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'''This is a background article'''. See [[psychology of unemployment]] for more detail of psychological issues involved.
 
'''This is a background article'''. See [[psychology of unemployment]] for more detail of psychological issues involved.
   
'''Unemployment''' is the condition of not having a job, often referred to as being "out of work", or '''unemployed'''. Not having a job when a person needs one, makes it difficult if not impossible to meet financial obligations such as purchasing food to feed oneself and one's family, and paying one's bills; failure to make mortgage payments or to pay rent may lead to [[homelessness]] through [[foreclosure]] or [[eviction]]. Being unemployed, and the financial difficulties and loss of [[health insurance]] benefits that come with it, may cause malnutrition and illness, and are major sources of mental stress and loss of [[self-esteem]] which may lead to [[depression]], which may have a further negative impact on [[health]].
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[[Image:Unemployment rate world from CIA figures2.PNG|thumb|350px|CIA figures for world unemployment rates, 2006]]
   
In economics, '''unemployment''' refers to the condition and extent of joblessness within an economy, and is measured in terms of the unemployment rate, which is the number of unemployed workers divided by the total civilian [[labor force]].
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'''Unemployment''' occurs when a person is available to work and currently seeking work, but the person is without [[Wage labour|work]].<ref name=a>{{cite web|url=http://www.ilo.org/public/english/bureau/stat/download/res/ecacpop.pdf|title=International Labour Organization: Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the Thirteenth International Conference of Labour Statisticians (October 1982); see page 4; accessed November 26, 2007|format=PDF}}</ref> The prevalence of unemployment is usually measured using the unemployment rate, which is defined as the percentage of those in the [[labor force]] who are unemployed. The unemployment rate is also used in [[economics|economic]] studies and economic [[index]]es such as the [[United States]]' [[The Conference Board|Conference Board's]] [[Index of Leading Indicators]] as a measure of the state of the [[macroeconomics]].
   
The terms ''unemployment'' and ''unemployed'' are sometimes used to refer to other inputs to production that are not being fully used for example, unemployed [[capital goods]].
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There are a variety of different causes of unemployment, and disagreement on which causes are most important. Different schools of economic thought suggest different policies to address unemployment. [[Monetarism|Monetarists]] for example, believe that controlling inflation to facilitate growth and investment is more important, and will lead to increased employment in the long run. [[Keynesians]] on the other hand emphasize the smoothing out of [[business cycles]] by manipulating [[aggregate demand]]. There is also disagreement on how exactly to measure unemployment. Different countries experience different levels of unemployment; the [[USA]] currently experiences lower unemployment levels than the [[European Union]],<ref>[http://www.cato.org/view_ddispatch.php?viewdate=20080606 Cato Daily Dispatch<!-- Bot generated title -->]</ref><ref>[https://www.cia.gov/library/publications/the-world-factbook/rankorder/2129rank.html CIA - The World Factbook - Rank Order - Unemployment rate<!-- Bot generated title -->]</ref> and it also changes over time (e.g. the [[Great depression]]) throughout [[economic cycle]]s.
   
The history of unemployment is the history of industrialization. It was not considered an issue in rural areas, despite the "disguised unemployment" of rural laborers having little to do, especially in conditions of overpopulation.
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[[Image:Us unemployment rates 1950 2005.png|thumb|right|250px|Unemployment rate as a percentage of the labor force in the [[United States]] according to the U.S. [[Bureau of Labor Statistics]].]]
   
==Impact on society and the economy==
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==Types ==
[[Image:Us unemployment rates 1950 2005.png|thumb|right|250px|Unemployment rate (as a percentage of the labor force) in the [[United States]]. Data source: U.S. [[Bureau of Labor Statistics]].]]
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{{main|Types of unemployment|Graduate unemployment}}
   
===Individual costs===
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According to economist [[Edmond Malinvaud]], the type of unemployment that occurs depends on the situation at the goods market, rather than that they belong to opposing economic theories.<ref>Edmond Malinvaud, "The theory of unemployment reconsidered", Oxford: Basil Blackwell, 1977, ISBN 0631144757</ref> If the market for goods is a buyers' market (i.e.: sales are restricted by demand), Keynesian unemployment may ensue while a limiting production capacity is more consistent with classical unemployment.
Lacking a job often means lacking social contact with fellow employees, a purpose for many hours of the day, lack of [[self-esteem]], mental stress and illness, and of course, the inability to pay bills and to purchase both necessities and luxuries. The latter is especially serious for those with family obligations, debts, and/or medical costs, where the availability of [[health insurance]] is often linked to holding a job. Dr. M. Harvey Brenner and others have shown that rising unemployment increases the [[crime]] rate, the [[suicide]] rate, and causes a decline in [[health]]iness.[http://ashleymac.econ.vt.edu/ashley/3204/brenner.pdf] However, during the [[Great Depression]], when unemployment rates exceeded 20% in many countries, the crime rate did not increase.{{Fact|date=February 2007}} Because unemployment insurance in the U.S. typically does not even replace 50% of the income one received on the job (and one cannot receive it forever), the unemployed often end up tapping [[welfare (financial aid)|welfare]] programs such as [[Food Stamps]] &mdash; or accumulating [[debt]], both formal debt to banks and informal debt to friends and relatives. Higher government transfer payments in the form of welfare and food stamps decrease spending on productive economic goods, decreasing GDP.
 
   
Some hold that many of the low-income jobs aren't really a better option than unemployment with a [[welfare state]] (with its [[unemployment insurance]] benefits). But since it is difficult or impossible to get unemployment insurance benefits without having worked in the past, these jobs and unemployment are more complementary than they are substitutes. (These jobs are often held short-term, either by students or by those trying to gain experience; turnover in most low-paying jobs is high, in excess of 30%/year.{{Fact|date=February 2007}}) Unemployment insurance keeps an available supply of workers for the low-paying jobs, while the employers' choice of management techniques (low wages and benefits, few chances for advancement) is made with the existence of unemployment insurance in mind. This combination promotes the existence of one kind of unemployment, [[Unemployment types#Frictional unemployment|frictional unemployment]].
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A common typology of unemployment is the following:
   
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. That is, unemployment can cause [[underemployment]] (definition 1). This is one of the economic arguments in favor of having unemployment insurance.
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===Frictional unemployment===
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Frictional unemployment occurs when a worker moves from one job to another. While he searches for a job he is experiencing frictional unemployment. This applies for fresh graduates looking for employment as well. This is a productive part of the economy, increasing both the worker's long term welfare and economic efficiency. It is a result of imperfect information in the labour market, because if job seekers knew that they would be employed for a particular job vacancy, almost no time would be lost in getting a new job, eliminating this form of unemployment.
   
This feared '''cost of job loss''' can spur psychological anxiety, weaken [[trade union|labor union]]s and their members' sense of solidarity, encourage greater work-effort and lower wage demands, and/or abet [[protectionism]]. This last means efforts to preserve existing jobs (of the "insiders") via barriers to entry against "outsiders" who want jobs, legal obstacles to [[immigration]], and/or [[tariff]]s and similar [[trade barrier]]s against foreign competitors. The impact of unemployment on the employed is related to the idea of [[Unemployment types#Marxian unemployment|Marxian unemployment]]. Finally, the existence of significant unemployment raises the [[oligopsony]] power of one's employer: that raises the cost of quitting one's job and lowers the probability of finding a new source of livelihood.
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===Classical unemployment===
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Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level. This is often ascribed to government intervention, as with the minimum wage, or [[labour union]]s. Some, such as [[Murray Rothbard]],<ref>''[[America's Great Depression]]'' p. 45</ref> suggest that even social taboos can prevent wages from falling to the market clearing level.
   
===Costs to businesses and to economic growth===
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===Structural unemployment===
   
High unemployment implies low real [[Gross Domestic Product]] - human resources are not being used as completely as possible and are thus wasting opportunities to produce goods and services. The economic health and real wealth of nations is closely tied to what can be produced and sold.
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[[Structural unemployment]] is caused by a mismatch between jobs offered by employers and potential workers. This may pertain to geographical location, skills, and many other factors. If such a mismatch exists, frictional unemployment is likely to be more significant as well.
   
Because the unemployed are lost from the world of production &mdash; called deficient-demand or [[Unemployment types#Cyclical unemployment|cyclical]] unemployment &mdash; thus represents a profound form of [[inefficiency]], sometimes called "Keynesian inefficiency." (However, this loss of production might instead be caused by [[Unemployment types#Classical unemployment|classical unemployment]] or [[Unemployment types#Marxian unemployment|Marxian unemployment]], which reduce [[potential output]] by restricting supply.) [[Okun's Law]] tells us that for the U.S., the economy misses out on about two percent of its [[potential output]] for each one percentage point of unemployment above the "[[full employment]]" unemployment rate or [[NAIRU]] (see below). Alternatively, this "law" says that as unemployment rises by one percentage point, say from 5% to 6% of the civilian labour force, the percentage of potential output that could have been produced ''but was not'' rises by about two points.
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For example, in the late 1990s there was a tech bubble, creating demand for computer specialists. In 2000-2001 this bubble collapsed. A housing bubble soon formed, creating demand for real estate workers, and many computer workers had to retrain to find employment.
   
Unemployed workers are lost from the producing world of work, but the reduction in their consumption also has a negative effect on the businesses they no longer patronize, and on the overall economy. One business's employees are the next business's customers. As workers reduce or increase spending, based on their present or expected earnings, the impact on the bottom line of the businesses they patronize is disproportionately greater. A large loss of jobs at one employer may reduces aggregate income and spending so that other businesses come to expect to sell fewer goods, prompting them to consider cutting production and reducing their own workforces. A spiraling circle of job cuts tends to cause or sharpen business panics. The tasks of predicting and moderating panics or recessions is made more difficult by the self-perpetuating negative feedback on the economy of the reduced spending of unemployed workers. The impact of unemployment on businesses is sharpened because the bottom line in business reflects the margin after variable and fixed costs are paid, so that the last lots of goods or services sold tend to be much more profitable than the first.
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[[Temporary work|Seasonal unemployment]] occurs when an occupation is not in demand at certain seasons.
   
===Economic benefits of unemployment===
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===Cyclical or Keynesian unemployment===
In weighing the advantages and disadvantages of unemployment, some say that slow economic growth and the resulting unemployment, if not unreservedly good, at least include important economic benefits which must be carefully balanced against the obvious advantages of full employment.
 
   
The key benefit for the ''entire economy'' arising from unemployment is that it tends to reduce [[inflation]], following the [[Phillips curve]], or to decelerate [[inflation]], following the NAIRU/[[natural rate of unemployment]] theory. Runaway inflation has many serious long-term economic costs that negatively affect everyone in the affected economy. Evaluating the relatively straightforward impact on the domestic economy of local unemployment is increasingly complicated by consideration of the effects of the expansion of international trade.
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Cyclical or [[Keynesian economics|Keynesian]] unemployment, also known as demand deficient unemployment, occurs when there is not enough aggregate demand in the economy. This is caused by a [[business cycle]] recession, and wages not falling to meet the equilibrium rate.
   
A small amount of [[Unemployment types#Frictional unemployment|frictional unemployment]] creates a larger pool so that employers are not forced to settle for employees poorly suited to the jobs offered. The amount needed for this purpose may be very small, however, since it is relatively easy to seek a new job without losing one's current one. And when more jobs are available for fewer workers (lower unemployment), it may allow workers to find the jobs that better fit their tastes, talents, and needs.
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==Causes==
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There is considerable debate among [[economist]]s as to the causes of unemployment. [[Keynesian economics]] emphasizes unemployment resulting from insufficient [[effective demand]] for goods and services in the economy ([[Unemployment types#Cyclical unemployment|cyclical unemployment]]). Others point to structural problems, inefficiencies, inherent in labour markets ([[Unemployment types#Structural unemployment|structural unemployment]]). [[Classical economics|Classical]] or [[neoclassical economics]] tends to reject these explanations, and focuses more on rigidities imposed on the labor market from the outside, such as minimum wage laws, taxes, and other regulations that may discourage the hiring of workers ([[Unemployment types#Classical unemployment|classical unemployment]]). Yet others see unemployment as largely due to voluntary choices by the unemployed (frictional unemployment).
   
As in the Marxian theory of unemployment, [[special interests]] may also benefit: employers often like having their employees in fear of losing their jobs, and thus working hard, keeping their wage demands low, etc. As noted, unemployment may increase employers' [[monopsony]]-like power. Unemployment may thus promote [[Productivity (economics)|labor productivity]] and [[profit|profitability]].
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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. 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 unemployment may result from the legislative and economic choices made by labor unions and/or [[political party|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, there would be unemployed workers. This is the case of cyclical unemployment, for which macroeconomic forces lead to microeconomic unemployment. ''See also:'' [[unemployment types]]
   
An advantage of unemployment is that it tends to limit a constantly accelerated growth of the GDP that cannot be sustained forever, given resource constraints and environmental impacts. But others ask if denying jobs to willing workers is the best, or even an efficient means of limiting the excessive use of resources or the abuse of the environment. At best, the reduced consumption of the unemployed is short-term. Putting the same workforce in play toward the goal of finding more environmentally efficient methods for production and consumption might have a far greater cumulative environmental benefit.
 
   
==Causes of unemployment==
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''Open unemployment'' is generally associated with [[capitalism|capitalist]] economies. In this view, unemployment is not an aberration of capitalism, indicating any sort of systemic malfunction. Rather, unemployment is a necessary structural feature of capitalism, intended to discipline the workforce. If unemployment is too low, workers make wage demands that either cuts into profits to an extent that jeopardize future investment, or are passed on to consumers, thus generating inflationary instability. [[David Schweickart]] suggests, "Capitalism cannot be a full-employment economy, except in the very short term. For unemployment is the "[[invisible hand]]" -- carrying a stick -- that keeps the workforce in line."<ref name="After Capitalism">{{cite book |last=Schweickart |first=David |title=After Capitalism |publisher=Rowman & Littlefield Publishers, Inc. |ISBN=0-7425-1299-1 |year=2002 |page=97 }}</ref>.
   
