Unemployment

Unemployed men outside a soup kitchen in

Depression-era Chicago, Illinois, the US, 1931

Unemployment or joblessness is a
situation in which able-bodied people who
are looking for a job cannot find a job.
The causes of unemployment are heavily
debated.[1] Classical economics, new
classical economics, and the Austrian
School of economics argued that market
mechanisms are reliable means of
resolving unemployment. These theories
argue against interventions imposed on
the labor market from the outside, such as
unionization, bureaucratic work rules,
minimum wage laws, taxes, and other
regulations that they claim discourage the
hiring of workers. Keynesian economics
emphasizes the cyclical nature of
unemployment and recommends
government interventions in the economy
that it claims will reduce unemployment
during recessions. This theory focuses on
recurrent shocks that suddenly reduce
aggregate demand for goods and services
and thus reduce demand for workers.
Keynesian models recommend
government interventions designed to
increase demand for workers; these can
include financial stimuli, publicly funded
job creation, and expansionist monetary
policies. Its namesake economist, John
Maynard Keynes, believed that the root
cause of unemployment is the desire of
investors to receive more money rather
than produce more products, which is not
possible without public bodies producing
new money.[2] A third group of theories
emphasize the need for a stable supply of
capital and investment to maintain full
employment.[3] On this view, government
should guarantee full employment through
fiscal policy, monetary policy and trade
policy as stated, for example, in the US
Employment Act of 1946, by counteracting
private sector or trade investment
volatility, and reducing inequality.[4]

In addition to theories of unemployment,

there are a few categorizations of
unemployment that are used to more
precisely model the effects of
unemployment within the economic
system. Some of the main types of
unemployment include structural
unemployment and frictional
unemployment, as well as cyclical
unemployment, involuntary
unemployment, and classical
unemployment. Structural unemployment
focuses on foundational problems in the
economy and inefficiencies inherent in
labor markets, including a mismatch
between the supply and demand of
laborers with necessary skill sets.
Structural arguments emphasize causes
and solutions related to disruptive
technologies and globalization.
Discussions of frictional unemployment
focus on voluntary decisions to work
based on each individuals' valuation of
their own work and how that compares to
current wage rates plus the time and effort
required to find a job. Causes and
solutions for frictional unemployment
often address job entry threshold and
wage rates.

The unemployment rate is a measure of

the prevalence of unemployment and it is
calculated as a percentage by dividing the
number of unemployed individuals by all
individuals currently in the labor force.
During periods of recession, an economy
usually experiences a relatively high
unemployment rate.[5] Millions of people
globally or 6% of the world's workforce
were without a job in 2012.[6]

Definitions, types, and

theories
The state of being without any work yet
looking for work is called unemployment.
Economists distinguish between various
overlapping types of and theories of
unemployment, including cyclical or
Keynesian unemployment, frictional
unemployment, structural unemployment
and classical unemployment. Some
additional types of unemployment that are
occasionally mentioned are seasonal
unemployment, hardcore unemployment,
and hidden 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. Voluntary unemployment
includes workers who reject low wage jobs
whereas involuntary unemployment
includes workers fired due to an economic
crisis, industrial decline, company
bankruptcy, or organizational restructuring.

On the other hand, cyclical unemployment,

structural unemployment, and classical
unemployment are largely involuntary in
nature. However, the existence of
structural unemployment may reflect
choices made by the unemployed in the
past, while classical (natural)
unemployment may result from the
legislative and economic choices made by
labour unions or political parties.

The clearest cases of involuntary

unemployment are those where there are
fewer job vacancies than unemployed
workers even when wages are allowed to
adjust, so that even if all vacancies were to
be filled, some unemployed workers would
still remain. This happens with cyclical
unemployment, as macroeconomic forces
cause microeconomic unemployment
which can boomerang back and
exacerbate these macroeconomic forces.
Classical unemployment

Classical, or real-wage unemployment,

occurs when real wages for a job are set
above the market-clearing level causing
the number of job-seekers to exceed the
number of vacancies. On the other hand,
most economists argue that as wages fall
below a livable wage many choose to drop
out of the labor market and no longer seek
employment. This is especially true in
countries where low-income families are
supported through public welfare systems.
In such cases, wages would have to be
high enough to motivate people to choose
employment over what they receive
through public welfare. Wages below a
livable wage are likely to result in lower
labor market participation in the above-
stated scenario. In addition, consumption
of goods and services is the primary driver
of increased demand for labor. Higher
wages lead to workers having more
income available to consume goods and
services. Therefore, higher wages increase
general consumption and as a result
demand for labor increases and
unemployment decreases.

Many economists have argued that

unemployment increases with increased
governmental regulation. For example,
minimum wage laws raise the cost of
some low-skill laborers above market
equilibrium, resulting in increased
unemployment as people who wish to
work at the going rate cannot (as the new
and higher enforced wage is now greater
than the value of their labour).[7][8] Laws
restricting layoffs may make businesses
less likely to hire in the first place, as hiring
becomes more risky.[8]

However, this argument overly simplifies

the relationship between wage rates and
unemployment, ignoring numerous factors
which contribute to
unemployment.[9][10][11][12][13] Some, such
as Murray Rothbard, suggest that even
social taboos can prevent wages from
falling to the market-clearing level.[14]

In Out of Work: Unemployment and

Government in the Twentieth-Century
America, economists Richard Vedder and
Lowell Gallaway argue that the empirical
record of wages rates, productivity, and
unemployment in America validates
classical unemployment theory. Their data
shows a strong correlation between
adjusted real wage and unemployment in
the United States from 1900 to 1990.
However, they maintain that their data
does not take into account exogenous
events.[15]

Cyclical unemployment

Cyclical, deficient-demand, or Keynesian

unemployment, occurs when there is not
enough aggregate demand in the economy
to provide jobs for everyone who wants to
work. Demand for most goods and
services falls, less production is needed
and consequently fewer workers are
needed, wages are sticky and do not fall to
meet the equilibrium level, and
unemployment results.[16] Its name is
derived from the frequent ups and downs
in the business cycle, although
unemployment can also be persistent as
occurred during the Great Depression of
the 1930s.

With cyclical unemployment, the number

of unemployed workers exceeds the
number of job vacancies, so that even if all
open jobs were filled, some workers would
still remain unemployed. Some associate
cyclical unemployment with frictional
unemployment because the factors that
cause the friction are partially caused by
cyclical variables. For example, a surprise
decrease in the money supply may
suddenly inhibit aggregate demand and
thus inhibit labor demand.

