wikipedia/commons/thumb/8/8f/US_beveridge_2004_through_fall_2010.gif/220px-US_beveridge_2004_through_fall_2010.gif)
Frictional unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another. It is sometimes called search unemployment and can be voluntary based on the circumstances of the unemployed individual. Frictional unemployment is always present in an economy, so the level of involuntary unemployment is properly the unemployment rate minus the rate of frictional unemployment, which means that increases or decreases in unemployment are normally under-represented in the simple statistics.[31]
Frictional unemployment exists because both jobs and workers are heterogeneous, and a mismatch can result between the characteristics of supply and demand. Such a mismatch can be related to skills, payment, work-time, location, seasonal industries, attitude, taste, and a multitude of other factors. New entrants (such as graduating students) and re-entrants (such as former homemakers) can also suffer a spell of frictional unemployment. Workers as well as employers accept a certain level of imperfection, risk or compromise, but usually not right away; they will invest some time and effort to find a better match. This is in fact beneficial to the economy since it results in a better allocation of resources. However, if the search takes too long and mismatches are too frequent, the economy suffers, since some work will not get done. Therefore, governments will seek ways to reduce unnecessary frictional unemployment through multiple means including providing education, advice, training, and assistance such as daycare centers.
The frictions in the labour market are sometimes illustrated graphically with a Beveridge curve, a downward-sloping, convex curve that shows a correlation between the unemployment rate on one axis and the vacancy rate on the other. Changes in the supply of or demand for labour cause movements along this curve. An increase (decrease) in labour market frictions will shift the curve outwards (inwards).
Hidden unemployment
[edit]Hidden, or covered, unemployment is the unemployment of potential workers that is not reflected in official unemployment statistics, due to the way the statistics are collected. In many countries only those who have no work but are actively looking for work (and/or qualifying for social security benefits) are counted as unemployed. Those who have given up looking for work (and sometimes those who are on Government "retraining" programs) are not officially counted among the unemployed, even though they are not employed. The same applies to those who have taken early retirement to avoid being laid off, but would prefer to be working. The statistic also does not count the "underemployed" — those working fewer hours than they would prefer or in a job that doesn't make good use of their capabilities. In addition, those who are of working age but are currently in full-time education are usually not considered unemployed in government statistics. Traditional unemployed native societies who survive by gathering, hunting, herding, and farming in wilderness areas, may or may not be counted in unemployment statitics. Official statistics often underestimate unemployment rates because of hidden unemployment.
![](http://upload.wikimedia.org/wikipedia/commons/thumb/d/db/US_average_duration_of_unemployment.png/250px-US_average_duration_of_unemployment.png)
Long-term unemployment
[edit]This is normally defined, for instance in European Union statistics, as unemployment lasting for longer than one year. It is an important indicator of social exclusion. The United States Bureau of Labor Statistics (BLS) reports this as 27 weeks or longer. Long-term unemployment can result in older workers taking early retirement; in the United States, taking reduced social security benefits at age 62.[30]
- ^ O'Sullivan, Arthur (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 330. ISBN 0-13-063085-3.
{{cite book}}
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ignored (|author=
suggested) (help)CS1 maint: location (link) - ^ Theories of the Labour Market and Employment: A Review, ISR/Google Books, 2nd revised edition 2011
- ^ F. A. Hayek, The Constitution of Liberty
- ^ a b c d Alain Anderson, Economics. Fourth edition, 2006
- ^ a b P. Garegnani, "Heterogeneous Capital, the Production Function and the Theory of Distribution", Review of Economic Studies, V. 37, N. 3 (Jul. 1970): 407-436
- ^ a b Robert L. Vienneau, "On Labour Demand and Equilibria of the Firm", Manchester School, V. 73, N. 5 (Sep. 2005): 612-619
- ^ a b Arrigo Opocher and Ian Steedman, "Input Price-Input Quantity Relations and the Numeraire", Cambridge Journal of Economics, V. 3 (2009): 937-948
- ^ a b Michael Anyadike-Danes and Wyne Godley, "Real Wages and Employment: A Skeptical View of Some Recent Empirical Work", Manchester School, V. 62, N. 2 (Jun. 1989): 172-187
- ^ a b Graham White, "The Poverty of Conventional Economic Wisdom and the Search for Alternative Economic and Social Policies", The Drawing Board: An Australian Review of Public Affairs, V. 2, N. 2 (Nov. 2001): 67-87
- ^ America's Great Depression p. 45
- ^ Out of Work: Unemployment and Government in the Twentieth-Century America, NYU Press
- ^ a b Keynes, John Maynard (2007) [1936]. The General Theory of Employment, Interest and Money. Basingstoke, Hampshire: Palgrave Macmillan. ISBN 978-0-230-00476-4.
- ^ Hayek, Friedrich (1989). The Collected Works of F.A. Hayek. University of Chicago Press. ISBN 978-0-226-32097-7.
- ^ Harris, Seymour E. (2005). The New Economics: Keynes' Influence on Theory and Public Policy. Kessinger Publishing. ISBN 1-4191-4534-7.
- ^ a b Cite error: The named reference
Marx 1863 478 or at MEW, 26.3, 300
was invoked but never defined (see the help page). - ^ Marx, Karl (2009). Capital: An Abridged Edition. Edited by David McLellan, Oxford Paperbacks, Oxford, UK. ISBN 978-0-19-953570-5.
- ^ Marx, Karl. "The Communist Manifesto". Retrieved 22 October 2010.
- ^ a b Bourdieu, Pierre. THE WEIGHT OF THE WORLD: Social Suffering in Contemporary Society.
- ^ a b Cite error: The named reference
Jerome 1934
was invoked but never defined (see the help page). - ^ O'Sullivan, Arthur (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 330. ISBN 0-13-063085-3.
{{cite book}}
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suggested) (help)CS1 maint: location (link) - ^ Theories of the Labour Market and Employment: A Review, ISR/Google Books, 2nd revised edition 2011
- ^ F. A. Hayek, The Constitution of Liberty
- ^ America's Great Depression p. 45
- ^ Out of Work: Unemployment and Government in the Twentieth-Century America, NYU Press
- ^ Hayek, Friedrich (1989). The Collected Works of F.A. Hayek. University of Chicago Press. ISBN 978-0-226-32097-7.
- ^ Harris, Seymour E. (2005). The New Economics: Keynes' Influence on Theory and Public Policy. Kessinger Publishing. ISBN 1-4191-4534-7.
- ^ Marx, Karl (2009). Capital: An Abridged Edition. Edited by David McLellan, Oxford Paperbacks, Oxford, UK. ISBN 978-0-19-953570-5.
- ^ Marx, Karl. "The Communist Manifesto". Retrieved 22 October 2010.
- ^ "Quiggin Takes My Euro-Bet, Bryan Caplan | EconLog | Library of Economics and Liberty". Econlog.econlib.org. 2009-05-28. Retrieved 2010-03-25.
- ^ a b Motoko Rich (June 9, 2012). "Forced to Early Social Security, Unemployed Pay a Steep Price". The New York Times. Retrieved June 10, 2012.
- ^ "Quiggin Takes My Euro-Bet, Bryan Caplan | EconLog | Library of Economics and Liberty". Econlog.econlib.org. 2009-05-28. Retrieved 2010-03-25.