''Open unemployment'' of the sort defined above is associated with [[capitalism|capitalist]] economies. Preliterate communities treat their members as parts of an extended family and thus do not allow them to be unemployed &mdash; in the effort to preserve the group. In precapitalist societies such as European [[feudalism]], the serfs (though clearly dominated and exploited by the lords) 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 laborers 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.
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Classical economists dispute this, arguing that when there is too high a supply of labour, providing unions and Government have no prevented wage changes, the wage rate should fall, returning the economy to its long run efficient position at full employment.
   
Under both ancient and modern systems of slave-labor, slave-owners never let their property be unemployed for long. (If anything, they would sell the unneeded laborer.) [[central planning|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]], definition 3.) [[Cooperatives#Worker cooperative|Workers' cooperatives]] &mdash; such as those producing [[plywood]] in the U.S. Pacific Northwest &mdash; do not let their members become unemployed unless the co-op itself goes bankrupt.
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Libertarian thinkers like F.A. Hayek claimed that unemployment increases the more the government intervenes into the economy to try to improve the rights of those with jobs. For example, he asserted that minimum wages raise the cost of labour to above the market equilibrium, resulting in people who wish to work at the going rate but cannot as the wages are higher than their worth to business; unemployment.<ref> F. A. Hayek, The Constitution of Liberty</ref><ref name="autogenerated2"> Alain Anderson, Economics. Fourth edition, 2006</ref> They believed that laws restricting layoffs made businesses less likely to hire in the first place leaving many young people unemployed and unable to find work.<ref name="autogenerated2" />
   
On the other hand, under capitalism the individual profit-seeking employer does not have to bear the complete [[social cost]]s of laying off or firing workers, so they are willing to live with (or even profit from) the existence of unemployment &mdash; unless employees are able to win good severance packages or protection from the government (such as restrictions on firing and lay-offs, although some doubt if even these help since they may make employers more reluctant to take the risk of hiring someone in the first place). (That is, there is arguably a [[market failure]] due to the existence of [[externality|external costs]] of firing or laying-off of people.) On the "supply side," workers' lack of significantly positive net worth (beyond equity in a home or a car) makes it very difficult for them to go into business for themselves to avoid unemployment. Economist [http://www.econ.nyu.edu/user/wolffe/ Edward Wolff] estimates that in 1995 in the U.S., families with adults aged 25-45 in the middle income quintile could sustain their current consumption for only 1.2 months (or live at 125% of the poverty standard for 1.8 months) based on their financial reserves. Poorer quintiles of course had more difficulty.
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This school (the [[Austrian School]]) argued that the results of both actions lead to less productivity and are claimed to incur a higher cost on society as a whole. The results lead to not just higher unemployment but may increase poverty. The narrative continued by saying that the welfare state then responds with various benefits that are paid for by the middle and upper class which reduces their ability to consume and reduces the incentive to work hard and innovate for all sections of society, as the poor have income without working and the rich see their reward for work reduced.<ref>Keynes for Beginners, Peter Pugh and Chris Garratt, 1993</ref> Economists like [[Ludwig Von Mises]], [[Milton Friedman]], [[Friedrich Von Hayek]] not only believe that the welfare of society decreases with this kind of intervention<ref>[http://www.mises.org/story/1782 Politics Causes Unemployment - Hans F. Sennholz - Mises Institute<!-- Bot generated title -->]</ref> but that these economic policies are not sustainable.{{Fact|date=February 2008}}
   
Since not all unemployment may be "open" and counted by government agencies, official unemployment may be very low even under capitalism. Most poorer capitalist countries lack a modern welfare state and unemployment insurance so that it is very difficult to afford being unemployed for very long: they often end up taking jobs below their skill levels. Those who might be counted as "unemployed" in the rich countries end up instead being [[underemployment|underemployed]] (definition 1) and not counted.
 
   
Others argue that unemployment actually increases the more the government intervenes into the economy. For example, minimum wages raise costs of doing business and businesses respond by laying off workers. Laws restricting layoffs make businesses less likely to hire in the first place leaving many young people unemployed and unable to find work.
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One of the explanations behind ([[Unemployment types#Structural unemployment|structural unemployment]]) and a warning that
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this kind of unemployment could be [[permanent]] in modern society, came from [[economist]] and [[philosopher]] [[André Gorz]].The [[microchip]] revolution and the explosion in [[computer]] science and [[robot]]ising of work even
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in less developed industrialized countries is the main reason.
   
The results of both actions lead to less productivity and are claimed to incur a higher cost on society as a whole. The results lead to not just higher unemployment but may increase poverty. This is why the less market oriented countries of Europe often sustain substantially high unemployment rates in comparison to the United States; that is, government induced employment through policies designed to protect the worker. The welfare state then responds with various benefits that are paid for by the middle and upper class which reduces their ability to consume and is theorised to reduce the incentive to work hard and innovate. Economists like Ludwig Von Mises, Milton Friedman, Friedrich Von Hayek, and many others not only believe that the welfare of society decreases with this kind of intervention but that these economic policies are not sustainable.
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He therefore argues that the idea of `working less so everyone can work and that an [[basic income]] for all must be the solution,and he explains:
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"The connection between more and better has been broken; our needs for many products and services are already more than adequately met, and many of our as-yet- unsatisfied needs will be met not by producing more, but by producing differently, producing other things, or even producing less. This is especially true as regards our needs for air, water, space, silence, beauty, time and human contact...
   
===Government===
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"From the point where it takes only 1,000 hours per year or 20,000 to 30,000 hours per lifetime to create an amount of wealth equal to or greater than the amount we create at the present time in 1,600 hours per year or 40,000 to 50,000 hours in a working life, we must all be able to obtain a real income equal to or higher than our current salaries in exchange for a greatly reduced quantity of work...
Some economists have found high correlations between government spending as a percentage of GDP to unemployment from 1981 to the present using data from the Bureau of Labor Statistics. The correlation between government spending was actually negative during the 1940 to 1980 period; however, the [[Misery index (economics)|Misery Index]] was steadily rising during this period.
 
   
These same economists state that the unemployment supply curve is actually vertical, that labor will work under any condition provided work is available, and the economic element with the most power to shift it is government.
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"Neither is it true any longer that the more each individual works, the better off everyone will be. The present crisis has stimulated technological change of an unprecedented scale and speed: `the ''[[microchip]]'' revolution'. The object and indeed the effect of this revolution has been to make rapidly increasing savings in labour, in the industrial, administrative and [[service sector]]s. Increasing production is secured in these sectors by decreasing amounts of labour. As a result, the social process of production no longer needs everyone to work in it on a full-time basis. The [[work ethic]] ceases to be viable in such a situation and workbased society is thrown into crisis," [http://www.antenna.nl/~waterman/gorz.html André Gorz, ''Critique of Economic Reason,''Gallié, 1989].
   
===Debate on unemployment===
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===Okun's Law===
There is considerable debate amongst [[economist]]s as to what the main causes of unemployment are. [[Keynesian economics]] emphasizes unemployment resulting from insufficient [[effective demand]] for goods and service in the economy ([[Unemployment types#Cyclical unemployment|cyclical unemployment]]). Others point to structural problems (inefficiencies) inherent in labor markets ([[Unemployment types#Structural unemployment|structural unemployment]]). [[Classical economics|Classical]] or [[neoclassical economics]] tends to reject these explanations, and focuses more on rigidities imposed on the labor market from the outside, such as minimum wage laws, taxes, and other regulations that may discourage the hiring of workers ([[Unemployment types#Classical unemployment|classical unemployment]]). Yet others see unemployment as largely due to voluntary choices by the unemployed (frictional unemployment). On the other extreme, Marxists see unemployment as a structural fact helping to preserve business profitability and capitalism (Marxian unemployment). The different perspectives may be right in different ways, contributing to our understanding of different types of unemployment.
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[[Okun's law]] states that for every 2% GDP falls relative to potential GDP, unemployment rises 1% (of the total workforce). When the economy operates at productive capacity, it will experience the [[Natural rate of unemployment|natural rate of unemployment]]. <ref> Alain Anderson, ''Economics''. Fourth Edition, 2006</ref>
   
Though there have been several definitions of '''voluntary''' (and '''involuntary''') unemployment in the economics literature, a simple distinction is often applied. Voluntary unemployment is blamed on the individual unemployed workers (and their 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. On the other hand, cyclical unemployment, structural unemployment, classical unemployment, and Marxian unemployment are largely involuntary in nature. However, the existence of structural unemployment may reflect choices made by the unemployed in the past, while classical unemployment may result from the legislative and economic choices made by labor unions and/or [[political party|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, there would be unemployed workers. This is the case of cyclical unemployment and Marxian unemployment, for which macroeconomic forces lead to microeconomic unemployment. For more details, see [[unemployment types]].
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'''U= ^u-h[100(y/yn)-100]'''
   
Some say that one of the main causes of unemployment in a free market economy is the fact that the law of supply and demand is not really applied to the price to be paid for employing people. In situations of falling demand for products & services the wages of all employees (from president to errand boy) are not automatically reduced by the required percentage to make the business viable. Others say that it is the market that determines the wages based on the desirability of the job. The more people qualified and interested in the job, the lower the wages for that job become. Based on this view, the profitability of the company is not a factor in determining whether or not the work is profitable to the employee. People are laid off, because pay reductions would reduce the number of people willing to work a job. With fewer people interested in a particular job, the employees bargaining power would actually rise to stabilize the situation, but their employer would be unable to fulfill their wage expectations. In the classical framework, such unemployment is due to the existing legal framework, along with interferences with the market by non-market institutions such as labor unions and government. Others say many of the problems with market adjustment arise from the market itself (Keynes) or from the nature of capitalism (Marx).
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== Solutions ==
   
In developing countries, unemployment is often caused by burdensome government regulation. The World Bank's Doing Business project shows how excessive labor regulation increases unemployment among women and youths in Africa, the Middle East and Latin America.
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Societies try a number of different measures to get as many people as possible into work. However, attempts to reduce the level of unemployment beyond the [[Natural rate of unemployment]] generally fail, resulting only in less output and more [[inflation]].
   
==Types of unemployment==
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===Phillips Curve ===
{{main|unemployment types}}
 
   
*'''Frictional''': When moving from one job to another, the unemployment temporarily experienced when looking for a new job.
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It used to be largely believed that unemployment could be solved using the [[Phillips curve]]. This involves increasing inflation to reduce unemployment by fooling workers into accepting jobs at a lower rate than they would otherwise have done, due to the declining value of money.<ref name="autogenerated1">[http://www.daviddfriedman.com/Academic/Price_Theory/PThy_1st_Edn_Ch22/PThy_1st_Edn_Chap_22.html PThy_Edn_1_Chap_23.rtf<!-- Bot generated title -->]</ref> However, since the work of [[Milton Friedman]], it is widely accepted that the Phillips curve is vertical in the long run: you cannot achieve a lowering of the unemployment rate in the long run, and attempts to do so will only cause inflation.
*'''Structural''': Caused by a mismatch between the location of jobs and the location of job-seekers. "Location" may be geographical, or in terms of skills. The mismatch comes because unemployed are unwilling or unable to change geography or skills.
 
*'''Cyclical''' (Demand deficient unemployment) unemployment:When there is not enough aggregate demand for the labor. Caused by a [[business cycle]] recession.
 
*'''Technological''': Caused by the replacement of workers by machines or other advanced technology (such as [[artificial intelligence]] technology).
 
*'''Classical''' (real-wage): When real wage for a job are set above the market-clearing level, commonly government (as with the minimum wage) or unions, although some (such as Murray Rothbard, ''America's Great Depression'' p. 45) suggest that even social taboos can prevent wages from falling to the market clearing level.
 
*'''Marxian''': when unemployment is needed to motivate workers to work hard and to keep wages down.
 
*'''Seasonal''': When an occupation is not in demand at certain seasons. For example, construction workers in winter, ski teachers in summer.
 
   
== Measuring unemployment ==
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===Demand side===
   
The unemployment rate is:
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Normal markets reach equilibrium, where supply equals demand; everyone who wants to sell at the market price can. Those who do not want to sell at this price do not; in the labour market this is classical unemployment. Increases in the demand for labour will move the economy along the demand curve, increasing wages and employment. The demand for labour in an economy is derived from the demand for goods and services. As such, if the demand for goods and services in the economy increases, the demand for labour will increase, increasing employment and wages.
   
<math>Unemployed Workers/Total Labor Force*100%</math>
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Monetary policy and fiscal policy can both be used to increase short-term growth in the economy, increasing the demand for labour and decreasing unemployment.
   
For the purpose of calculating the the unemployment rate, unemployed persons are considered to be those who are willing and able to work for pay but are unable to find jobs. The civilian labor force includes all those willing and able to work for pay - both unemployed and employed.
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===Supply side===
   
In practice, it is notoriously difficult to measure the number of unemployed workers actually seeking work, particularly those whose unemployment benefits have expired before finding work. There are several different methods for measuring the number of unemployed workers, each with its own biases, making comparisons between methods difficult.
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However, the labour market is not efficient: it doesn't clear. Minimum wages and union activity keep wages from falling, which means too many people want to sell their labour at the going price but cannot. [[Supply-side]] policies can solve this by making the labour market more flexible. These include removing the minimum wage and reducing the power of unions, which act as a labour cartel. Other supply side policies include education to make workers more attractive to employers.
   
===United States Bureau of Labor Statistics definitions===
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Supply side reforms also increase long-term growth. This increased supply of goods and services requires more workers, increasing employment. It is argued that supply side policies, which include cutting taxes on businesses and reducing regulation.
The U.S. Bureau of Labor Statistics (BLS) provides some definitions which are similar to, but not the same as, those of other countries.
 