Keynesian economists, on the other hand,

see the lack of supply of jobs as
potentially resolvable by government
intervention. One suggested intervention
involves deficit spending to boost
employment and goods demand. Another
intervention involves an expansionary
monetary policy that increases the supply
of money, which should reduce interest
rates, which in turn should lead to an
increase in non-governmental spending.[17]

Full employment
Short-Run Phillips Curve before and after
Expansionary Policy, with Long-Run Phillips Curve
(NAIRU). Note, however, that the unemployment rate is
an inaccurate predictor of inflation in the long
term.[18][19]

In demand-based theory, it is possible to

abolish cyclical unemployment by
increasing the aggregate demand for
products and workers. However, eventually
the economy hits an "inflation barrier"
imposed by the four other kinds of
unemployment to the extent that they
exist. Historical experience suggests that
low unemployment affects inflation in the
short term but not the long term.[18] In the
long term, the velocity of money supply
measures such as the MZM ("money zero
maturity", representing cash and
equivalent demand deposits) velocity is far
more predictive of inflation than low
unemployment.[19][20]

Some demand theory economists see the

inflation barrier as corresponding to the
natural rate of unemployment. The
"natural" rate of unemployment is defined
as the rate of unemployment that exists
when the labour market is in equilibrium
and there is pressure for neither rising
inflation rates nor falling inflation rates. An
alternative technical term for this rate is
the NAIRU, or the Non-Accelerating
Inflation Rate of Unemployment. No matter
what its name, demand theory holds that
this means that if the unemployment rate
gets "too low," inflation will accelerate in
the absence of wage and price controls
(incomes policies).

One of the major problems with the NAIRU

theory is that no one knows exactly what
the NAIRU is (while it clearly changes over
time).[18] The margin of error can be quite
high relative to the actual unemployment
rate, making it hard to use the NAIRU in
policy-making.[19]

Another, normative, definition of full

employment might be called the ideal
unemployment rate. It would exclude all
types of unemployment that represent
forms of inefficiency. This type of "full
employment" unemployment would
correspond to only frictional
unemployment (excluding that part
encouraging the McJobs management
strategy) and would thus be very low.
However, it would be impossible to attain
this full-employment target using only
demand-side Keynesian stimulus without
getting below the NAIRU and causing
accelerating inflation (absent incomes
policies). Training programs aimed at
fighting structural unemployment would
help here.

To the extent that hidden unemployment

exists, it implies that official
unemployment statistics provide a poor
guide to what unemployment rate
coincides with "full employment".[18]

Structural unemployment
Okun's Law interprets unemployment as a function of
the rate of growth in GDP.

Structural unemployment occurs when a

labour market is unable to provide jobs for
everyone who wants one because there is
a mismatch between the skills of the
unemployed workers and the skills needed
for the available jobs. Structural
unemployment is hard to separate
empirically from frictional unemployment,
except to say that it lasts longer. As with
frictional unemployment, simple demand-
side stimulus will not work to easily
abolish this type of unemployment.

Structural unemployment may also be

encouraged to rise by persistent cyclical
unemployment: if an economy suffers
from long-lasting low aggregate demand, it
means that many of the unemployed
become disheartened, while their skills
(including job-searching skills) become
"rusty" and obsolete. Problems with debt
may lead to homelessness and a fall into
the vicious circle of poverty.

This means that they may not fit the job

vacancies that are created when the
economy recovers. The implication is that
sustained high demand may lower
structural unemployment. This theory of
persistence in structural unemployment
has been referred to as an example of path
dependence or "hysteresis".

Much technological unemployment,[21] due

to the replacement of workers by
machines, might be counted as structural
unemployment. Alternatively, technological
unemployment might refer to the way in
which steady increases in labour
productivity mean that fewer workers are
needed to produce the same level of
output every year. The fact that aggregate
demand can be raised to deal with this
problem suggests that this problem is
instead one of cyclical unemployment. As
indicated by Okun's Law, the demand side
must grow sufficiently quickly to absorb
not only the growing labour force but also
the workers made redundant by increased
labour productivity.

Seasonal unemployment may be seen as a

kind of structural unemployment, since it
is a type of unemployment that is linked to
certain kinds of jobs (construction work,
migratory farm work). The most-cited
official unemployment measures erase
this kind of unemployment from the
statistics using "seasonal adjustment"
techniques. This results in substantial,
permanent structural unemployment.

Frictional unemployment

The Beveridge curve of 2004 job vacancy and

unemployment rate from the United States Bureau of
Labour Statistics.

Frictional unemployment is the time period

between jobs when a worker is searching
for, or transitioning from one job to
another. It is sometimes called search
unemployment and can be voluntary
based on the circumstances of the
unemployed individual.

Frictional unemployment exists because

both jobs and workers are heterogeneous,
and a mismatch can result between the
characteristics of supply and demand.
Such a mismatch can be related to skills,
payment, work-time, location, seasonal
industries, attitude, taste, and a multitude
of other factors. New entrants (such as
graduating students) and re-entrants (such
as former homemakers) can also suffer a
spell of frictional unemployment.

Workers as well as employers accept a

certain level of imperfection, risk or
compromise, but usually not right away;
they will invest some time and effort to
find a better match. This is in fact
beneficial to the economy since it results
in a better allocation of resources.
However, if the search takes too long and
mismatches are too frequent, the
economy suffers, since some work will not
get done. Therefore, governments will
seek ways to reduce unnecessary
frictional unemployment through multiple
means including providing education,
advice, training, and assistance such as
daycare centers.

The frictions in the labour market are

sometimes illustrated graphically with a
Beveridge curve, a downward-sloping,
convex curve that shows a correlation
between the unemployment rate on one
axis and the vacancy rate on the other.
Changes in the supply of or demand for
labour cause movements along this curve.
An increase (decrease) in labour market
frictions will shift the curve outwards
(inwards).
Hidden unemployment

Hidden, or covered, unemployment is the

unemployment of potential workers that
are not reflected in official unemployment
statistics, due to the way the statistics are
collected. In many countries, only those
who have no work but are actively looking
for work (and/or qualifying for social
security benefits) are counted as
unemployed. Those who have given up
looking for work (and sometimes those
who are on Government "retraining"
programs) are not officially counted
among the unemployed, even though they
are not employed. Hidden unemployment
often is a result of deliberate
manipulations by the state to make
statistics about the country look better
(especially for international propaganda
purposes), which - to give an example -
was a common practice in USSR and the
Soviet-occupied satellite states under the
Warsaw Pact. Especially in those countries
it is often referred to as agrarian
unemployment, since it often occurred in
agricultural sectors, mostly in rural
areas[22]. It was commonly done in a form
of early retirement due to lack of vacant
jobs for those who did not reach the
retirement age yet, or often a situation
where increasing the number of
employees did not increase the production
(creating fake vacancies on paper for
people with whom they did not know what
to do, how to utilise their potential
workforce - whilst not admitting to that
inability and paying out the diminutive
wages for them to pretend to work and
remain silent), thus rendering the overall
productivity close to zero. It was a very
common problem, and was one of the
main reasons for the economic crisis
leading to the common people's strikes
that later on led to government's response
with martial law state in places like
Poland, and the eventual downfall of USSR
and Soviet occupation over the rest of the
subjugated states under the Warsaw Pact.

