Contents
[hide]
• 1 Okun's Law
• 2 Involuntary unemployment
• 3 Solutions
○ 3.1 Demand side
○ 3.2 Supply side
○ 3.3 Tax-related
• 4 Types of unemployment
○ 4.1 Frictional unemployment
○ 4.2 Classical unemployment
4.2.1 Cyclical or Keynesian unemployment
○ 4.3 Structural unemployment
○ 4.4 Long-term unemployment
• 5 Costs of unemployment
○ 5.1 Individual
○ 5.2 Social
• 6 Historical and contemporary unemployment
• 7 Measurement
○ 7.1 European Union (Eurostat)
○ 7.2 United States Bureau of Labor Statistics
○ 7.3 Limitations of the unemployment definition
• 8 Aiding the unemployed
• 9 Benefits
• 10 See also
• 11 References
• 12 External links
“ Productivity gains in steel may reduce the number of jobs in steel, but they create jobs
elsewhere (if only by lowering the price of steel, and therefore releasing money to be ”
spent on other things); advanced countries may lose garment industry jobs to
developing-country exports, but they gain other jobs producing the goods that those
countries buy with their new export income. To observe that productivity growth in a
particular industry reduces employment in that same industry tells us nothing about
whether productivity growth in the economy as a whole reduces employment in the
economy as a whole.[11]
Another cost for the unemployed is that the combination of unemployment, lack of financial
resources, and social responsibilities may push unemployed workers to take jobs that do not fit
their skills or allow them to use their talents. Unemployment can cause underemployment, and
drinking in the afternoon.
The fear of job loss can spur psychological anxiety.
[edit] Social
An economy with high unemployment is not using all of the resources, i.e. labour, available to it.
Since it is operating below its production possibility frontier, it could have higher output if all the
workforce were usefully employed. However, there is a trade off between economic efficiency
and unemployment: if the frictionally unemployed accepted the first job they were offered, they
would be likely to be operating at below their skill level, reducing the economy's efficiency.[15]
It is estimated that, during the Great Depression, unemployment due to sticky wages cost the US
economy about $4 trillion.[citation needed] This is many times larger than losses due to monopolies,
cartels and tariffs.[citation needed]
During a long period of unemployment, workers can lose their skills, causing a loss of human
capital. Being unemployed can also reduce the life expectancy of workers by about 7 years [16]
High unemployment can encourage xenophobia and protectionism as workers fear that
foreigners are stealing their jobs.[citation needed] Efforts to preserve existing jobs of domestic and
native workers include legal barriers against "outsiders" who want jobs, obstacles to
immigration, and/or tariffs and similar trade barriers against foreign competitors.
Finally, a rising unemployment rate concentrates the oligopsony power of employers by
increasing competition amongst workers for scarce employment opportunities.[citation needed].
[edit] Historical and contemporary unemployment
Preliterate communities treat their members as parts of an extended family and thus do not allow
unemployment.[citation needed] In historical societies such as European feudalism, the serfs were never
"unemployed" because they had direct access to the land, and the needed tools, and could thus
work to produce crops. Just as on the American frontier during the nineteenth century, there were
day labourers and subsistence farmers on poor land, whose position in society was somewhat
analogous to the unemployed of today. But they were not truly unemployed, since they could
find work and support themselves on the land.[citation needed]
The decade of the 1930s saw the Great Depression in the United States and many other
countries. In 1929, the U.S. unemployment rate averaged 3%.[17] In 1933, 25% of all American
workers and 37% of all nonfarm workers were unemployed,[18] with firms unwilling to employ
workers at the abnormally high wage rates enforced while output fell.[19] In Cleveland, Ohio, the
unemployment rate was 60%; in Toledo, Ohio, 80%.[20] Unemployment in Canada reached 27%
at the depth of the Depression in 1933.[21] In some towns and cities in the north east of England,
unemployment reached as high as 70%.[22] In Germany the unemployment rate reached nearly
25% in 1932.[23] One Soviet trading corporation in New York averaged 350 applications a day
from Americans seeking jobs in the Soviet Union.[24] There were two million homeless people
migrating across the United States. One Arkansas man walked 900 miles looking for work.[20]
Under systems of slave-labor, slave-owners never let their property be unemployed for long. (If
anything, they would sell the unneeded laborer.) Planned economies such as the old Soviet
Union or today's Cuba typically provide occupation for everyone, using substantial overstaffing
if necessary. (This is called "hidden unemployment," which is sometimes seen as a kind of
underemployment[citation needed] Workers' cooperatives—such as those producing plywood in the
U.S. Pacific Northwest—do not let their members become unemployed unless the co-op itself
goes bankrupt.[citation needed]
Even in broadly Capitalist economies, unemployment rates can vary significantly. Relatively
lightly regulated labour markets, like those of America, the UK or Denmark, tend to have lower
involuntary unemployment, though in recessions their unemployment rates can increase very
rapidly because firms find it easier to lay off workers. France, Germany and Italy, with more
regulation and stronger unions, tend to have higher involuntary unemployment, though the
increases in times of recession tend to be less because firms find it harder to lay off workers.