   
The BLS counts employment and unemployment (of those over 16 years of age) using a sample survey of households.[http://www.bls.gov/cps/cps_faq.htm] In BLS definitions, people are considered ''employed'' if they did any work at all for pay or profit during the survey week. This includes not only regular full-time year-round employment but also all part-time and temporary work. Workers are also counted as "employed" if they have a job at which they did not work during the survey week because they were:
+
===Tax-related===
* On vacation;
+
One structural solution to unemployment proposed was a graduated retail tax, or "jobs levy", to firms where labor is more expensive than capital. This method will shift tax burden to capital intensive firms and away from labor intensive firms. In theory this will make firms shift operations to a more politically desired balance between labor intensive and capital intensive production. The excess tax revenue from the jobs levy would finance labor intensive public projects.<ref>Robert Struble, Jr., [http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&contentId=847176 "Toward a Structural Solution to Unemployment"] ''International Journal of Social Economics'' 20, no. 11 (1993): 15-26. Also seen in ''Treatise on Twelve Lights'', (2007-08 ed.), chapter 8, [http://www.tell-usa.org/totl/08-Bolstering%20Workers.htm#Toward_structural_solution "Bolstering Workers: Structuring Full-Employment into Capitalism."]</ref> However, by raising the value of labour artificially above capital, this would discourage capital investment, the source of economic growth. With less growth, long-run employment would fall.
* Ill or absent due to medical problems;
 
* Taking care of some other family or personal obligation (for example, due to child-care problems);
 
* On maternity or paternity leave;
 
* Involved in an industrial dispute (strike or lock-out); or
 
* Prevented from working by bad weather.
 
   
Typically, employment and the labor force include only work done for monetary gain. Hence, a [[homemaker]] is neither part of the labor force nor unemployed. Nor are full-time students nor prisoners considered to be part of the labor force or unemployment. The latter can be important. In 1999, economists Lawrence F. Katz and Alan B. Krueger estimated that increased incarceration lowered measured unemployment in the United States by 0.17 %age points between 1985 and the late 1990s. In particular, as of 2005, roughly 0.7% of the US population is incarcerated (1.5% of the available working population).
+
==Costs of unemployment==
  +
===Individual===
  +
[[Image:panic1837.jpg|thumb|350px|An 1837 political cartoon about unemployment in the [[United States]].]]
  +
Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay mortgage payments or to pay rent may lead to [[homelessness]] through [[foreclosure]] or [[eviction]]. Unemployment increases susceptibility to malnutrition, illness, mental stress, and loss of [[self-esteem]], leading to [[Clinical depression|depression]]. According to a study published in Social Indicator Research, even those who tend to be optimistic find it difficult to look on the bright side of things when unemployed. Using interviews and data from German participants aged 16 to 94 – including individuals coping with the stresses of real life and not just a volunteering student population – the researchers determined that even optimists struggled with being unemployed.<ref>[http://newswise.com/articles/view/545782/ Even Optimists Get the Blues When Pink-slipped] Newswise, Retrieved on [[October 27]], [[2008]].</ref>
   
On the other hand, individuals are classified as "unemployed" if they do not have a job, have actively looked for work in the prior four weeks, and are currently available for work. The unemployed includes all individuals who were not working for pay but were waiting to be called back to a job from which they had been temporarily laid off.
+
Dr. M. Brenner conducted a study in 1979 on the "Influence of the Social Environment on Psychology." Brenner found that for every 10% increase in the number of unemployed there is a 1.2% in total mortality, a 1.7% increase in [[cardiovascular disease]], 1.3% more [[cirrhosis]] cases, 1.7% more suicides, 0.4% more arrests, and 0.8% more assaults reported to the police.<ref name=b>{{cite web|author=Richard Ashley|year=2007|url=http://ashleymac.econ.vt.edu/ashley/3204/brenner.pdf|title=Fact sheet on the impact of unemployment|format=PDF|publisher=Virginia Tech, Department of Economics|accessdate=2007-10-11|accessyear=2007}}</ref> A more recent study by Christopher Ruhm<ref name=Ruhm> Christopher Ruhm, "Are Recessions Good for Your Health?", ''Quarterly Journal of Economics'' 2000, 115(2): 617-650 </ref> on the effect of recessions on health found that several measures of health actually improve during recessions. As for the impact of an economic downturn on crime, during the [[Great Depression]] the crime rate did not decrease. Because unemployment insurance in the U.S. typically does not replace 50% of the income one received on the job (and one cannot receive it forever), the unemployed often end up tapping [[welfare (financial aid)|welfare]] programs such as [[Food Stamps]] or accumulating [[debt]]. Higher government transfer payments in the form of welfare and food stamps decrease spending on productive economic goods, decreasing GDP.{{Fact|date=October 2007}}
   
Finally, it is possible to be neither employed nor unemployed by BLS definitions, i.e., to be outside of the "labor force." These are people who have no job and are not looking for one. Many of these are going to school or are retired. Family responsibilities keep others out of the labor force. Still others have a physical or mental disability which prevents them from participating in labor force activities.
+
Some hold that many of the low-income jobs are not really a better option than unemployment with a [[welfare state]] (with its [[unemployment insurance]] benefits). But since it is difficult or impossible to get unemployment insurance benefits without having worked in the past, these jobs and unemployment are more complementary than they are substitutes. (These jobs are often held short-term, either by students or by those trying to gain experience; turnover in most low-paying jobs is high) Unemployment insurance keeps an available supply of workers for the low-paying jobs, while the employers' choice of management techniques (low wages and benefits, few chances for advancement) is made with the existence of unemployment insurance in mind. This combination promotes the existence of one kind of unemployment, [[Unemployment types#Frictional unemployment|frictional unemployment]].{{Fact|date=October 2007}}
   
Children, the elderly, and some individuals with disabilities are typically not counted as part of the labor force in and are correspondingly not included in the unemployment statistics. However, some elderly and many disabled individuals are active in the labor market.
+
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]].
   
In the early stages of an economic [[boom]], unemployment often rises. This is because people join the labor market (give up studying, start a job hunt, etc.) because of the improving job market, but until they have actually found a position they are counted as unemployed. Similarly, during a [[recession]], the increase in the unemployment rate is moderated by people leaving the labor force.
+
The fear of job loss can spur psychological anxiety.
   
Note: from [[March 1]] [[2005]] unemployment statistics were be derived from three sources, the Current Population Survey, a statewide survey of businesses known as the Current Employment Statistics Survey, and state unemployment insurance claims.
+
===Society===
  +
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 [[frictional unemployment|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.<ref name="autogenerated1" />
   
=== The inaccuracy of unemployment statistics ===
+
It is estimated that, during the [[Great Depression]], unemployment due to [[sticky wages]] cost the [[US economy]] about $4 trillion.{{Fact|date=April 2008}} This is many times larger than losses due to monopolies, cartels and tariffs.{{Fact|date=April 2008}}
   
The unemployment rate may be different from the impact of the economy on people. The unemployment figures indicate how many are not working for pay but seeking employment for pay. It is only indirectly connected with the number of people who are actually not working at all or working without pay. Therefore, critics believe that current methods of measuring unemployment are inaccurate in terms of the impact of unemployment on people as these methods do not take into account:
+
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 <ref>Alain Anderson, Economics. Fourth Edition 2006</ref>
* The 1.5% of the available working population incarcerated in U.S. prisons.
 
* Those who have lost their jobs and have become [[discouraged worker|discouraged]] over time from actively looking for work.
 
* Those who are [[self-employed]] or wish to become self-employed, such as tradesmen or building contractors or IT consultants.
 
* Those who have retired before the official retirement age but would still like to work (involuntary early retirees).
 
* Those on [[disability]] pensions who, while not possessing full health, still wish to work in occupations suitable for their medical conditions.
 
* Those who work for payment for as little as one hour per week but would like to work full-time. These people are "involuntary part-time" workers.
 
* Those who are underemployed, e.g., a computer programmer who is working in a retail store until he can find a permanent job.
 
* Involuntary stay-at-home mothers who would prefer to work.
 
* Graduate and Professional school students who were unable to find worthwhile jobs after they graduated with their Bachelor's degrees.
 
   
On the other hand, the measures of employment and unemployment may be "too high." In some countries, the availability of [[unemployment benefits]] can inflate statistics since they give an incentive to register as unemployed. Homemakers and other people who do not really seek work may choose to declare themselves unemployed so as to get benefits; people with undeclared paid occupations may try to get unemployment benefits in addition to the money they earn from their work. Conversely, the absence of any tangible benefit for registering as unemployed discourages people from registering.
+
High unemployment can encourage [[xenophobia]] and [[protectionism]] as workers fear that foreigners are stealing their jobs.{{Fact|date=April 2008}} Efforts to preserve existing jobs of domestic and native workers include legal barriers against "outsiders" who want jobs, obstacles to [[immigration]], and/or [[tariff]]s and similar [[trade barrier]]s against foreign competitors.
   
However, in countries such as the United States, Canada, Mexico, Australia, Japan and the European Union, unemployment is measured using a sample survey (akin to a Gallup poll). According to the BLS, a number of Eastern European nations have instituted labor force surveys as well. The sample survey has its own problems because the total number of workers in the economy is estimated based on a sample rather than a census. So many economists look to the survey of employers ([http://www.bls.gov/ces in U.S.]) to get a better estimate of the number of jobs created or destroyed.
+
Finally, a rising unemployment rate concentrates the [[oligopsony]] power of employers by increasing competition amongst workers for scarce employment opportunities.{{Fact|date=October 2007}}.
   
Due to these deficiencies, many [[labor economics|labor market]] economists prefer to look at a range of economic statistics such as:
+
==Historical unemployment==
* Labor market participation rate (the percentage of people aged between 15 and 64 who are currently employed or searching for employment)
+
{{ambox
* The total number of full-time jobs in an economy
+
| type = content
* The number of people seeking work as a raw number and not a percentage
+
| text = This section is suspect and may represent a minority view.
* The total number of person-hours worked in a month compared to the total number of person-hours people would like to work
+
}}
   
=== The limits of the unemployment definition ===
+
Preliterate communities treat their members as parts of an extended family and thus do not allow unemployment.{{Fact|date=February 2008}} In precapitalist 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 laborers 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.{{Fact|date=February 2008}}
   
For the fourth quarter of 2004, according to [[Organisation for Economic Co-operation and Development|OECD]], (source [http://www.oecd.org/dataoecd/36/30/35024561.pdf Employment Outlook 2005 ISBN 92-64-01045-9]), normalized unemployment for men aged 25 to 54 was 4.6% in the USA and 7.4% in [[France]]. At the same time and for the same population the employment rate (number of workers divided by population) was 86.3% in the USA and 86.7% in France.
+
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%.<ref>[http://eh.net/encyclopedia/article/Steindl.GD.Recovery Economic Recovery in the Great Depression], Frank G. Steindl, Oklahoma State University</ref> In 1933, 25% of all American workers and 37% of all nonfarm workers were unemployed.<ref>[http://www.econlib.org/library/Enc/GreatDepression.html Great Depression], The Concise Encyclopedia of Economics</ref> In Cleveland, Ohio, the unemployment rate was 60%; in Toledo, Ohio, 80%.<ref name=Depression>[http://amhist.ist.unomaha.edu/lessons/Ruben%20Cano_Why%20did%20the%20Great%20Depression%20happen%3F_lesson_template_mps.doc Overproduction of Goods, Unequal Distribution of Wealth, High Unemployment, and Massive Poverty], From: President’s Economic Council</ref> Unemployment in [[Canada]] reached 27% at the depth of the Depression in 1933.<ref>[http://www.canadianeconomy.gc.ca/English/economy/1929_39depression.html 1929–1939 – The Great Depression], Source: Bank of Canada</ref> In some towns and cities in the north east of [[England]], unemployment reached as high as 70%.<ref>[http://knowledgerush.com/kr/encyclopedia/Great_Depression_(United_Kingdom)/ Great Depression (United Kingdom)], Knowledgerush.com</ref> In Germany the unemployment rate reached nearly 25% in 1932.<ref>[http://www.english.uiuc.edu/maps/depression/about.htm About the Great Depression], University of Illinois</ref> One Soviet trading corporation in New York averaged 350 applications a day from Americans seeking jobs in the Soviet Union.<ref>[http://www.usnews.com/usnews/culture/articles/030630/3070thanniv.htm A reign of rural terror, a world away], U.S. News, June 22, 2003</ref> There were two million homeless people migrating across the United States. One Arkansas man walked 900 miles looking for work.<ref name=Depression/>
   
This example shows that the unemployment rate is 60% higher in France than in the USA, yet more people in this demographic are working in France than in the USA, which is counterintuitive if it is expected that the unemployment rate reflects the health of the labor market.
+
Under both ancient and modern systems of [[Slavery|slave-labor]], slave-owners never let their property be unemployed for long. (If anything, they would sell the unneeded laborer.) [[central planning|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]], definition 3.){{Fact|date=February 2008}} [[Cooperatives#Worker cooperative|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.{{Fact|date=February 2008}}
   
This is because the definition of unemployment relies on the distinction between inactive and unemployed, a quite subjective measure which can be easily manipulated by policies that do not change the situation of the labor market, but decrease unemployment by shifting people from unemployed to inactive status.
+
==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:
   
===Situation in the United States===
 
[[Image:USA states unemployment 2004.PNG|thumb|Unemployment rate for US states in 2004]]
 
There are two permanent government projects conducted by the [[United States Census Bureau]] (within the [[United States Department of Commerce]]) and/or the [[Bureau of Labor Statistics]]
 
(within the [[United States Department of Labor]]) that gather employment statistics monthly.
 
One is the [[Current Population Survey]] (CPS) [http://www.bls.gov/cps] which surveys 60,000 households: it is used in calculating the unemployment rate. The other is the Current Employment Statistics (CES) which surveys 300,000 employers.
 
   
These two sources have different classification criteria, and usually produce differing results. As noted, most economists these days see the CES as a more accurate estimate of the state of the job market. Because the CES only surveys employers, it does not produce an unemployment rate statistic.
+
<math>\text{Unemployment Rate}=\frac{\text{Unemployed Workers}}{\text{Total Labor Force}}</math>
   
Though many people care about the number of unemployed (6.8 million in the U.S. in November 2006), economists typically focus on the unemployment rate (4.5% in November 2006). This corrects for the normal increase in the number of people working for pay or seeking work due to population increases and increases in the paid labor force relative to the population &mdash; and thus the normal increase in the number of unemployed workers.
 