The statistic also does not count the

"underemployed"—those working fewer
hours than they would prefer or in a job
that doesn't make good use of their
capabilities. In addition, those who are of
working age but are currently in full-time
education are usually not considered
unemployed in government statistics.
Traditional unemployed native societies
who survive by gathering, hunting, herding,
and farming in wilderness areas, may or
may not be counted in unemployment
statistics. Official statistics often
underestimate unemployment rates
because of hidden unemployment.

Long-term unemployment

This section needs expansion.

Learn more

Long-term unemployment is defined in

European Union statistics, as
unemployment lasting for longer than one
year. The United States Bureau of Labor
Statistics (BLS), which reports current
long-term unemployment rate at 1.9
percent, defines this as unemployment
lasting 27 weeks or longer. Long-term
unemployment is a component of
structural unemployment, which results in
long-term unemployment existing in every
social group, industry, occupation, and all
levels of education.[23]

Marxian theory of
unemployment

Karl Marx, Theorien über den Mehrwert, 1956

 It is in the very nature of the
capitalist mode of production to
overwork some workers while
keeping the rest as a reserve
army of unemployed paupers.

— Marx, Theory of Surplus

Value[24]

Marxists share the Keynesian viewpoint of

the relationship between economic
demand and employment, but with the
caveat that the market system's propensity
to slash wages and reduce labor
participation on an enterprise level causes
a requisite decrease in aggregate demand
in the economy as a whole, causing crises
of unemployment and periods of low
economic activity before the capital
accumulation (investment) phase of
economic growth can continue.

According to Karl Marx, unemployment is

inherent within the unstable capitalist
system and periodic crises of mass
unemployment are to be expected. He
theorized that unemployment was
inevitable and even a necessary part of the
capitalist system, with recovery and
regrowth also part of the process.[25] The
function of the proletariat within the
capitalist system is to provide a "reserve
army of labour" that creates downward
pressure on wages. This is accomplished
by dividing the proletariat into surplus
labour (employees) and under-
employment (unemployed).[26] This
reserve army of labour fight among
themselves for scarce jobs at lower and
lower wages.

At first glance, unemployment seems

inefficient since unemployed workers do
not increase profits, but unemployment is
profitable within the global capitalist
system because unemployment lowers
wages which are costs from the
perspective of the owners. From this
perspective low wages benefit the system
by reducing economic rents. Yet, it does
not benefit workers; according to Karl
Marx, the workers (proletariat) work to
benefit the bourgeoisie through their
production of capital[27]. Capitalist
systems unfairly manipulate the market
for labour by perpetuating unemployment
which lowers laborers' demands for fair
wages. Workers are pitted against one
another at the service of increasing profits
for owners. As a result of the capitalist
mode of production, Marx argued that
workers experienced alienation and
estrangement through their economic
identity.[28]

According to Marx, the only way to

permanently eliminate unemployment
would be to abolish capitalism and the
system of forced competition for wages
and then shift to a socialist or communist
economic system. For contemporary
Marxists, the existence of persistent
unemployment is proof of the inability of
capitalism to ensure full employment.[29]

Measurement
There are also different ways national
statistical agencies measure
unemployment. These differences may
limit the validity of international
comparisons of unemployment data.[30] To
some degree these differences remain
despite national statistical agencies
increasingly adopting the definition of
unemployment by the International Labour
Organization.[31] To facilitate international
comparisons, some organizations, such as
the OECD, Eurostat, and International
Labor Comparisons Program, adjust data
on unemployment for comparability
across countries.

Though many people care about the

number of unemployed individuals,
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 labour force relative
to the population. The unemployment rate
is expressed as a percentage, and is
calculated as follows:

As defined by the International Labour

Organization, "unemployed workers" are
those who are currently not working but
are willing and able to work for pay,
currently available to work, and have
actively searched for work.[32] Individuals
who are actively seeking job placement
must make the effort to: be in contact with
an employer, have job interviews, contact
job placement agencies, send out
resumes, submit applications, respond to
advertisements, or some other means of
active job searching within the prior four
weeks. Simply looking at advertisements
and not responding will not count as
actively seeking job placement. Since not
all unemployment may be "open" and
counted by government agencies, official
statistics on unemployment may not be
accurate.[33] In the United States, for
example, the unemployment rate does not
take into consideration those individuals
who are not actively looking for
employment, such as those still attending
college.[34]

The ILO describes 4 different methods to

calculate the unemployment rate:[35]

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.

The primary measure of unemployment,

U3, allows for comparisons between
countries. Unemployment differs from
country to country and across different
time periods. For example, during the
1990s and 2000s, the United States had
lower unemployment levels than many
countries in the European Union,[36] which
had significant internal variation, with
countries like the UK and Denmark
outperforming Italy and France. However,
large economic events such as the Great
Depression can lead to similar
unemployment rates across the globe.

In 2013, ILO adopted a resolution to

introduce new indicators to measure
unemployment rate.[37]

LU1: Unemployment rate: [persons in

unemployment / labour force] x 100
 LU2: Combined rate of time-related
underemployment and unemployment:
[(persons in time-related
underemployment + persons in
unemployment) / labour force]

x 100

LU3: Combined rate of unemployment

and potential labour force: [(persons in
unemployment + potential labour force)
/ (extended labour force)] x 100
LU4: Composite measure of labour
underutilization: [(persons in time-
related underemployment + persons in
unemployment + potential
labour force) / (extended labour force)] x
100

European Union (Eurostat)

Unemployment in the European Union, Switzerland and

two EEA countries (Iceland and Norway) in March
2017, according to Eurostat
 

Unemployment rates from 1993–2009 for United

States and European Union.