Some countries like Spain suffer from both high normal unemployment and a sharp increase.[25]
[edit] Measurement
Though many people care about the number of unemployed, economists typically focus on the
unemployment rate. This corrects for the normal increase in the number of people employed due
to increases in population and increases in the labor force relative to the population. The
unemployment rate is expressed as a percentage, and is calculated as follows:
As defined by the International Labour Organization, "unemployed workers" are those who are
currently not working but are willing and able to work for pay, currently available to work, and
have actively searched for work.[26] Many countries such as the UK and Sweden have begun
counting more people as disabled, reducing their unemployment figures.
Since not all unemployment may be "open" and counted by government agencies, official
statistics on unemployment may not be accurate[27].
The ILO describes 4 different methods to calculate the unemployment rate:[28]
• Labour Force Sample Surveys are the most preferred method of unemployment rate
calculation since they give the most comprehensive results and enables calculation of
unemployment by different group categories such as race and gender. This method is the
most internationally comparable.
• Official Estimates are determined by a combination of information from one or more of
the other three methods. The use of this method has been declining in favor of Labour
Surveys.
• Social Insurance Statistics such as unemployment benefits, are computed base on the
number of persons insured representing the total labour force and the number of persons
who are insured that are collecting benefits. This method has been heavily criticized due
to the expiration of benefits before the person finds work.
• Employment Office Statistics are the least effective being that they only include a
monthly tally of unemployed persons who enter employment offices. This method also
includes unemployed who are not unemployed per the ILO definition.
[edit] European Union (Eurostat)
Eurostat, the statistical office of the European Union, defines unemployed as those persons age
15 to 74 who are not working, have looked for work in the last four weeks, and ready to start
work within two weeks, which conform to ILO standards. Both the actual count and rate of
unemployment are reported. Statistical data are available by member state, for the European
Union as a whole (EU27) as well as for the euro area (EA16). Eurostat also includes a long-term
unemployment rate. This is defined as part of the unemployed who have been unemployed for an
excess of 1 year.
The main source used is the European Union Labour Force Survey (EU-LFS). The EU-LFS
collects data on all member states each quarter. For monthly calculations, national surveys or
national registers from employment offices are used in conjunction with quarterly EU-LFS data.
The exact calculation for individual countries, resulting in harmonised monthly data, depend on
the availability of the data.[29]
Workers employed
Other federal work projects 554 663 452 488 468 681
Unemployed workers (Bur Lab 9,03 7,70 10,39 9,48 8,12 5,56
Stat) 0 0 0 0 0 0
source: Donald S. Howard, WPA and Federal Relief Policy. 1943 p 34.
1933 24.9
1934 21.7
1935 20.1
1936 16.9
1937 14.3
1938 19.0
1939 17.2
1940 14.6
1941 9.9
1942 4.7
1943 1.9
1944 1.2
1945 1.9
Benefits Annual leave • Sick leave • Parental leave • Health insurance • Life
insurance • Disability insurance • Take-home vehicle
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