   
It is important to note that these statistics are for the U.S. economy as a whole, hiding variations among groups. For November 2006 in the U.S., the unemployment rates for the major worker groups were 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.<ref>International Labour Organization, Bureau of Statistics,[http://www.ilo.org/public/english/bureau/stat/download/res/ecacpop.pdf The Thirteenth International Conference of Labour Statisticians], received July 21, 2007</ref>
* adult men: 3.9 %
 
* adult women: 4.0 %
 
* Caucasians: 3.9 %
 
* Asians: 3.2 %
 
* Hispanics or Latinos (all races): 4.9 %
 
* African American Descent: 8.6 %
 
* teenagers: 15.1 %
 
   
These percentages represent the usual rough ranking of these different groups' unemployment rates, though the absolute numbers normally change over time with the [[business cycle]]. They come from [http://www.bls.gov/news.release/pdf/empsit.pdf the Bureau of Labor Statistics]. (Clicking on this link will lead to a pdf file with up-to-date numbers.)
+
Since not all unemployment may be "open" and counted by government agencies, official statistics on unemployment may not be accurate<ref>[http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/11/17/BU239666.DTL Official unemployment numbers omit discouraged seekers, part-time workers]</ref>.
  +
  +
The [[International Labor Organization| ILO]] describes 4 different methods to calculate the unemployment rate:<ref>International Labour Organization, LABORSTA,[http://laborsta.ilo.org/applv8/data/c3e.html], retrieved July 22,2007</ref>
  +
*''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 [[International Labour Organization| ILO]] definition.
  +
  +
===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 [[International Labour Office| ILO]] standards. Both the actual count and rate of employment are reported. Statistical data are available by member state, EU12, EU15, EU25, EU27, EA11, and EA13. 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.<ref>{{cite web|url=http://europa.eu.int/estatref/info/sdds/en/une/une_sm.htm#concepts|title=European Commission, Eurostat|accessmonthday=July 23|accessyear=2007}}</ref>
  +
  +
Three methods of data collection are used in the European Union. The European Union [[Labour Force Survey]] (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. Monthly unemployment rates are interpolated from monthly data from member states to provide "harmonized data."<ref>{{cite web|url=http://europa.eu.int/estatref/info/sdds/en/une/une_sm.htm#compilation|title=European Commission, Eurostat|accessmonthday=July 23|accessyear=2007}}</ref>
  +
  +
At this time [[Germany]]'s unemployment data are collected separately from the (EU-LFS).
  +
  +
===United States Bureau of Labor Statistics===
  +
[[Image:USA states unemployment 2004.PNG|thumb|Unemployment rate for US states in 2004]]The [[Bureau of Labor Statistics]] measures employment and unemployment (of those over 15 years of age) using two different labor force surveys<ref> United States, Bureau of Labor Statistics,[http://www.bls.gov/cps/cps_faq.htm], retrieved July 23, 2007</ref> conducted by the [[United States Census Bureau]] (within the [[United States Department of Commerce]]) and/or the [[Bureau of Labor Statistics]] (within the [[United States Department of Labor]]) that gather employment statistics monthly. The [[Current Population Survey]] (CPS), or "Household Survey", conducts a survey based on a sample of 60,000 households. This Survey measures the unemployment rate based on the ILO definition.<ref>U.S. Department of Labor, Bureau of Labor Statistics, [http://www.bls.gov/cps/cps_over.htm#overview Current Population Survey overview], retrieved May 25, 2007</ref>The data are also used to calculate 5 other unemployment rates as a percentage of the labor force based on different definitions noted as U1 through U6:<ref>U.S. Department of Labor, Bureau of Labor Statistics, [http://www.bls.gov/webapps/legacy/cpsatab12.htm], retrieved August 22, 2007</ref>
  +
*U1: Percentage of labor force unemployed 15 weeks or longer.
  +
*U2: Percentage of labor force who lost jobs or completed temporary work.
  +
*U3: Official unemployment rate per ILO definition.
  +
*U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
  +
*U5: U4 + other "marginally attached workers", or those who "would like" and are able to work, but have not looked for work recently.
  +
*U6: U5 + Part time workers who want to work full time, but can not due to economic reasons.
  +
''Note: "Marginally attached workers" are added to the total labor force for unemployment rate calculation for U4, U5, and U6.''
  +
  +
The Current Employment Statistics survey (CES), or "Payroll Survey", conducts a survey based on a sample of 160,000 businesses and government agencies that represent 400,000 individual employers.<ref name=c> U.S. Department of Labor, Bureau of Labor Statistics, "[http://www.bls.gov/news.release/pdf/empsit.pdf The Employment Situation: January 2008]", January 2008</ref> This survey measures only nonagricultural, nonsupervisory employment; thus, it does not calculate an unemployment rate, and it differs from the ILO unemployment rate definition. These two sources have different classification criteria, and usually produce differing results. Additional data are also available from the government, such as the unemployment insurance weekly claims report available from the Office of Workforce Security, within the U.S. Department of Labor Employment & Training Administration.<ref>U.S. Department of Labor, Employment & Training Administration, Office of Workforce Security, [http://workforcesecurity.doleta.gov/unemploy/claims_arch.asp UI Weekly Claims]</ref>
  +
  +
These statistics are for the U.S. economy as a whole, hiding variations among groups. For January 2008 in the U.S. the unemployment rates were 4.4% for adult men, 4.2% for adult women, 4.4% for Caucasians, 6.3% for Hispanics or Latinos (all races), 9.2% for African Americans, 3.2% for Asian Americans, and 18.0% for teenagers.<ref name=c/>
  +
  +
These percentages represent the usual rough ranking of these different groups' unemployment rates. The absolute numbers change over time and with the [[business cycle]]. The Bureau of Labor Statistics provides up-to-date numbers via a pdf linked [http://www.bls.gov/news.release/pdf/empsit.pdf here]. The BLS also provides a readable concise current Employment Situation Summary, updated monthly.<ref>[http://stats.bls.gov/news.release/empsit.nr0.htm Employment Situation Summary<!-- Bot generated title -->]</ref>
  +
  +
===Limitations of the unemployment definition===
  +
The unemployment rate may be different from the impact of the economy on people. The unemployment figures indicate how many are not working for pay but seeking employment for pay. It is only indirectly connected with the number of people who are actually not working at all or working without pay. Therefore, critics believe that current methods of measuring unemployment are inaccurate in terms of the impact of unemployment on people as these methods do not take into account the 1.5% of the available working population incarcerated in U.S. prisons (who may or may not be working while incarcerated), those who have lost their jobs and have become [[discouraged worker|discouraged]] over time from actively looking for work, those who are [[self-employed]] or wish to become self-employed, such as tradesmen or building contractors or IT consultants, those who have retired before the official retirement age but would still like to work (involuntary early retirees), those on [[disability]] pensions who, while not possessing full health, still wish to work in occupations suitable for their medical conditions, those who work for payment for as little as one hour per week but would like to work full-time. These people are "involuntary part-time" workers, those who are underemployed, e.g., a computer programmer who is working in a retail store until he can find a permanent job, involuntary stay-at-home mothers who would prefer to work, and graduate and Professional school students who were unable to find worthwhile jobs after they graduated with their Bachelor's degrees.
  +
  +
On the other hand, the measures of employment and unemployment may be "too high". In some countries, the availability of [[unemployment benefits]] can inflate statistics since they give an incentive to register as unemployed. People who do not really seek work may choose to declare themselves unemployed so as to get benefits; people with undeclared paid occupations may try to get unemployment benefits in addition to the money they earn from their work. Conversely, the absence of any tangible benefit for registering as unemployed discourages people from registering.
  +
  +
However, in countries such as the United States, Canada, Mexico, Australia, Japan and the European Union, unemployment is measured using a sample survey (akin to a Gallup poll). According to the BLS, a number of Eastern European nations have instituted labor force surveys as well. The sample survey has its own problems because the total number of workers in the economy is calculated based on a sample rather than a census.
  +
  +
It is possible to be neither employed nor unemployed by ILO definitions, i.e., to be outside of the "labor force." These are people who have no job and are not looking for one. Many of these are going to school or are retired. Family responsibilities keep others out of the labor force. Still others have a physical or mental disability which prevents them from participating in labor force activities.
  +
  +
Typically, employment and the labor force include only work done for monetary gain. Hence, a [[homemaker]] is neither part of the labor force nor unemployed. Nor are full-time students nor prisoners considered to be part of the labor force or unemployment. The latter can be important. In 1999, economists Lawrence F. Katz and Alan B. Krueger estimated that increased incarceration lowered measured unemployment in the United States by 0.17% between 1985 and the late 1990s. In particular, as of 2005, roughly 0.7% of the US population is incarcerated (1.5% of the available working population).
  +
  +
Children, the elderly, and some individuals with disabilities are typically not counted as part of the labor force in and are correspondingly not included in the unemployment statistics. However, some elderly and many disabled individuals are active in the labor market.
  +
  +
In the early stages of an [[Boom and bust|economic boom]], unemployment often rises. This is because people join the labor market (give up studying, start a job hunt, etc.) because of the improving job market, but until they have actually found a position they are counted as unemployed. Similarly, during a [[recession]], the increase in the unemployment rate is moderated by people leaving the labor force or being otherwise discounted from the labor force, such as with the self-employed.
  +
  +
For the fourth quarter of 2004, according to [[Organisation for Economic Co-operation and Development|OECD]], (source [http://www.oecd.org/dataoecd/36/30/35024561.pdf Employment Outlook 2005 ISBN 92-64-01045-9]), normalized unemployment for men aged 25 to 54 was 4.6% in the USA and 7.4% in [[France]]. At the same time and for the same population the employment rate (number of workers divided by population) was 86.3% in the U.S. and 86.7% in France.
  +
  +
This example shows that the unemployment rate is 60% higher in France than in the USA, yet more people in this demographic are working in France than in the USA, which is counterintuitive if it is expected that the unemployment rate reflects the health of the labor market.<ref>{{cite web|url=http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=01&year=2007&base_name=wall_street_journal_gets_germa&162#comment-1679545|title=Dean Baker, Center for Economic and Policy Research}} </ref> <ref>Raymond Torres, OECD head of Employment Analysis, [http://www.lemonde.fr/web/article/0,1-0@2-823448,36-917229@51-628862,0.html ''Le Monde'', 30 mai 2007] : ''unemployment measure is less and less meaningful to measure labour market efficiency.''</ref>.
  +
  +
Due to these deficiencies, many [[labor economics|labor market]] economists prefer to look at a range of economic statistics such as labor market participation rate, the percentage of people aged between 15 and 64 who are currently employed or searching for employment, the total number of full-time jobs in an economy, the number of people seeking work as a raw number and not a percentage, and the total number of person-hours worked in a month compared to the total number of person-hours people would like to work. In particular the [[NBER]] does not use the unemployment rate but prefer various employment rates to date recessions <ref>[http://wwwdev.nber.org/dec2008.html ''Determination of the December 2007 Peak in Economic Activity'', November 28, 2008]</ref>.
   
 
==Aiding the unemployed==
 
==Aiding the unemployed==
The most developed countries have aids for the unemployed as part of the welfare state. These unemployment benefits include unemployment insurance, welfare, [[unemployment compensation]] and subsidies to aid in retraining. The main goal of these programs is to alleviate short-term hardships and, more importantly, to allow workers more time to search for a good job.
+
The most developed countries have aids for the unemployed as part of the social welfare. These unemployment benefits include unemployment insurance, welfare, [[unemployment compensation]] and subsidies to aid in retraining. The main goal of these programs is to alleviate short-term hardships and, more importantly, to allow workers more time to search for a good job.
   
In the U.S., the unemployement insurance allowance one receives is based solely on previous income (not time worked, family size, etc.) and usually compensates for one-third of one's previous income. To qualify, one must reside in their respective state for at least a year and, of course, work. While 90% of citizens are covered on paper, only 40% could actually receive benefits as unemployment is based on an antiquated system created in the [[Social Security Act of 1935]]. In cases of highly seasonal industries the system provides income to workers during the off seasons, thus encouraging them to stay attached to the industry. To calculate the unemployment insurance benefits you might receive, see the page at the [http://www.epinet.org/content.cfm/datazone_uicalc_index Economic Policy Institute].
+
In the U.S. the unemployment insurance allowance one receives is based solely on previous income (not time worked, family size, etc.) and usually compensates for one-third of one's previous income. To qualify, one must reside in their respective state for at least a year and, of course, work. The system was established by the [[Social Security Act of 1935]]. While 90% of citizens are covered on paper, only 40% could actually receive benefits.{{Fact|date=December 2007}} In cases of highly seasonal industries the system provides income to workers during the off seasons, thus encouraging them to stay attached to the industry.
   
  +
In the United States the [[New Deal]] made unemployment relief a top governmental priority. The goal of the [[Works Progress Administration]] (WPA) was to employ most of the unemployed people on relief until the economy recovered. FERA/WPA director [[Harry Hopkins]] testified to Congress in January 1935 why he set the number at 3.5 million, using FERA data. At $1200 per worker per year he asked for and received $4 billion.
   
In the United States, the [[New Deal]] made relief of the unemployed a high priority, with many different programs. The goal of the [[Works Progress Administration]] (WPA) was to employ most of the unemployed people on relief until the economy recovered. FERA/WPA director [[Harry Hopkins]] testified to Congress in January 1935 why he set the number at 3.5 million, using FERA data. At $1200 per worker per year he asked for and received $4 billion.
 