Eurostat, the statistical office of the

European Union, defines unemployed as
those persons age 15 to 74 who are not
working, have looked for work in the last
four weeks, and ready to start work within
two weeks, which conform to ILO
standards. Both the actual count and rate
of unemployment are reported. Statistical
data are available by member state, for the
European Union as a whole (EU28) as well
as for the euro area (EA19). 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.[38]

The main source used is the European

Union Labour Force Survey (EU-LFS). The
EU-LFS collects data on all member states
each quarter. For monthly calculations,
national surveys or national registers from
employment offices are used in
conjunction with quarterly EU-LFS data.
The exact calculation for individual
countries, resulting in harmonized monthly
data, depends on the availability of the
data.[39]

United States Bureau of Labor

statistics

Unemployment rate in the U.S. by county in 2008.[40]

   1.2–3%    8.1–9%
   3.1–4%    9.1–10%
   4.1–5%    10.1–11%
   5.1–6%    11.1–13%
   6.1–7%    13.1–22.9%
   7.1–8%
The Bureau of Labor Statistics measures
employment and unemployment (of those
over 17 years of age) using two different
labor force surveys[41] 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.[42]
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.[43]
This survey measures only civilian
nonagricultural 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.[44] The Bureau of
Labor Statistics provides up-to-date
numbers via a PDF linked here.[45] The BLS
also provides a readable concise current
Employment Situation Summary, updated
monthly.[46]

U1–U6 since 1950, as reported by the Bureau of Labor

Statistics
The Bureau of Labor Statistics also
calculates six alternate measures of
unemployment, U1 through U6, that
measure different aspects of
unemployment:[47]

U1:[48] 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 the
ILO definition occurs when people are
without jobs and they have actively
looked for work within the past four
weeks.[49]
 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 "loosely 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 cannot due to
economic reasons (underemployment).

Note: "Marginally attached workers" are

added to the total labour force for
unemployment rate calculation for U4, U5,
and U6. The BLS revised the CPS in 1994
and among the changes the measure
representing the official unemployment
rate was renamed U3 instead of U5.[50] In
2013, Representative Hunter proposed
that the Bureau of Labor Statistics use the
U5 rate instead of the current U3 rate.[51]

Statistics for the U.S. economy as a whole

hide variations among groups. For
example, in January 2008 U.S.
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.[43] Also, the U.S. unemployment
rate would be at least 2% higher if
prisoners and jail inmates were
counted.[52][53]

The unemployment rate is included in a

number of major economic indexes
including the United States' Conference
Board's Index of Leading Indicators a
macroeconomic measure of the state of
the economy.
  

Estimated U.S.
Unemployment rate from
1800–1890. All data are
estimates based on data
compiled by
Lebergott.[54] See
limitations section below
regarding how to
interpret unemployment
statistics in self-
employed, agricultural
economies. See image
info for complete data.
  

Estimated U.S. Unemployment

rate since 1890. 1890–1930
data are from Romer.[55]
1930–1940 data are from
Coen.[56] 1940–2011 data are
from Bureau of Labor
Statistics.[57][58] See image
info for complete data.

Alternatives

Limitations of the unemployment

definition
Some 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; or those who
work for payment for as little as one hour
per week but would like to work full-
time.[59]

These last 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.

A government unemployment office with job listings,

West Berlin, West Germany, 1982.

Internationally, some nations'

unemployment rates are sometimes
muted or appear less severe due to the
number of self-employed individuals
working in agriculture.[54] Small
independent farmers are often considered
self-employed; so, they cannot be
unemployed. The impact of this is that in
non-industrialized economies, such as the
United States and Europe during the early
19th century, overall unemployment was
approximately 3% because so many
individuals were self-employed,
independent farmers; yet, unemployment
outside of agriculture was as high as
80%.[54]

Many economies industrialize and

experience increasing numbers of non-
agricultural workers. For example, the
United States' non-agricultural labour force
increased from 20% in 1800, to 50% in
1850, to 97% in 2000.[54] The shift away
from self-employment increases the
percentage of the population who are
included in unemployment rates. When
comparing unemployment rates between
countries or time periods, it is best to
consider differences in their levels of
industrialization and self-employment.

Additionally, 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 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.[60]

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).[31] According to the BLS, a
number of Eastern European nations have
instituted labour 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 "labour force".[33] These are
people who have no job and are not
looking for one. Many of these people are
going to school or are retired. Family
responsibilities keep others out of the
labour force. Still others have a physical or
mental disability which prevents them
from participating in labour force
activities. Some people simply elect not to
work preferring to be dependent on others
for sustenance.
Typically, employment and the labour force
include only work done for monetary gain.
Hence, a homemaker is neither part of the
labour force nor unemployed. Nor are full-
time students nor prisoners considered to
be part of the labour force or
unemployment.[59] 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.[59]

In particular, as of 2005, roughly 0.7% of

the U.S. population is incarcerated (1.5%
of the available working population).
Additionally, children, the elderly, and some
individuals with disabilities are typically
not counted as part of the labour force in
and are correspondingly not included in
the unemployment statistics. However,
some elderly and many disabled
individuals are active in the labour market

In the early stages of an economic boom,

unemployment often rises.[16] This is
because people join the labour market
(give up studying, start a job hunt, etc.) as
a result 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 labour force or being
otherwise discounted from the labour
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 U.S. 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 U.S., yet more
people in this demographic are working in
France than in the U.S., which is
counterintuitive if it is expected that the
unemployment rate reflects the health of
the labour market.[61][62]

Due to these deficiencies, many labour

market economists prefer to look at a
range of economic statistics such as
labour 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.[63]

Labor force participation rate

The United States Labor Force Participation Rate by

gender 1948–2011. Men are represented in light blue,
women in pink, and the total in black.
The labor force participation rate is the
ratio between the labor force and the
overall size of their cohort (national
population of the same age range). In the
West, during the later half of the 20th
century, the labor force participation rate
increased significantly, due to an increase
in the number of women who entered the
workplace.

In the United States, there have been four

significant stages of women's participation
in the labor force—increases in the 20th
century and decreases in the 21st century.
Male labor force participation decreased
from 1953 until 2013. Since October 2013
men have been increasingly joining the
labor force.

During the late 19th century through the

1920s, very few women worked outside
the home. They were young single women
who typically withdrew from the labor
force at marriage unless family needed
two incomes. These women worked
primarily in the textile manufacturing
industry or as domestic workers. This
profession empowered women and
allowed them to earn a living wage. At
times, they were a financial help to their
families.
Between 1930 and 1950, female labor
force participation increased primarily due
to the increased demand for office
workers, women's participation in the high
school movement, and due to
electrification which reduced the time
spent on household chores. Between the
1950s to the early 1970s, most women
were secondary earners working mainly as
secretaries, teachers, nurses, and
librarians (pink-collar jobs).

Between the mid-1970s to the late 1990s,

there was a period of revolution of women
in the labor force brought on by a source
of different factors, many of which arose
from the second wave feminism
movement. Women more accurately
planned for their future in the work force,
investing in more applicable majors in
college that prepared them to enter and
compete in the labor market. In the United
States, the female labor force participation
rate rose from approximately 33% in 1948
to a peak of 60.3% in 2000. As of April
2015, the female labor force participation
is at 56.6%, the male labor force
participation rate is at 69.4% and the total
is 62.8%.[64]

A common theory in modern economics

claims that the rise of women participating
in the U.S. labor force in the 1950s to the
1990s was due to the introduction of a
new contraceptive technology, birth
control pills, and the adjustment of age of
majority laws. The use of birth control
gave women the flexibility of opting to
invest and advance their career while
maintaining a relationship. By having
control over the timing of their fertility, they
were not running a risk of thwarting their
career choices. However, only 40% of the
population actually used the birth control
pill.

This implies that other factors may have

contributed to women choosing to invest
in advancing their careers. One factor may
be that more and more men delayed the
age of marriage, allowing women to marry
later in life without worrying about the
quality of older men. Other factors include
the changing nature of work, with
machines replacing physical labor,
eliminating many traditional male
occupations, and the rise of the service
sector, where many jobs are gender
neutral.

Another factor that may have contributed

to the trend was The Equal Pay Act of
1963, which aimed at abolishing wage
disparity based on sex. Such legislation
diminished sexual discrimination and
encouraged more women to enter the
labor market by receiving fair
remuneration to help raising families and
children.

At the turn of the 21st century the labor

force participation began to reverse its
long period of increase. Reasons for this
change include a rising share of older
workers, an increase in school enrollment
rates among young workers and a
decrease in female labor force
participation.[65]
The labor force participation rate can
decrease when the rate of growth of the
population outweighs that of the employed
and unemployed together. The labor force
participation rate is a key component in
long-term economic growth, almost as
important as productivity.

A historic shift began around the end of

the great recession as women began
leaving the labor force in the United States
and other developed countries.[66] The
female labor force participation rate in the
United States has steadily decreased since
2009 and as of April 2015 the female labor
force participation rate has gone back
down to 1988 levels of 56.6%.[64]

Participation rates are defined as follows:

 LF = labor force
Pop = total population
=U+E
LFpop = labor force
population p = participation
(generally defined as all rate = LF /
men and women aged LFpop
15–64)
e = rate of
E = number employed employment = E
/ LFpop
u = rate of
U = number of
unemployment
unemployed
= U / LF

The labor force participation rate explains

how an increase in the unemployment rate
can occur simultaneously with an increase
in employment. If a large number of new
workers enter the labor force but only a
small fraction become employed, then the
increase in the number of unemployed
workers can outpace the growth in
employment.[67]

Unemployment ratio

The unemployment ratio calculates the

share of unemployed for the whole
population. Particularly many young
people between 15 and 24 are studying
full-time and are therefore neither working
nor looking for a job. This means they are
not part of the labour force which is used
as the denominator for calculating the
unemployment rate.[68] The youth
unemployment ratios in the European
Union range from 5.2 (Austria) to 20.6
percent (Spain). These are considerably
lower than the standard youth
unemployment rates, ranging from 7.9
(Germany) to 57.9 percent (Greece).[69]

Effects
High and persistent unemployment, in
which economic inequality increases, has
a negative effect on subsequent long-run
economic growth. Unemployment can
harm growth not only because it is a waste
of resources, but also because it
generates redistributive pressures and
subsequent distortions, drives people to
poverty, constrains liquidity limiting labor
mobility, and erodes self-esteem
promoting social dislocation, unrest and
conflict.[70] 2013 Economics Nobel prize
winner Robert J. Shiller said that rising
inequality in the United States and
elsewhere is the most important
problem.[71]

Costs

Individual
 

Migrant Mother, Dorothea Lange, 1936

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.[72] Across
the United States the growing ranks of
people made homeless in the foreclosure
crisis are generating tent cities.[73]

Unemployment increases susceptibility to

cardiovascular disease, somatization,
anxiety disorders, depression, and suicide.
In addition, unemployed people have
higher rates of medication use, poor diet,
physician visits, tobacco smoking,
alcoholic beverage consumption, drug use,
and lower rates of exercise.[74] 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.[75]

In 1979, Brenner found that for every 10%

increase in the number of unemployed
there is an increase of 1.2% in total
mortality, a 1.7% increase in
cardiovascular disease, 1.3% more
cirrhosis cases, 1.7% more suicides, 4.0%
more arrests, and 0.8% more assaults
reported to the police.[76][77]
A study by Ruhm, in 2000, on the effect of
recessions on health found that several
measures of health actually improve
during recessions.[78] As for the impact of
an economic downturn on crime, during
the Great Depression the crime rate did
not decrease. The unemployed in the U.S.
often use welfare programs such as Food
Stamps or accumulating debt because
unemployment insurance in the U.S.
generally does not replace a majority of
the income one received on the job (and
one cannot receive such aid indefinitely).

Not everyone suffers equally from

unemployment. In a prospective study of
9570 individuals over four years, highly
conscientious people suffered more than
twice as much if they became
unemployed.[79] The authors suggested
this may be due to conscientious people
making different attributions about why
they became unemployed, or through
experiencing stronger reactions following
failure. There is also possibility of reverse
causality from poor health to
unemployment.[80]

Some researchers 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.)

Another cost for the unemployed is that

the combination of unemployment, lack of
financial resources, and social
responsibilities may push unemployed
workers to take jobs that do not fit their
skills or allow them to use their talents.
Unemployment can cause
underemployment, and fear of job loss can
spur psychological anxiety. As well as
anxiety, it can cause depression, lack of
confidence, and huge amounts of stress.
This stress is increased when the
unemployed are faced with health issues,
poverty, and lack of relational support.[81]

Another personal cost of unemployment is

its impact on relationships. A 2008 study
from Covizzi, which examines the
relationship between unemployment and
divorce, found that the rate of divorce is
greater for couples when one partner is
unemployed.[82] However, a more recent
study has found that some couples often
stick together in "unhappy" or "unhealthy"
marriages when unemployed to buffer
financial costs.[83] A 2014 study by Van der
Meer found that the stigma that comes
from being unemployed affects personal
well-being, especially for men, who often
feel as though their masculine identities
are threatened by unemployment.[84]

Unemployment can also bring personal

costs in relation to gender. One study
found that women are more likely to
experience unemployment than men and
that they are less likely to move from
temporary positions to permanent
positions.[85] Another study on gender and
unemployment found that men, however,
are more likely to experience greater
stress, depression, and adverse effects
from unemployment, largely stemming
from the perceived threat to their role as
breadwinner.[86] This study found that men
expect themselves to be viewed as "less
manly" after a job loss than they actually
are, and as a result they engage in
compensating behaviors, such as financial
risk-taking and increased assertiveness,
because of it.