 
<blockquote>
 
<blockquote>
"On January 1 there were 20 million persons on relief in the United States. Of these, 8.3 million were children under sixteen years of age; 3.8 million were persons who, though
+
"On January 1 there were 20 million persons on relief in the United States. Of these, 8.3 million were children under sixteen years of age; 3.8 million were persons who, though between the ages of sixteen and sixty-five were not working nor seeking work. These included housewives, students in school, and incapacitated persons. Another 750,000 were persons sixty-five years of age or over. Thus, of the total of 20 million persons then receiving relief, 12.85 million were not considered eligible for employment. This left a total of 7.15 million presumably employable persons between the ages of sixteen and sixty-five inclusive. Of these, however, 1.65 million were said to be farm operators or persons who had some non-relief employment, while another 350,000 were, despite the fact that they were already employed or seeking work, considered incapacitated. Deducting this two million from the total of 7.15 million, there remained 5.15 million persons sixteen to sixty-five years of age, unemployed, looking for work, and able to work. Because of the assumption that only one worker per family would be permitted to work under the proposed program, this total of 5.15 million was further reduced by 1.6 million--the estimated number of workers who were members of families which included two or more employable persons. Thus, there remained a net total of 3.55 million workers in as many households for whom jobs were to be provided." [Howard p 562, paraphrasing Hopkins]
between the ages of sixteen and sixty-five were not working nor
 
seeking work. These included housewives, students in school,
 
and incapacitated persons. Another 750,000 were persons sixty-
 
five years of age or over. Thus, of the total of 20 million persons then receiving relief, 12.85 million were not considered eligible for employment. This left a total of 7.15 million presumably employable persons between the ages of sixteen and sixty-five inclusive. Of these, however, 1.65 million were said to be farm operators or persons who had some non-relief employment, while another 350,000 were, despite the fact that they were already employed or seeking work, considered incapacitated. Deducting this two million from the total of 7.15 million, there remained 5.15 million persons sixteen to sixty-five years of age, unemployed, looking for work, and able to work. Because of the assumption that only one worker per family would be permitted to work under the proposed program, this total of 5.15 million was further reduced by 1.6 million--the estimated number of workers who were members of families which included two or more employable persons. Thus, there remained a net total of 3.55 million workers in as many households for whom jobs were to be provided." [Howard p 562, paraphrasing Hopkins]
 
 
</blockquote>
 
</blockquote>
   
The WPA did not quite reach 3.5 million--its maximum was 3.3 million in November 1938. Worker pay was based on three factors: the region of the country, the degree of urbanization and the individual's skill. It varied from $19/month to $94/month. The goal was to pay the local prevailing wage, but to limit a person to 30 hours or less a week of work. About 75 percent of WPA employment and 75 percent of WPA expenditures went to public infrastructure, such as highways, airports, parks and libraries.
+
The WPA did not quite reach 3.5 million--its maximum was 3.3 million in November 1938. Worker pay was based on three factors: the region of the country, the degree of urbanization and the individual's skill. It varied from $19/month to $94/month. The goal was to pay the local prevailing wage, but to limit a person to 30 hours or less a week of work. About 75% of WPA employment and 75% of WPA expenditures went to public infrastructure, such as highways, airports, parks and libraries.
  +
  +
The WPA had numerous critics who said that political considerations helped decide which states received the most funding. Civil rights leaders often complained that African Americans were proportionally underrepresented. In New Jersey, they argued, "In spite of the fact that Negroes indubitably constitute more than 20% of the State's unemployed, they composed 15.9% of those assigned to W.P.A. jobs during 1937." [Howard 287] Nationwide in late 1937, 15.2% were African American. The NAACP magazine ''Opportunity'' hailed the WPA: [February, 1939, p. 34. in Howard 295]
   
The WPA had numerous critics who said that political considerations helped decide which states received the most funding. Civil rights leaders often complained that African Americans were proportionally underrepresented. In New Jersey, they argued, "In spite of the fact that Negroes indubitably constitute more than 20 per cent of the State's unemployed, they composed 15.9 per cent of those assigned to W.P.A. jobs during 1937." [Howard 287] Nationwide in late 1937, 15.2% were African American. The NAACP magazine ''Opportunity'' hailed the WPA: [February, 1939, p. 34. in Howard 295]
 
 
<blockquote>
 
<blockquote>
 
It is to the eternal credit of the administrative officers of the WPA that discrimination on various projects because of race has been kept to a minimum and that in almost every community Negroes have been given a chance to participate in the work program. In the South, as might have been expected, this participation has been limited, and differential wages on the basis of race have been more or less effectively established; but in the northern communities, particularly in the urban centers, the Negro has been afforded his first real opportunity for employment in white-collar occupations
 
It is to the eternal credit of the administrative officers of the WPA that discrimination on various projects because of race has been kept to a minimum and that in almost every community Negroes have been given a chance to participate in the work program. In the South, as might have been expected, this participation has been limited, and differential wages on the basis of race have been more or less effectively established; but in the northern communities, particularly in the urban centers, the Negro has been afforded his first real opportunity for employment in white-collar occupations
 
</blockquote>
 
</blockquote>
   
When unemployment disappeared in [[World War II]], and almost no one was eligible, Congress shut down the WPA in late 1943.
+
Congress shut down the WPA in late 1943 as [[World War II]] created thousands of jobs in the military.
   
The statistics show:
+
[[Image:Bundesarchiv Bild 183-R79053, Arbeitsloser auf Arbeitssuche.jpg|thumb|Unemployed man looking for a job in [[1928]]]]
<big><CENTER>'''Families on relief 1935-41'''</CENTER></big>
+
<TABLE BORDER>
+
{| class="wikitable"
<TR> <TD colspan=7>Relief cases 1936-1941<BR />Monthly average in 1,000</TD> </TR>
+
|+ Families on relief 1935–41<br />
<TR> <TD>Year</TD> <TD><B>
+
Relief cases 1936-1941<br />
1936</B></FONT></TD><TD><B>
+
Monthly average in 1,000
1937</B></FONT></TD><TD><B>
+
|-
1938</B></FONT></TD><TD><B>
+
! Year
1939</B></FONT></TD><TD><B>
+
! 1936
1940</B></FONT></TD><TD><B>
+
! 1937
1941</B></FONT></TD> </TR>
+
! 1938
<TR> <TD><I>
+
! 1939
Workers employed:</I></FONT></TD> <TD colspan=6>&nbsp;</TD> </TR>
+
! 1940
<TR> <TD>
+
! 1941
WPA</FONT></TD><TD QP::NUMFORMAT:="96,-1,1995">
+
|-
1,995</FONT></TD><TD QP::NUMFORMAT:="96,-1,2227">
+
|colspan="7"| ''Workers employed''
2,227</FONT></TD><TD QP::NUMFORMAT:="96,-1,1932">
+
|-
1,932</FONT></TD><TD QP::NUMFORMAT:="96,-1,2911">
+
! WPA
2,911</FONT></TD><TD QP::NUMFORMAT:="96,-1,1971">
+
| 1,995
1,971</FONT></TD><TD QP::NUMFORMAT:="96,-1,1638">
+
| 2,227
1,638</FONT></TD> </TR>
+
| 1,932
<TR> <TD>
+
| 2,911
CCC and NYA</FONT></TD><TD>
+
| 1,971
712</FONT></TD><TD>
+
| 1,638
801</FONT></TD><TD>
+
|-
643</FONT></TD><TD>
+
! CCC and NYA
793</FONT></TD><TD>
+
| 712
877</FONT></TD><TD>
+
| 801
919</FONT></TD> </TR>
+
| 643
<TR> <TD>
+
| 793
Other federal work projects</FONT></TD><TD>
+
| 877
554</FONT></TD><TD>
+
| 919
663</FONT></TD><TD>
+
|-
452</FONT></TD><TD>
+
! Other federal work projects
488</FONT></TD><TD>
+
| 554
468</FONT></TD><TD>
+
| 663
681</FONT></TD> </TR>
+
| 452
<TR> <TD><I>
+
| 488
Public assistance cases:</I></FONT></TD> <TD colspan=6>&nbsp;</TD> </TR>
+
| 468
<TR> <TD>
+
| 681
Social security programs</FONT></TD><TD>
+
|-
602</FONT></TD><TD QP::NUMFORMAT:="96,-1,1306">
+
|colspan="7"| ''Public assistance cases''
1,306</FONT></TD><TD QP::NUMFORMAT:="96,-1,1852">
+
|-
1,852</FONT></TD><TD QP::NUMFORMAT:="96,-1,2132">
+
! Social security programs
2,132</FONT></TD><TD QP::NUMFORMAT:="96,-1,2308">
+
| 602
2,308</FONT></TD><TD QP::NUMFORMAT:="96,-1,2517">
+
| 1,306
2,517</FONT></TD> </TR>
+
| 1,852
<TR> <TD>
+
| 2,132
General relief</FONT></TD><TD QP::NUMFORMAT:="96,-1,2946">
+
| 2,308
2,946</FONT></TD><TD QP::NUMFORMAT:="96,-1,1484">
+
| 2,517
1,484</FONT></TD><TD QP::NUMFORMAT:="96,-1,1611">
+
|-
1,611</FONT></TD><TD QP::NUMFORMAT:="96,-1,1647">
+
! General relief
1,647</FONT></TD><TD QP::NUMFORMAT:="96,-1,1570">
+
| 2,946
1,570</FONT></TD><TD QP::NUMFORMAT:="96,-1,1206">
+
| 1,484
1,206</FONT></TD> </TR>
+
| 1,611
<TR>
+
| 1,647
<TD><I>
+
| 1,570
Total families helped</I></FONT></TD> <TD QP::NUMFORMAT:="96,-1,5886">
+
| 1,206
5,886</FONT></TD><TD QP::NUMFORMAT:="96,-1,5660">
+
|-
5,660</FONT></TD><TD QP::NUMFORMAT:="96,-1,5474">
+
! Total families helped
5,474</FONT></TD><TD QP::NUMFORMAT:="96,-1,6751">
+
| 5,886
6,751</FONT></TD><TD QP::NUMFORMAT:="96,-1,5860">
+
| 5,660
5,860</FONT></TD><TD QP::NUMFORMAT:="96,-1,5167">
+
| 5,474
5,167</FONT></TD> </TR>
+
| 6,751
<TR> <TD>
+
| 5,860
Unemployed workers (Bur Lab Stat)</FONT></TD><TD QP::NUMFORMAT:="96,-1,@ROUND(+B14,-2)">
+
| 5,167
9,030</FONT></TD><TD QP::NUMFORMAT:="96,-1,@ROUND(+C14,-2)">
+
|-
7,700</FONT></TD><TD QP::NUMFORMAT:="96,-1,@ROUND(+D14,-2)">
+
! Unemployed workers (Bur Lab Stat)
10,390</FONT></TD><TD QP::NUMFORMAT:="96,-1,@ROUND(+E14,-2)">
+
| 9,030
9,480</FONT></TD><TD QP::NUMFORMAT:="96,-1,@ROUND(+F14,-2)">
+
| 7,700
8,120</FONT></TD><TD QP::NUMFORMAT:="96,-1,@ROUND(+G14,-2)">
+
| 10,390
5,560</FONT></TD> </TR>
+
| 9,480
<TR> <TD>
+
| 8,120
Coverage (cases/unemployed)</TD><TD QP::NUMFORMAT:="288,-1,+B11/B15">
+
| 5,560
65%</TD><TD QP::NUMFORMAT:="288,-1,+C11/C15">
+
|-
74%</TD><TD QP::NUMFORMAT:="288,-1,+D11/D15">
+
! Coverage (cases/unemployed)
53%</TD><TD QP::NUMFORMAT:="288,-1,+E11/E15">
+
| 65%
71%</TD><TD QP::NUMFORMAT:="288,-1,+F11/F15">
+
| 74%
72%</TD><TD QP::NUMFORMAT:="288,-1,+G11/G15">
+
| 53%
93%</TD> </TR>
+
| 71%
</TABLE>
+
| 72%
  +
| 93%
  +
|}
 
source: Donald S. Howard, ''WPA and Federal Relief Policy.'' 1943 p 34.
 
source: Donald S. Howard, ''WPA and Federal Relief Policy.'' 1943 p 34.
<TABLE BORDER>
+
{| class="wikitable"
<TR>
+
|-
<TD> Year </TD>
+
! Year
<TD> Unemployment (% labor force)</TD>
+
! Unemployment (% labor force)
</TR>
+
|-
<TR> <TD>
+
! 1933
1933</TD> <TD align=center QP::NUMFORMAT:="33,-1,24.9">
+
| 24.9
24.9</TD> </TR>
+
|-
<TR> <TD>
+
! 1934
1934</TD> <TD align=center QP::NUMFORMAT:="33,-1,21.7">
+
| 21.7
21.7</TD> </TR>
+
|-
<TR> <TD>
+
! 1935
1935</TD> <TD align=center QP::NUMFORMAT:="33,-1,20.1">
+
| 20.1
20.1</TD> </TR>
+
|-
<TR> <TD>
+
! 1936
1936</TD> <TD align=center QP::NUMFORMAT:="33,-1,16.9">
+
| 16.9
16.9</TD> </TR>
+
|-
<TR> <TD>
+
! 1937
1937</TD> <TD align=center QP::NUMFORMAT:="33,-1,14.3">
+
| 14.3
14.3</TD> </TR>
+
|-
<TR> <TD>
+
! 1938
1938</TD> <TD align=center QP::NUMFORMAT:="33,-1,19">
+
| 19.0
19.0</TD> </TR>
+
|-
<TR> <TD>
+
! 1939
1939</TD> <TD align=center QP::NUMFORMAT:="33,-1,17.2">
+
| 17.2
17.2</TD> </TR>
+
|-
<TR> <TD>
+
! 1940
1940</TD> <TD align=center QP::NUMFORMAT:="33,-1,14.6">
+
| 14.6
14.6</TD> </TR>
+
|-
<TR> <TD>
+
! 1941
1941</TD> <TD align=center QP::NUMFORMAT:="33,-1,9.9">
+
| 9.9
9.9</TD> </TR>
+
|-
<TR> <TD>
+
! 1942
1942</TD> <TD align=center QP::NUMFORMAT:="33,-1,4.7">
+
| 4.7
4.7</TD> </TR>
+
|-
<TR> <TD>
+
! 1943
1943</TD> <TD align=center QP::NUMFORMAT:="33,-1,1.9">
+
| 1.9
1.9</TD> </TR>
+
|-
<TR> <TD>
+
! 1944
1944</TD> <TD align=center QP::NUMFORMAT:="33,-1,1.2">
+
| 1.2
1.2</TD> </TR>
+
|-
<TR> <TD>
+
! 1945
1945</TD> <TD align=center QP::NUMFORMAT:="33,-1,1.9">
+
| 1.9
1.9</TD> </TR>
+
|}
<TR>
 