Costs of unemployment also vary

depending on age. The young and the old
are the two largest age groups currently
experiencing unemployment.[87] A 2007
study from Jacob and Kleinert found that
young people (ages 18 to 24) who have
fewer resources and limited work
experiences are more likely to be
unemployed.[88] Other researchers have
found that today’s high school seniors
place a lower value on work than those in
the past, and this is likely because they
recognize the limited availability of jobs.[89]
At the other end of the age spectrum,
studies have found that older individuals
have more barriers than younger workers
to employment, require stronger social
networks to acquire work, and are also
less likely to move from temporary to
permanent positions.[85][85][87] Additionally,
some older people see age discrimination
as the reason they are not getting hired.[90]

Social

Demonstration against unemployment in Kerala, South

India, India on 27 January 2004

An economy with high unemployment is

not using all of the resources, specifically
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.[91]

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 seven years.[8]
High unemployment can encourage
xenophobia and protectionism as workers
fear that foreigners are stealing their
jobs.[92] 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.

High unemployment can also cause social

problems such as crime; if people have
less disposable income than before, it is
very likely that crime levels within the
economy will increase.
A 2015 study published in The Lancet,
estimates that unemployment causes
45,000 suicides a year globally.[93]

Socio-political

Unemployment rate in Germany in 2003 by states.

High levels of unemployment can be

causes of civil unrest,[94] in some cases
leading to revolution, and particularly
totalitarianism. The fall of the Weimar
Republic in 1933 and Adolf Hitler's rise to
power, which culminated in World War II
and the deaths of tens of millions and the
destruction of much of the physical capital
of Europe, is attributed to the poor
economic conditions in Germany at the
time, notably a high unemployment rate[95]
of above 20%; see Great Depression in
Central Europe for details.

Note that the hyperinflation in the Weimar

Republic is not directly blamed for the Nazi
rise—the Hyperinflation in the Weimar
Republic occurred primarily in the period
1921–23, which was contemporary with
Hitler's Beer Hall Putsch of 1923, and is
blamed for damaging the credibility of
democratic institutions, but the Nazis did
not assume government until 1933, ten
years after the hyperinflation but in the
midst of high unemployment.

Rising unemployment has traditionally

been regarded by the public and media in
any country as a key guarantor of electoral
defeat for any government which oversees
it. This was very much the consensus in
the United Kingdom until 1983, when
Margaret Thatcher's Conservative
government won a landslide in the general
election, despite overseeing a rise in
unemployment from 1,500,000 to
3,200,000 since its election four years
earlier.[96]

Benefits

The primary benefit of unemployment is

that people are available for hire, without
being headhunted away from their existing
employers. This permits new and old
businesses to take on staff.

Unemployment is argued to be "beneficial"

to the people who are not unemployed in
the sense that it averts inflation, which
itself has damaging effects, by providing
(in Marxian terms) a reserve army of
labour, that keeps wages in check.[97]
However, the direct connection between
full local employment and local inflation
has been disputed by some due to the
recent increase in international trade that
supplies low-priced goods even while local
employment rates rise to full
employment.[98]

In the Shapiro–Stiglitz model of efficiency wages,

workers are paid at a level that dissuades shirking.
 o e s a e pa d at a e e t at d ssuades s g.
This prevents wages from dropping to market clearing
levels.

Full employment cannot be achieved

because workers would shirk, if they were
not threatened with the possibility of
unemployment.[99] The curve for the no-
shirking condition (labeled NSC) goes to
infinity at full employment as a result. The
inflation-fighting benefits to the entire
economy arising from a presumed
optimum level of unemployment have
been studied extensively.[100] The Shapiro–
Stiglitz model suggests that wages are not
bid down sufficiently to ever reach 0%
unemployment.[101] This occurs because
employers know that when wages
decrease, workers will shirk and expend
less effort. Employers avoid shirking by
preventing wages from decreasing so low
that workers give up and become
unproductive. These higher wages
perpetuate unemployment while the threat
of unemployment reduces shirking.

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, 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 labour productivity and profitability
by increasing employers' rationale for their
monopsony-like power (and profits).[24]
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.[102] 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.[103] 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.[104]

Decline in work hours

As a result of productivity, the work week

declined considerably during the 19th
century.[105][106] By the 1920s in the U.S.
the average work week was 49 hours, but
the work week was reduced to 40 hours
(after which overtime premium was
applied) as part of the National Industrial
Recovery Act of 1933. At the time of the
Great Depression of the 1930s, it was
believed that due to the enormous
productivity gains due to electrification,
mass production and agricultural
mechanization, there was no need for a
large number of previously employed
workers.[21][107]

Controlling or reducing
unemployment
United States Families on Relief (in 1,000's)[108]
1936 1937 1938 1939 1940 1

Workers emplo

WPA 1,995 2,227 1,932 2,911 1,971 1,

CCC and NYA 712 801 643 793 877

Other federal work

554 663 452 488 468
projects

Cases on public assista

Social security
602 1,306 1,852 2,132 2,308 2,
programs

General relief 2,946 1,484 1,611 1,647 1,570 1,

To

Total families
5,886 5,660 5,474 6,751 5,860 5,
helped

Unemployed
9,030 7,700 10,390 9,480 8,120 5,
workers (BLS)

Coverage
65% 74% 53% 71% 72%
(cases/unemployed)
Societies try a number of different
measures to get as many people as
possible into work, and various societies
have experienced close to full employment
for extended periods, particularly during
the Post-World War II economic
expansion. The United Kingdom in the
1950s and 1960s averaged 1.6%
unemployment,[109] while in Australia the
1945 White Paper on Full Employment in
Australia established a government policy
of full employment, which lasted until the
1970s when the government ran out of
money.
However, mainstream economic
discussions of full employment since the
1970s suggest that attempts to reduce the
level of unemployment below the natural
rate of unemployment will fail, resulting
only in less output and more inflation.

Demand-side solutions

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.

There are many ways to stimulate demand

for goods and services. Increasing wages
to the working class (those more likely to
spend the increased funds on goods and
services, rather than various types of
savings, or commodity purchases) is one
theory proposed. Increased wages are
believed to be more effective in boosting
demand for goods and services than
central banking strategies that put the
increased money supply mostly into the
hands of wealthy persons and institutions.
Monetarists suggest that increasing
money supply in general will increase
short-term demand. As for the long-term
demand, the increased demand will be
negated by inflation. A rise in fiscal
expenditures is another strategy for
boosting aggregate demand.

Providing aid to the unemployed is a

strategy used to prevent cutbacks in
consumption of goods and services which
can lead to a vicious cycle of further job
losses and further decreases in
consumption/demand. Many countries aid
the unemployed through social welfare
programs. These unemployment benefits
include unemployment insurance,
unemployment compensation, welfare 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 job.

A direct demand-side solution to

unemployment is government-funded
employment of the able-bodied poor. This
was notably implemented in Britain from
the 17th century until 1948 in the
institution of the workhouse, which
provided jobs for the unemployed with
harsh conditions and poor wages to
dissuade their use. A modern alternative is
a job guarantee, where the government
guarantees work at a living wage.

Temporary measures can include public

works programs such as the Works
Progress Administration. Government-
funded employment is not widely
advocated as a solution to unemployment,
except in times of crisis; this is attributed
to the public sector jobs' existence
depending directly on the tax receipts from
private sector employment.

 
Supply-side economics proposes that lower taxes lead
to employment growth. Historical state data from the
United States shows a heterogeneous result.

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 work. The
system was established by the Social
Security Act of 1935. Although 90% of
citizens are covered by unemployment
insurance, less than 40% apply for and
receive benefits.[110] However, the number
applying for and receiving benefits
increases during recessions. 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.

Tax decreases on high income earners (top 10%) are

not correlated with employment growth; however, tax
decreases on lower income earners (bottom 90%) are
correlated with employment growth.[111]
According to classical economic theory,
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. 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-side solutions

However, the labor market is not 100%

efficient, although it may be more efficient
than the bureaucracy. Some argue that
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. This assumes
perfect competition exists in the labour
market, specifically that no single entity is
large enough to affect wage levels and
that employees are similar in ability.

Advocates of supply-side policies believe

those policies can solve this by making the
labour market more flexible. These include
removing the minimum wage and reducing
the power of unions. Supply-siders argue
the reforms increase long-term growth by
reducing labour costs. 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, create jobs, reduce
unemployment and decrease labour's
share of national income. Other supply-
side policies include education to make
workers more attractive to employers.

History
There are relatively limited historical
records on unemployment because it has
not always been acknowledged or
measured systematically. Industrialization
involves economies of scale that often
prevent individuals from having the capital
to create their own jobs to be self-
employed. An individual who cannot either
join an enterprise or create a job is
unemployed. As individual farmers,
ranchers, spinners, doctors and merchants
are organized into large enterprises, those
who cannot join or compete become
unemployed.

Recognition of unemployment occurred

slowly as economies across the world
industrialized and bureaucratized. Before
this, traditional self sufficient native
societies have no concept of
unemployment. The recognition of the
concept of "unemployment" is best
exemplified through the well documented
historical records in England. For example,
in 16th century England no distinction was
made between vagrants and the jobless;
both were simply categorized as "sturdy
beggars", to be punished and moved
on.[112]

The closing of the monasteries in the

1530s increased poverty, as the church
had helped the poor. In addition, there was
a significant rise in enclosure during the
Tudor period. Also the population was
rising. Those unable to find work had a
stark choice: starve or break the law. In
1535, a bill was drawn up calling for the
creation of a system of public works to
deal with the problem of unemployment, to
be funded by a tax on income and capital.
A law passed a year later allowed
vagabonds to be whipped and hanged.[113]

In 1547, a bill was passed that subjected

vagrants to some of the more extreme
provisions of the criminal law, namely two
years servitude and branding with a "V" as
the penalty for the first offense and death
for the second.[114] During the reign of
Henry VIII, as many as 72,000 people are
estimated to have been executed.[115] In
the 1576 Act each town was required to
provide work for the unemployed.[116]

The Elizabethan Poor Law of 1601, one of

the world's first government-sponsored
welfare programs, made a clear distinction
between those who were unable to work
and those able-bodied people who refused
employment.[117] Under the Poor Law
systems of England and Wales, Scotland
and Ireland a workhouse was a place
where people who were unable to support
themselves, could go to live and work.[118]

Industrial Revolution to late

19th century

The Depression of 1873–79: New York City police

violently attacking unemployed workers in Tompkins
Square Park, Manhattan, New York City 1874

Poverty was a highly visible

problem in the eighteenth
century, both in cities and in the
countryside. In France and
Britain by the end of the century,
an estimated 10 percent of the
 people depended on charity or
begging for their food.

— Jackson J. Spielvogel
(2008), Cengage Learning.
p.566. ISBN 0-495-50287-1

By 1776 some 1,912 parish and

corporation workhouses had been
established in England and Wales, housing
almost 100,000 paupers.

A description of the miserable living

standards of the mill workers in England in
1844 was given by Fredrick Engels in The
Condition of the Working-Class in England
in 1844.[119] In the preface to the 1892
edition Engels notes that the extreme
poverty he wrote about in 1844 had largely
disappeared. David Ames Wells also noted
that living conditions in England had
improved near the end of the 19th century
and that unemployment was low.

The scarcity and high price of labor in the

U.S. during the 19th century was well
documented by contemporary accounts,
as in the following:

"The laboring classes are

comparatively few in number,
but this is counterbalanced by,
and indeed, may be one of the
causes of the eagerness by which
they call in the use of machinery
in almost every department of
industry. Wherever it can be
applied as a substitute for
manual labor, it is universally
and willingly resorted to ....It is
this condition of the labor
market, and this eager resort to
machinery wherever it can be
applied, to which, under the
guidance of superior education
and intelligence, the remarkable
 prosperity of the United States is
due."[120] Joseph Whitworth,
1854

Scarcity of labor was a factor in the

economics of slavery in the United States.

As new territories were opened and

Federal land sales conducted, land had to
be cleared and new homesteads
established. Hundreds of thousands of
immigrants annually came to the U.S. and
found jobs digging canals and building
railroads. Almost all work during most of
the 19th century was done by hand or with
horses, mules, or oxen, because there was
very little mechanization. The workweek
during most of the 19th century was 60
hours. Unemployment at times was
between one and two percent.