</TABLE>
 
 
source: ''Historical Statistics US'' (1976) series D-86
 
source: ''Historical Statistics US'' (1976) series D-86
   
==See also==
+
See also [[welfare]] and [[training]].
*[[Beveridge curve]]
+
*[[Economic collapse]]
+
==Involuntary unemployment==
*[[Begging]]
+
[[Say's law]] declares that, in time, "markets clear" in an unfettered, unregulated laissez-faire economy: every seller will find a buyer at some strike price, and every buyer will find a seller at some strike price. Sellers and buyers may refuse the strike price but this personal decision is voluntary, which causes the selling or buying to leave the economic model. This theory relies heavily on the absence of government regulation and assumes a developed economy without sabotage where labor strikes, as opposed to strike (mutually agreed upon) prices, are illegal.{{Fact|date=November 2007}}
*[[Unemployment benefit]]
+
*[[Wage slavery]]
+
Keynes tried to demonstrate in ''The General Theory of Employment, Interest and Money'' that Say's law did not work in the real world of the 1930s Depression because of oversaving and private investor timidity, and that in consequence people could be thrown out of work involuntarily without being able to find acceptable new jobs.
*[[Reserve army of labor]]
+
*[[List of countries by unemployment rate]]
+
This conflict of 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. This tends to broaden the "market" to a national level far beyond that with which most people are comfortable.
*[[List of U.S. states by unemployment rate]]
+
*[[Unemployment types]]
+
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, given that, in such societies, the suddenly unemployed person must meet his survival needs, by getting a new job quickly at any strike price, entrepreneurship, or joining the invisible economy of the hustler.<ref name=d>{{cite book|last=Bourdieu|first=Pierre|year=|title=THE WEIGHT OF THE WORLD: Social Suffering in Contemporary Society|pages=}}</ref>
  +
  +
From the narrative standpoint, involuntary unemployment is discussed in the stories by [[Barbara Ehrenreich|Ehrenreich]], the narrative sociology of [[Pierre Bourdieu|Bourdieu]], and novels of social suffering such as [[John Steinbeck]]'s ''[[Of Mice and Men]]''.
  +
  +
==Benefits==
  +
{{Main|Full employment}}
  +
Unemployment may have advantages as well as disadvantages for the overall economy. Notably, it may help avert runaway [[inflation]], which negatively affects almost everyone in the affected economy and has serious long-term economic costs. However the historic assumption that full local employment must lead directly to local inflation has been attenuated, as recently expanded international trade has shown itself able to continue to supply low-priced goods even as local employment rates rise closer to full employment.{{Fact|date=October 2007}}
  +
  +
The inflation-fighting benefits to the ''entire economy'' arising from a presumed optimum level of unemployment has been studied extensively. Before current levels of world trade were developed, unemployment was demonstrated to reduce inflation, following the [[Phillips curve]], or to decelerate inflation, following the NAIRU/[[natural rate of unemployment]] theory.{{Fact|date=October 2007}}
  +
  +
Beyond the benefits of controlled inflation, [[Unemployment types#Frictional unemployment|frictional unemployment]] provides employers a larger applicant pool from which to select employees better suited to available jobs. The unemployment needed for this purpose may be very small, however, since it is relatively easy to seek a new job without losing one's current one. And when more jobs are available for fewer workers (lower unemployment), it may allow workers to find the jobs that better fit their tastes, talents, and needs.
  +
  +
As in the Marxian theory of unemployment, [[special interests]] may also benefit: some employers may expect that employees with no fear of losing their jobs will not work as hard, or will demand increased wages and benefit. According to this theory, unemployment may promote general [[Productivity (economics)|labor productivity]] and [[profit]]ability by increasing employers' [[monopsony]]-like power (and profits).
  +
  +
Optimal unemployment has also been defended as an environmental tool to brake the constantly accelerated growth of the GDP to maintain levels sustainable in the context of resource constraints and environmental impacts. However the tool of denying jobs to willing workers seems a blunt instrument for conserving resources and the environment -- it reduces the consumption of the unemployed across the board, and only in the short-term. Full employment of the unemployed workforce, all focused toward the goal of developing more environmentally efficient methods for production and consumption might provide a more significant and lasting cumulative environmental benefit and reduced resource consumption.<ref>http://treehugger.com/files/2008/02/4_reasons_recession_bad_environment.php Counter-Point: 4 Reasons Why Recession is BAD for the Environment
  +
by Michael Graham Richard, Gatineau, Canada on 02. 6.08
  +
Business & Politics </ref> If so the future economy and workforce would benefit from the resultant structural increases in the sustainable level of GDP growth.
  +
  +
Some critics of the "culture of work" such as anarchist [[Bob Black]] see employment as overemphasized culturally in modern countries. Such critics often propose quitting jobs when possible, working less, reassessing the cost of living to this end, creation of jobs which are "fun" as opposed to "work," and creating cultural norms where work is seen as unhealthy. These people advocate an "[[anti-work]]" ethic for life.{{Fact|date=November 2008}}
  +
  +
== See also ==
  +
* [[Employment gap]]
  +
* [[Employment history]]
  +
* [[Employment rate]]
  +
* [[Job search]]
  +
* [[Job security]]
  +
* [[List of countries by unemployment rate]]
  +
* [[List of U.S. states by unemployment rate]]
  +
* [[Personnel]]
  +
* [[Personnel termination]]
  +
* [[Poverty]]
  +
* [[Remployment]]
  +
* [[Retirement]
  +
* [[Underemployment]]
  +
* [[Unemployment benefit]]
  +
* [[Workfare]]
  +
  +
  +
== References ==
  +
{{Reflist}}
  +
  +
== External links ==
  +
* [http://www.epinet.org/content.cfm/datazone_uicalc_index Economic Policy Institute]
  +
* [http://www.blogmybrain.com/stock_apps/graphical_economy/Employment%20vs.%20Unemployment/n00/00r/a U.S. Unemployment Rate] time-series chart of the United States Historical Unemployment Rate
  +
*[http://www.nationmaster.com/graph/lab_une_rat-labor-unemployment-rate Current unemployment rates by country]
  +
*[http://stats.oecd.org/wbos/Index.aspx?QueryId=251 OECD Unemployment statistics]
  +
*[http://www.loans4unemployed.co.uk Unemployed Loans in the UK]
  +
  +
{{Employment}}
   
==Bibliography==
 
* Mario Baldassarri. ''The New Welfare: Unemployment and Social Security in Europe'' (2003)
 
* Ray Barrell. ''The UK Labour Market: Comparative Aspects and Institutional Developments'' (National Institute of Economic and Social Research Economic and Social Studies) (1994)
 
* Baskerville, Peter and Sager, Eric W. "Unwilling Idlers: The Urban Unemployed and Their Families in Late Victorian Canada." U. of Toronto Pr., 1998. 294 pp.
 
* Benjamin, Daniel K & Kochin, Levis A, 1979. "Searching for an Explanation of Unemployment in Interwar Britain," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 441-78, June.
 
* Nancy Bermeo (Ed.), ''Unemployment in the New Europe'' (2001)
 
* Bix, Amy Sue. ''Inventing Ourselves Out of Jobs? America's Debate over Technological Unemployment, 1929-1981.'' Johns Hopkins U. Press, 2000. 376 pp.
 
* George J Borjas. ''Labor Economics'' (3rd ed.) (2004)
 
* Campbell R McConnell, Stanley L Brue, David Macpherson. ''Contemporary Labor Economics'' (7th ed.) (2005)
 
* Ronald G. Ehrenberg and Robert S. Smith, ''Modern Labor Economics: Theory and Public Policy'' (9th Edition) (2005)
 
* Folsom, Franklin, ''Impatient Armies of the Poor: the Story of Collective Action of the Unemployed 1808 - 1942'', University Press of Colorado, (1991) (ISBN 0-87081-184-3)
 
* Duncan Gallie, Catherine Marsh, Carolyn Vogler. ''Social Change and the Experience of Unemployment'' (1994)
 
* Markus Gangl.''Unemployment Dynamics in the United States and West Germany'' (2003)
 
* John A. Garraty. ''Unemployment in history: Economic thought and public policy'' (1978) (ISBN 0-06-011457-6), focus on Europe & US in previous 100 years
 
* W. R. Garside. ''British Unemployment 1919-1939: A Study in Public Policy'' (2002)
 
* Gordon, Robert J. ''Productivity, Growth, Inflation, and Unemployment.'' Cambridge U. Press, 2004. 504 pp.
 
* Jensen, Richard J. "The Causes and Cures of Unemployment in the Great Depression," ''Journal of Interdisciplinary History'' 19 (1989) 553-83. [http://links.jstor.org/sici?sici=0022-1953(198921)19%3A4%3C553%3ATCACOU%3E2.0.CO%3B2-T online at JSTOR]
 
* Katz, Lawrence F. and Alan B. Krueger. 1999. The High-Pressure U.S. Labor Market of the 1990s. ''Brookings Papers on Economic Activity''. 1: 1-65. [www.krueger.princeton.edu/working_papers.html online]
 
* Keyssar, Alexander. ''Out of Work: The First Century of Unemployment in Massachusetts'' (1986) (ISBN 0-521-29767-2)
 
* Jeremy Moon and Jeremy John Richardson. ''Unemployment in the UK: Politics and Policies'' (1985)
 
* Singleton, Jeff. "The American Dole: Unemployment Relief and the Welfare State in the Great Depression." Greenwood, 2000. 256 pp.
 
*{{cite book |editor=Martin Werding, ed.| title=Structural Unemployment in Western Europe| url=http://mitpress.mit.edu/0262232464| year=2006 | publisher=[[The MIT Press]] | id=ISBN 0-262-23246-4}}
 
   
==External links==
 
*[http://www.job-hunt.org/state_unemployment_offices.shtml U.S. Employment Offices by State] - info on qualifying and registering for unemployment compensation, office locations, etc.
 
*[http://www.cepr.net/publications/jobs_machine_10_05_2006.pdf Whatever Happened to the American Jobs Machine?] CEPR, October 2006
 
*[http://www.bls.gov/cps/home.htm Current Population Survey Home Page]
 
*[http://encyclopedia.jrank.org/TUM_VAN/UNEMPLOYMENT.html Unemployment] - [[1911 Encyclopædia Britannica]] article
 
*[http://ashleymac.econ.vt.edu/ashley/3204/brenner.pdf "Influence of the Social Environment on Psychology: The Historical Perspective," in ''Stress and Mental Disorder'', ed. James E. Barrett (NY: Raven University Press, 1979)]
 
* [http://www.dollarsandsense.org/archives/2006/0906drdollar.html Discussion of relationship between unemployment and inflation] in [[Dollars & Sense]] magazine
 
* [http://hubpages.com/hub/Unemployment_Compensation_Ins_and_Outs Practical Advice for U.S. Unemployment Compensation Claimants] from [[HubPages]] article
 
   
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Panic1837
An 1837 political cartoon about unemployment in the United States.
Dr Joe KiffAdded by Dr Joe Kiff
Unemployment rate world from CIA figures
CIA figures for world unemployment rates, 2006
Dr Joe KiffAdded by Dr Joe Kiff

This is a background article. See psychology of unemployment for more detail of psychological issues involved.

File:Unemployment rate world from CIA figures2.PNG
CIA figures for world unemployment rates, 2006

Unemployment occurs when a person is available to work and currently seeking work, but the person is without work.[1] The prevalence of unemployment is usually measured using the unemployment rate, which is defined as the percentage of those in the labor force who are unemployed. The unemployment rate is also used in economic studies and economic indexes such as the United States' Conference Board's Index of Leading Indicators as a measure of the state of the macroeconomics.

There are a variety of different causes of unemployment, and disagreement on which causes are most important. Different schools of economic thought suggest different policies to address unemployment. Monetarists for example, believe that controlling inflation to facilitate growth and investment is more important, and will lead to increased employment in the long run. Keynesians on the other hand emphasize the smoothing out of business cycles by manipulating aggregate demand. There is also disagreement on how exactly to measure unemployment. Different countries experience different levels of unemployment; the USA currently experiences lower unemployment levels than the European Union,[2][3] and it also changes over time (e.g. the Great depression) throughout economic cycles.

Us unemployment rates 1950 2005
Unemployment rate as a percentage of the labor force in the United States according to the U.S. Bureau of Labor Statistics.
PhloxBotAdded by PhloxBot

Types Edit

Main article: Types of unemployment

According to economist Edmond Malinvaud, the type of unemployment that occurs depends on the situation at the goods market, rather than that they belong to opposing economic theories.[4] If the market for goods is a buyers' market (i.e.: sales are restricted by demand), Keynesian unemployment may ensue while a limiting production capacity is more consistent with classical unemployment.

A common typology of unemployment is the following:

Frictional unemploymentEdit

Frictional unemployment occurs when a worker moves from one job to another. While he searches for a job he is experiencing frictional unemployment. This applies for fresh graduates looking for employment as well. This is a productive part of the economy, increasing both the worker's long term welfare and economic efficiency. It is a result of imperfect information in the labour market, because if job seekers knew that they would be employed for a particular job vacancy, almost no time would be lost in getting a new job, eliminating this form of unemployment.

Classical unemploymentEdit

Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level. This is often ascribed to government intervention, as with the minimum wage, or labour unions. Some, such as Murray Rothbard,[5] suggest that even social taboos can prevent wages from falling to the market clearing level.

Structural unemploymentEdit

Structural unemployment is caused by a mismatch between jobs offered by employers and potential workers. This may pertain to geographical location, skills, and many other factors. If such a mismatch exists, frictional unemployment is likely to be more significant as well.

For example, in the late 1990s there was a tech bubble, creating demand for computer specialists. In 2000-2001 this bubble collapsed. A housing bubble soon formed, creating demand for real estate workers, and many computer workers had to retrain to find employment.

Seasonal unemployment occurs when an occupation is not in demand at certain seasons.

Cyclical or Keynesian unemploymentEdit

Cyclical or Keynesian unemployment, also known as demand deficient unemployment, occurs when there is not enough aggregate demand in the economy. This is caused by a business cycle recession, and wages not falling to meet the equilibrium rate.