The tight labor market was a factor in

productivity gains allowing workers to
maintain or increase their nominal wages
during the secular deflation that caused
real wages to rise at various times in the
19th century, especially in the final
decades.[121]

20th century
    

An Unemployed
unemploye Canadian
d German, men,
1928. marching for
Unemploy jobs during
ment in the Great
Germany Depression
reached to Bathurst
almost 30% Street United
of the Church,
workforce Toronto,
after the Ontario in
Great Canada,
Depression. 1930
There were labor shortages during WW
I.[21] Ford Motor Co. doubled wages to
reduce turnover. After 1925 unemployment
began to gradually rise.[122]

The decade of the 1930s saw the Great

Depression impact unemployment across
the globe. One Soviet trading corporation
in New York averaged 350 applications a
day from Americans seeking jobs in the
Soviet Union.[123] In Germany the
unemployment rate reached nearly 25% in
1932.[124]

In some towns and cities in the north east

of England, unemployment reached as
high as 70%; the national unemployment
level peaked at more than 22% in 1932.[125]
Unemployment in Canada reached 27% at
the depth of the Depression in 1933.[126] In
1929, the U.S. unemployment rate
averaged 3%.[127]

WPA poster promoting the benefits of employment

In the U.S., the Works Progress
Administration (1935–43) was the largest
make-work program. It hired men (and
some women) off the relief roles ("dole")
typically for unskilled labor.[128]

In Cleveland, Ohio, the unemployment rate

was 60%; in Toledo, Ohio, 80%.[129] There
were two million homeless people
migrating across the United States.[129]
Over 3 million unemployed young men
were taken out of the cities and placed
into 2600+ work camps managed by the
Civilian Conservation Corps.[130]
Unemployment in the United Kingdom fell
later in the 1930s as the depression eased,
and remained low (in six figures) after
World War II.

Fredrick Mills found that in the U.S., 51% of

the decline in work hours was due to the
fall in production and 49% was from
increased productivity.[131] By 1972
unemployment in the UK had crept back
up above 1,000,000, and was even higher
by the end of the decade, with inflation
also being high. Although the monetarist
economic policies of Margaret Thatcher's
Conservative government saw inflation
reduced after 1979, unemployment soared
in the early 1980s, exceeding 3,000,000—a
level not seen for some 50 years—by 1982.
This represented one in eight of the
workforce, with unemployment exceeding
20% in some parts of the United Kingdom
which had relied on the now-declining
industries such as coal mining.[132]

However, this was a time of high

unemployment in all major industrialised
nations.[133] By the spring of 1983,
unemployment in the United Kingdom had
risen by 6% in the previous 12 months;
compared to 10% in Japan, 23% in the
United States of America and 34% in West
Germany (seven years before
reunification).[134]

Unemployment in the United Kingdom

remained above 3,000,000 until the spring
of 1987, by which time the economy was
enjoying a boom.[132] By the end of 1989,
unemployment had fallen to 1,600,000.
However, inflation had reached 7.8% and
the following year it reached a nine-year
high of 9.5%; leading to increased interest
rates.[135]

Another recession began during 1990 and

lasted until 1992. Unemployment began to
increase and by the end of 1992 nearly
3,000,000 in the United Kingdom were
unemployed. Then came a strong
economic recovery.[132] With inflation
down to 1.6% by 1993, unemployment then
began to fall rapidly, standing at 1,800,000
by early 1997.[136]

21st century

The Japanese unemployment rate, 1953–2006.

The official unemployment rate in the 16
EU countries that use the Euro rose to 10%
in December 2009 as a result of another
recession.[137] Latvia had the highest
unemployment rate in the EU at 22.3% for
November 2009.[138] Europe's young
workers have been especially hard hit.[139]
In November 2009, the unemployment rate
in the EU27 for those aged 15–24 was
18.3%. For those under-25, the
unemployment rate in Spain was
43.8%.[140] Unemployment has risen in
two-thirds of European countries since
2010.[141]
Into the 21st century, unemployment in the
United Kingdom remained low and the
economy remaining strong, while at this
time several other European economies—
namely, France and Germany (reunified a
decade earlier)—experienced a minor
recession and a substantial rise in
unemployment.[142]

In 2008, when the recession brought on

another increase in the United Kingdom,
after 15 years of economic growth and no
major rises in unemployment.[143] Early in
2009, unemployment passed the
2,000,000 mark, by which time economists
were predicting it would soon reach
3,000,000.[144] However, the end of the
recession was declared in January
2010[145] and unemployment peaked at
nearly 2,700,000 in 2011,[146] appearing to
ease fears of unemployment reaching
3,000,000.[147] The unemployment rate of
Britain's young black people was 47.4% in
2011.[148] 2013/2014 has seen the
employment rate increase from 1,935,836
to 2,173,012 as supported by[149] showing
the UK is creating more job opportunities
and forecasts the rate of increase in
2014/2015 will be another 7.2%.[150]

A 26 April 2005 Asia Times article notes

that, "In regional giant South Africa, some
300,000 textile workers have lost their jobs
in the past two years due to the influx of
Chinese goods".[151] The increasing U.S.
trade deficit with China cost 2.4 million
American jobs between 2001-2008,
according to a study by the Economic
Policy Institute (EPI).[152] From 2000-2007,
the United States lost a total of 3.2 million
manufacturing jobs.[153] 12.1% of US
military veterans who had served after the
September 11 attacks in 2001 were
unemployed as of 2011; 29.1% of male
veterans aged 18–24 were unemployed.[74]
As of September 2016, the total veteran
unemployment rate was 4.3 percent. By
September 2017, that figure had dropped
to 3 percent.[154]

About 25,000,000 people in the world's

thirty richest countries will have lost their
jobs between the end of 2007 and the end
of 2010 as the economic downturn pushes
most countries into recession.[155] In April
2010, the U.S. unemployment rate was
9.9%, but the government's broader U-6
unemployment rate was 17.1%.[156] In April
2012, the unemployment rate was 4.6% in
Japan.[157] In a 2012 news story, the
Financial Post reported, "Nearly 75 million
youth are unemployed around the world,
an increase of more than 4 million since
2007. In the European Union, where a debt
crisis followed the financial crisis, the
youth unemployment rate rose to 18% last
year from 12.5% in 2007, the ILO report
shows."[158] In March 2018, according to
U.S. Unemployment Rate Statistics, the
unemployment rate was 4.1%, below the
4.5 to 5.0% norm. [159]

See also
Basic income
Economics terminology that differs from
common usage
Effective unemployment rate
Employment Protection Legislation
Employment rate
Federal Reserve Economic Data FRED
Graduate unemployment
HIRE Act
Job migration
Jobseeker's Allowance
List of countries by long-term
unemployment rate
List of countries by unemployment rate
List of films featuring unemployment
List of U.S. states by unemployment rate
List of European regions by
unemployment rate
Male unemployment
 Practice firm
Short time
Spatial mismatch
Training
Unemployment extension
Volunteering
Waithood
Workfare
Youth exclusion

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[1]
External links
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1. "Karmasandhan" . Karmasandhan.
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