CausesEdit

There is considerable debate among economists as to the causes of unemployment. Keynesian economics emphasizes unemployment resulting from insufficient effective demand for goods and services in the economy (cyclical unemployment). Others point to structural problems, inefficiencies, inherent in labour markets (structural unemployment). Classical or neoclassical economics tends to reject these explanations, and focuses more on rigidities imposed on the labor market from the outside, such as minimum wage laws, taxes, and other regulations that may discourage the hiring of workers (classical unemployment). Yet others see unemployment as largely due to voluntary choices by the unemployed (frictional unemployment).

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. 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 unemployment may result from the legislative and economic choices made by labor unions and/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, there would be unemployed workers. This is the case of cyclical unemployment, for which macroeconomic forces lead to microeconomic unemployment. See also: unemployment types


Open unemployment is generally associated with capitalist economies. In this view, unemployment is not an aberration of capitalism, indicating any sort of systemic malfunction. Rather, unemployment is a necessary structural feature of capitalism, intended to discipline the workforce. If unemployment is too low, workers make wage demands that either cuts into profits to an extent that jeopardize future investment, or are passed on to consumers, thus generating inflationary instability. David Schweickart suggests, "Capitalism cannot be a full-employment economy, except in the very short term. For unemployment is the "invisible hand" -- carrying a stick -- that keeps the workforce in line."[6].

Classical economists dispute this, arguing that when there is too high a supply of labour, providing unions and Government have no prevented wage changes, the wage rate should fall, returning the economy to its long run efficient position at full employment.

Libertarian thinkers like F.A. Hayek claimed that unemployment increases the more the government intervenes into the economy to try to improve the rights of those with jobs. For example, he asserted that minimum wages raise the cost of labour to above the market equilibrium, resulting in people who wish to work at the going rate but cannot as the wages are higher than their worth to business; unemployment.[7][8] They believed that laws restricting layoffs made businesses less likely to hire in the first place leaving many young people unemployed and unable to find work.[8]

This school (the Austrian School) argued that the results of both actions lead to less productivity and are claimed to incur a higher cost on society as a whole. The results lead to not just higher unemployment but may increase poverty. The narrative continued by saying that the welfare state then responds with various benefits that are paid for by the middle and upper class which reduces their ability to consume and reduces the incentive to work hard and innovate for all sections of society, as the poor have income without working and the rich see their reward for work reduced.[9] Economists like Ludwig Von Mises, Milton Friedman, Friedrich Von Hayek not only believe that the welfare of society decreases with this kind of intervention[10] but that these economic policies are not sustainable.[How to reference and link to summary or text]


One of the explanations behind (structural unemployment) and a warning that this kind of unemployment could be permanent in modern society, came from economist and philosopher André Gorz.The microchip revolution and the explosion in computer science and robotising of work even in less developed industrialized countries is the main reason.

He therefore argues that the idea of `working less so everyone can work and that an basic income for all must be the solution,and he explains: "The connection between more and better has been broken; our needs for many products and services are already more than adequately met, and many of our as-yet- unsatisfied needs will be met not by producing more, but by producing differently, producing other things, or even producing less. This is especially true as regards our needs for air, water, space, silence, beauty, time and human contact...

"From the point where it takes only 1,000 hours per year or 20,000 to 30,000 hours per lifetime to create an amount of wealth equal to or greater than the amount we create at the present time in 1,600 hours per year or 40,000 to 50,000 hours in a working life, we must all be able to obtain a real income equal to or higher than our current salaries in exchange for a greatly reduced quantity of work...

"Neither is it true any longer that the more each individual works, the better off everyone will be. The present crisis has stimulated technological change of an unprecedented scale and speed: `the microchip revolution'. The object and indeed the effect of this revolution has been to make rapidly increasing savings in labour, in the industrial, administrative and service sectors. Increasing production is secured in these sectors by decreasing amounts of labour. As a result, the social process of production no longer needs everyone to work in it on a full-time basis. The work ethic ceases to be viable in such a situation and workbased society is thrown into crisis," André Gorz, Critique of Economic Reason,Gallié, 1989.

Okun's LawEdit

Okun's law states that for every 2% GDP falls relative to potential GDP, unemployment rises 1% (of the total workforce). When the economy operates at productive capacity, it will experience the natural rate of unemployment. [11]

U= ^u-h[100(y/yn)-100]

Solutions Edit

Societies try a number of different measures to get as many people as possible into work. However, attempts to reduce the level of unemployment beyond the Natural rate of unemployment generally fail, resulting only in less output and more inflation.

Phillips Curve Edit

It used to be largely believed that unemployment could be solved using the Phillips curve. This involves increasing inflation to reduce unemployment by fooling workers into accepting jobs at a lower rate than they would otherwise have done, due to the declining value of money.[12] However, since the work of Milton Friedman, it is widely accepted that the Phillips curve is vertical in the long run: you cannot achieve a lowering of the unemployment rate in the long run, and attempts to do so will only cause inflation.

Demand sideEdit

Normal markets reach equilibrium, where supply equals demand; everyone who wants to sell at the market price can. Those who do not want to sell at this price do not; in the labour market this is classical unemployment. Increases in the demand for labour will move the economy along the demand curve, increasing wages and employment. The demand for labour in an economy is derived from the demand for goods and services. As such, if the demand for goods and services in the economy increases, the demand for labour will increase, increasing employment and wages.

Monetary policy and fiscal policy can both be used to increase short-term growth in the economy, increasing the demand for labour and decreasing unemployment.

Supply sideEdit

However, the labour market is not efficient: it doesn't clear. Minimum wages and union activity keep wages from falling, which means too many people want to sell their labour at the going price but cannot. Supply-side policies can solve this by making the labour market more flexible. These include removing the minimum wage and reducing the power of unions, which act as a labour cartel. Other supply side policies include education to make workers more attractive to employers.

Supply side reforms also increase long-term growth. This increased supply of goods and services requires more workers, increasing employment. It is argued that supply side policies, which include cutting taxes on businesses and reducing regulation.

Tax-relatedEdit

One structural solution to unemployment proposed was a graduated retail tax, or "jobs levy", to firms where labor is more expensive than capital. This method will shift tax burden to capital intensive firms and away from labor intensive firms. In theory this will make firms shift operations to a more politically desired balance between labor intensive and capital intensive production. The excess tax revenue from the jobs levy would finance labor intensive public projects.[13] However, by raising the value of labour artificially above capital, this would discourage capital investment, the source of economic growth. With less growth, long-run employment would fall.

Costs of unemploymentEdit

IndividualEdit

Panic1837
An 1837 political cartoon about unemployment in the United States.
Dr Joe KiffAdded by Dr Joe Kiff

Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay mortgage payments or to pay rent may lead to homelessness through foreclosure or eviction. Unemployment increases susceptibility to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression. According to a study published in Social Indicator Research, even those who tend to be optimistic find it difficult to look on the bright side of things when unemployed. Using interviews and data from German participants aged 16 to 94 – including individuals coping with the stresses of real life and not just a volunteering student population – the researchers determined that even optimists struggled with being unemployed.[14]

Dr. M. Brenner conducted a study in 1979 on the "Influence of the Social Environment on Psychology." Brenner found that for every 10% increase in the number of unemployed there is a 1.2% in total mortality, a 1.7% increase in cardiovascular disease, 1.3% more cirrhosis cases, 1.7% more suicides, 0.4% more arrests, and 0.8% more assaults reported to the police.[15] A more recent study by Christopher Ruhm[16] on the effect of recessions on health found that several measures of health actually improve during recessions. As for the impact of an economic downturn on crime, during the Great Depression the crime rate did not decrease. Because unemployment insurance in the U.S. typically does not replace 50% of the income one received on the job (and one cannot receive it forever), the unemployed often end up tapping welfare programs such as Food Stamps or accumulating debt. Higher government transfer payments in the form of welfare and food stamps decrease spending on productive economic goods, decreasing GDP.[How to reference and link to summary or text]

Some hold that many of the low-income jobs are not really a better option than unemployment with a welfare state (with its unemployment insurance benefits). But since it is difficult or impossible to get unemployment insurance benefits without having worked in the past, these jobs and unemployment are more complementary than they are substitutes. (These jobs are often held short-term, either by students or by those trying to gain experience; turnover in most low-paying jobs is high) Unemployment insurance keeps an available supply of workers for the low-paying jobs, while the employers' choice of management techniques (low wages and benefits, few chances for advancement) is made with the existence of unemployment insurance in mind. This combination promotes the existence of one kind of unemployment, frictional unemployment.[How to reference and link to summary or text]

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.

The fear of job loss can spur psychological anxiety.

SocietyEdit

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.[12]

It is estimated that, during the Great Depression, unemployment due to sticky wages cost the US economy about $4 trillion.[How to reference and link to summary or text] This is many times larger than losses due to monopolies, cartels and tariffs.[How to reference and link to summary or text]

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 [17]

High unemployment can encourage xenophobia and protectionism as workers fear that foreigners are stealing their jobs.[How to reference and link to summary or text] 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.[How to reference and link to summary or text].

Historical unemploymentEdit

Preliterate communities treat their members as parts of an extended family and thus do not allow unemployment.[How to reference and link to summary or text] In precapitalist 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 laborers 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.[How to reference and link to summary or text]

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%.[18] In 1933, 25% of all American workers and 37% of all nonfarm workers were unemployed.[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 both ancient and modern 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, definition 3.)[How to reference and link to summary or text] 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.[How to reference and link to summary or text]

MeasurementEdit

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:


\text{Unemployment Rate}=\frac{\text{Unemployed Workers}}{\text{Total Labor Force}}


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.[25]

Since not all unemployment may be "open" and counted by government agencies, official statistics on unemployment may not be accurate[26].

The ILO describes 4 different methods to calculate the unemployment rate:[27]

  • 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.

European Union (Eurostat)Edit

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 employment are reported. Statistical data are available by member state, EU12, EU15, EU25, EU27, EA11, and EA13. 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.[28]

Three methods of data collection are used in the European Union. The European Union Labour Force Survey (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. Monthly unemployment rates are interpolated from monthly data from member states to provide "harmonized data."[29]

At this time Germany's unemployment data are collected separately from the (EU-LFS).

United States Bureau of Labor StatisticsEdit

USA states unemployment 2004
Unemployment rate for US states in 2004
PhloxBotAdded by PhloxBot
The Bureau of Labor Statistics measures employment and unemployment (of those over 15 years of age) using two different labor force surveys[30] conducted by the United States Census Bureau (within the United States Department of Commerce) and/or the Bureau of Labor Statistics (within the United States Department of Labor) that gather employment statistics monthly. The Current Population Survey (CPS), or "Household Survey", conducts a survey based on a sample of 60,000 households. This Survey measures the unemployment rate based on the ILO definition.[31]The data are also used to calculate 5 other unemployment rates as a percentage of the labor force based on different definitions noted as U1 through U6:[32]
  • U1: Percentage of labor force unemployed 15 weeks or longer.
  • U2: Percentage of labor force who lost jobs or completed temporary work.
  • U3: Official unemployment rate per ILO definition.
  • U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
  • U5: U4 + other "marginally attached workers", or those who "would like" and are able to work, but have not looked for work recently.
  • U6: U5 + Part time workers who want to work full time, but can not due to economic reasons.

Note: "Marginally attached workers" are added to the total labor force for unemployment rate calculation for U4, U5, and U6.

The Current Employment Statistics survey (CES), or "Payroll Survey", conducts a survey based on a sample of 160,000 businesses and government agencies that represent 400,000 individual employers.[33] This survey measures only nonagricultural, nonsupervisory employment; thus, it does not calculate an unemployment rate, and it differs from the ILO unemployment rate definition. These two sources have different classification criteria, and usually produce differing results. Additional data are also available from the government, such as the unemployment insurance weekly claims report available from the Office of Workforce Security, within the U.S. Department of Labor Employment & Training Administration.[34]

These statistics are for the U.S. economy as a whole, hiding variations among groups. For January 2008 in the U.S. the unemployment rates were 4.4% for adult men, 4.2% for adult women, 4.4% for Caucasians, 6.3% for Hispanics or Latinos (all races), 9.2% for African Americans, 3.2% for Asian Americans, and 18.0% for teenagers.[33]

These percentages represent the usual rough ranking of these different groups' unemployment rates. The absolute numbers change over time and with the business cycle. The Bureau of Labor Statistics provides up-to-date numbers via a pdf linked here. The BLS also provides a readable concise current Employment Situation Summary, updated monthly.[35]

Limitations of the unemployment definitionEdit

The unemployment rate may be different from the impact of the economy on people. The unemployment figures indicate how many are not working for pay but seeking employment for pay. It is only indirectly connected with the number of people who are actually not working at all or working without pay. Therefore, critics believe that current methods of measuring unemployment are inaccurate in terms of the impact of unemployment on people as these methods do not take into account the 1.5% of the available working population incarcerated in U.S. prisons (who may or may not be working while incarcerated), those who have lost their jobs and have become discouraged over time from actively looking for work, those who are self-employed or wish to become self-employed, such as tradesmen or building contractors or IT consultants, those who have retired before the official retirement age but would still like to work (involuntary early retirees), those on disability pensions who, while not possessing full health, still wish to work in occupations suitable for their medical conditions, those who work for payment for as little as one hour per week but would like to work full-time. These people are "involuntary part-time" workers, those who are underemployed, e.g., a computer programmer who is working in a retail store until he can find a permanent job, involuntary stay-at-home mothers who would prefer to work, and graduate and Professional school students who were unable to find worthwhile jobs after they graduated with their Bachelor's degrees.

On the other hand, the measures of employment and unemployment may be "too high". In some countries, the availability of unemployment benefits can inflate statistics since they give an incentive to register as unemployed. People who do not really seek work may choose to declare themselves unemployed so as to get benefits; people with undeclared paid occupations may try to get unemployment benefits in addition to the money they earn from their work. Conversely, the absence of any tangible benefit for registering as unemployed discourages people from registering.

However, in countries such as the United States, Canada, Mexico, Australia, Japan and the European Union, unemployment is measured using a sample survey (akin to a Gallup poll). According to the BLS, a number of Eastern European nations have instituted labor force surveys as well. The sample survey has its own problems because the total number of workers in the economy is calculated based on a sample rather than a census.

It is possible to be neither employed nor unemployed by ILO definitions, i.e., to be outside of the "labor force." These are people who have no job and are not looking for one. Many of these are going to school or are retired. Family responsibilities keep others out of the labor force. Still others have a physical or mental disability which prevents them from participating in labor force activities.

Typically, employment and the labor force include only work done for monetary gain. Hence, a homemaker is neither part of the labor force nor unemployed. Nor are full-time students nor prisoners considered to be part of the labor force or unemployment. The latter can be important. In 1999, economists Lawrence F. Katz and Alan B. Krueger estimated that increased incarceration lowered measured unemployment in the United States by 0.17% between 1985 and the late 1990s. In particular, as of 2005, roughly 0.7% of the US population is incarcerated (1.5% of the available working population).

Children, the elderly, and some individuals with disabilities are typically not counted as part of the labor force in and are correspondingly not included in the unemployment statistics. However, some elderly and many disabled individuals are active in the labor market.

In the early stages of an economic boom, unemployment often rises. This is because people join the labor market (give up studying, start a job hunt, etc.) because of the improving job market, but until they have actually found a position they are counted as unemployed. Similarly, during a recession, the increase in the unemployment rate is moderated by people leaving the labor force or being otherwise discounted from the labor force, such as with the self-employed.

For the fourth quarter of 2004, according to OECD, (source Employment Outlook 2005 ISBN 92-64-01045-9), normalized unemployment for men aged 25 to 54 was 4.6% in the USA and 7.4% in France. At the same time and for the same population the employment rate (number of workers divided by population) was 86.3% in the U.S. and 86.7% in France.

This example shows that the unemployment rate is 60% higher in France than in the USA, yet more people in this demographic are working in France than in the USA, which is counterintuitive if it is expected that the unemployment rate reflects the health of the labor market.[36] [37].

Due to these deficiencies, many labor market economists prefer to look at a range of economic statistics such as labor market participation rate, the percentage of people aged between 15 and 64 who are currently employed or searching for employment, the total number of full-time jobs in an economy, the number of people seeking work as a raw number and not a percentage, and the total number of person-hours worked in a month compared to the total number of person-hours people would like to work. In particular the NBER does not use the unemployment rate but prefer various employment rates to date recessions [38].

Aiding the unemployedEdit

The most developed countries have aids for the unemployed as part of the social welfare. These unemployment benefits include unemployment insurance, welfare, unemployment compensation and subsidies to aid in retraining. The main goal of these programs is to alleviate short-term hardships and, more importantly, to allow workers more time to search for a good job.

In the U.S. the unemployment insurance allowance one receives is based solely on previous income (not time worked, family size, etc.) and usually compensates for one-third of one's previous income. To qualify, one must reside in their respective state for at least a year and, of course, work. The system was established by the Social Security Act of 1935. While 90% of citizens are covered on paper, only 40% could actually receive benefits.[How to reference and link to summary or text] In cases of highly seasonal industries the system provides income to workers during the off seasons, thus encouraging them to stay attached to the industry.

In the United States the New Deal made unemployment relief a top governmental priority. The goal of the Works Progress Administration (WPA) was to employ most of the unemployed people on relief until the economy recovered. FERA/WPA director Harry Hopkins testified to Congress in January 1935 why he set the number at 3.5 million, using FERA data. At $1200 per worker per year he asked for and received $4 billion.

"On January 1 there were 20 million persons on relief in the United States. Of these, 8.3 million were children under sixteen years of age; 3.8 million were persons who, though between the ages of sixteen and sixty-five were not working nor seeking work. These included housewives, students in school, and incapacitated persons. Another 750,000 were persons sixty-five years of age or over. Thus, of the total of 20 million persons then receiving relief, 12.85 million were not considered eligible for employment. This left a total of 7.15 million presumably employable persons between the ages of sixteen and sixty-five inclusive. Of these, however, 1.65 million were said to be farm operators or persons who had some non-relief employment, while another 350,000 were, despite the fact that they were already employed or seeking work, considered incapacitated. Deducting this two million from the total of 7.15 million, there remained 5.15 million persons sixteen to sixty-five years of age, unemployed, looking for work, and able to work. Because of the assumption that only one worker per family would be permitted to work under the proposed program, this total of 5.15 million was further reduced by 1.6 million--the estimated number of workers who were members of families which included two or more employable persons. Thus, there remained a net total of 3.55 million workers in as many households for whom jobs were to be provided." [Howard p 562, paraphrasing Hopkins]

The WPA did not quite reach 3.5 million--its maximum was 3.3 million in November 1938. Worker pay was based on three factors: the region of the country, the degree of urbanization and the individual's skill. It varied from $19/month to $94/month. The goal was to pay the local prevailing wage, but to limit a person to 30 hours or less a week of work. About 75% of WPA employment and 75% of WPA expenditures went to public infrastructure, such as highways, airports, parks and libraries.

The WPA had numerous critics who said that political considerations helped decide which states received the most funding. Civil rights leaders often complained that African Americans were proportionally underrepresented. In New Jersey, they argued, "In spite of the fact that Negroes indubitably constitute more than 20% of the State's unemployed, they composed 15.9% of those assigned to W.P.A. jobs during 1937." [Howard 287] Nationwide in late 1937, 15.2% were African American. The NAACP magazine Opportunity hailed the WPA: [February, 1939, p. 34. in Howard 295]

It is to the eternal credit of the administrative officers of the WPA that discrimination on various projects because of race has been kept to a minimum and that in almost every community Negroes have been given a chance to participate in the work program. In the South, as might have been expected, this participation has been limited, and differential wages on the basis of race have been more or less effectively established; but in the northern communities, particularly in the urban centers, the Negro has been afforded his first real opportunity for employment in white-collar occupations

Congress shut down the WPA in late 1943 as World War II created thousands of jobs in the military.

File:Bundesarchiv Bild 183-R79053, Arbeitsloser auf Arbeitssuche.jpg
Unemployed man looking for a job in 1928
Families on relief 1935–41
Relief cases 1936-1941
Monthly average in 1,000
Year 1936 1937 1938 1939 1940 1941
Workers employed
WPA 1,995 2,227 1,932 2,911 1,971 1,638
CCC and NYA 712 801 643 793 877 919
Other federal work projects 554 663 452 488 468 681
Public assistance cases
Social security programs 602 1,306 1,852 2,132 2,308 2,517
General relief 2,946 1,484 1,611 1,647 1,570 1,206
Total families helped 5,886 5,660 5,474 6,751 5,860 5,167
Unemployed workers (Bur Lab Stat) 9,030 7,700 10,390 9,480 8,120 5,560
Coverage (cases/unemployed) 65% 74% 53% 71% 72% 93%

source: Donald S. Howard, WPA and Federal Relief Policy. 1943 p 34.

Year Unemployment (% labor force)
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

source: Historical Statistics US (1976) series D-86

See also welfare and training.

Involuntary unemploymentEdit

Say's law declares that, in time, "markets clear" in an unfettered, unregulated laissez-faire economy: every seller will find a buyer at some strike price, and every buyer will find a seller at some strike price. Sellers and buyers may refuse the strike price but this personal decision is voluntary, which causes the selling or buying to leave the economic model. This theory relies heavily on the absence of government regulation and assumes a developed economy without sabotage where labor strikes, as opposed to strike (mutually agreed upon) prices, are illegal.[How to reference and link to summary or text]

Keynes tried to demonstrate in The General Theory of Employment, Interest and Money that Say's law did not work in the real world of the 1930s Depression because of oversaving and private investor timidity, and that in consequence people could be thrown out of work involuntarily without being able to find acceptable new jobs.

This conflict of 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. This tends to broaden the "market" to a national level far beyond that with which most people are comfortable.

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, given that, in such societies, the suddenly unemployed person must meet his survival needs, by getting a new job quickly at any strike price, entrepreneurship, or joining the invisible economy of the hustler.[39]

From the narrative standpoint, involuntary unemployment is discussed in the stories by Ehrenreich, the narrative sociology of Bourdieu, and novels of social suffering such as John Steinbeck's Of Mice and Men.

BenefitsEdit

Main article: Full employment

Unemployment may have advantages as well as disadvantages for the overall economy. Notably, it may help avert runaway inflation, which negatively affects almost everyone in the affected economy and has serious long-term economic costs. However the historic assumption that full local employment must lead directly to local inflation has been attenuated, as recently expanded international trade has shown itself able to continue to supply low-priced goods even as local employment rates rise closer to full employment.[How to reference and link to summary or text]

The inflation-fighting benefits to the entire economy arising from a presumed optimum level of unemployment has been studied extensively. Before current levels of world trade were developed, unemployment was demonstrated to reduce inflation, following the Phillips curve, or to decelerate inflation, following the NAIRU/natural rate of unemployment theory.[How to reference and link to summary or text]

Beyond the benefits of controlled inflation, frictional unemployment provides employers a larger applicant pool from which to select employees better suited to available jobs. The unemployment needed for this purpose may be very small, however, since it is relatively easy to seek a new job without losing one's current one. And when more jobs are available for fewer workers (lower unemployment), it may allow workers to find the jobs that better fit their tastes, talents, and needs.

As in the Marxian theory of unemployment, special interests may also benefit: some employers may expect that employees with no fear of losing their jobs will not work as hard, or will demand increased wages and benefit. According to this theory, unemployment may promote general labor productivity and profitability by increasing employers' monopsony-like power (and profits).

Optimal unemployment has also been defended as an environmental tool to brake the constantly accelerated growth of the GDP to maintain levels sustainable in the context of resource constraints and environmental impacts. However the tool of denying jobs to willing workers seems a blunt instrument for conserving resources and the environment -- it reduces the consumption of the unemployed across the board, and only in the short-term. Full employment of the unemployed workforce, all focused toward the goal of developing more environmentally efficient methods for production and consumption might provide a more significant and lasting cumulative environmental benefit and reduced resource consumption.[40] If so the future economy and workforce would benefit from the resultant structural increases in the sustainable level of GDP growth.

Some critics of the "culture of work" such as anarchist Bob Black see employment as overemphasized culturally in modern countries. Such critics often propose quitting jobs when possible, working less, reassessing the cost of living to this end, creation of jobs which are "fun" as opposed to "work," and creating cultural norms where work is seen as unhealthy. These people advocate an "anti-work" ethic for life.[How to reference and link to summary or text]

See also Edit


References Edit

  1. International Labour Organization: Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the Thirteenth International Conference of Labour Statisticians (October 1982); see page 4; accessed November 26, 2007. (PDF)
  2. Cato Daily Dispatch
  3. CIA - The World Factbook - Rank Order - Unemployment rate
  4. Edmond Malinvaud, "The theory of unemployment reconsidered", Oxford: Basil Blackwell, 1977, ISBN 0631144757
  5. America's Great Depression p. 45
  6. Schweickart, David (2002). After Capitalism, Rowman & Littlefield Publishers, Inc..
  7. F. A. Hayek, The Constitution of Liberty
  8. 8.0 8.1 Alain Anderson, Economics. Fourth edition, 2006
  9. Keynes for Beginners, Peter Pugh and Chris Garratt, 1993
  10. Politics Causes Unemployment - Hans F. Sennholz - Mises Institute
  11. Alain Anderson, Economics. Fourth Edition, 2006
  12. 12.0 12.1 PThy_Edn_1_Chap_23.rtf
  13. Robert Struble, Jr., "Toward a Structural Solution to Unemployment" International Journal of Social Economics 20, no. 11 (1993): 15-26. Also seen in Treatise on Twelve Lights, (2007-08 ed.), chapter 8, "Bolstering Workers: Structuring Full-Employment into Capitalism."
  14. Even Optimists Get the Blues When Pink-slipped Newswise, Retrieved on October 27, 2008.
  15. Richard Ashley (2007). Fact sheet on the impact of unemployment. (PDF) Virginia Tech, Department of Economics. URL accessed on 2007-10-11, 2007.
  16. Christopher Ruhm, "Are Recessions Good for Your Health?", Quarterly Journal of Economics 2000, 115(2): 617-650
  17. Alain Anderson, Economics. Fourth Edition 2006
  18. Economic Recovery in the Great Depression, Frank G. Steindl, Oklahoma State University
  19. Great Depression, The Concise Encyclopedia of Economics
  20. 20.0 20.1 Overproduction of Goods, Unequal Distribution of Wealth, High Unemployment, and Massive Poverty, From: President’s Economic Council
  21. 1929–1939 – The Great Depression, Source: Bank of Canada
  22. Great Depression (United Kingdom), Knowledgerush.com
  23. About the Great Depression, University of Illinois
  24. A reign of rural terror, a world away, U.S. News, June 22, 2003
  25. International Labour Organization, Bureau of Statistics,The Thirteenth International Conference of Labour Statisticians, received July 21, 2007
  26. Official unemployment numbers omit discouraged seekers, part-time workers
  27. International Labour Organization, LABORSTA,[1], retrieved July 22,2007
  28. European Commission, Eurostat.
  29. European Commission, Eurostat.
  30. United States, Bureau of Labor Statistics,[2], retrieved July 23, 2007
  31. U.S. Department of Labor, Bureau of Labor Statistics, Current Population Survey overview, retrieved May 25, 2007
  32. U.S. Department of Labor, Bureau of Labor Statistics, [3], retrieved August 22, 2007
  33. 33.0 33.1 U.S. Department of Labor, Bureau of Labor Statistics, "The Employment Situation: January 2008", January 2008
  34. U.S. Department of Labor, Employment & Training Administration, Office of Workforce Security, UI Weekly Claims
  35. Employment Situation Summary
  36. Dean Baker, Center for Economic and Policy Research.
  37. Raymond Torres, OECD head of Employment Analysis, Le Monde, 30 mai 2007 : unemployment measure is less and less meaningful to measure labour market efficiency.
  38. Determination of the December 2007 Peak in Economic Activity, November 28, 2008
  39. Bourdieu, Pierre. THE WEIGHT OF THE WORLD: Social Suffering in Contemporary Society.
  40. http://treehugger.com/files/2008/02/4_reasons_recession_bad_environment.php Counter-Point: 4 Reasons Why Recession is BAD for the Environment by Michael Graham Richard, Gatineau, Canada on 02. 6.08 Business & Politics

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