Int. J. Pluralism and Economics Education, Vol. 7, No.

1, 2016 45

Marx-Keynes on involuntary unemployment and

alternative labour market indicators

Hee-Young Shin
Department of Economics,
Raj Soin College of Business,
Wright State University, Ohio, USA
Email: HeeYoung.Shin@wright.edu

Abstract: The paper revisits Marx and Keynes’ notion of involuntary

unemployment and discusses how to account for this phenomenon by
developing a series of alternative labour market indicators. Both Marx and
Keynes treated the ‘reserve army of labour’ or ‘involuntary unemployment’
phenomenon as a consequence of the long-run capital accumulation and as an
inevitable outcome of the deficient decentralised capitalist market economy.
The goal of this paper is to survey the latest developments in labour force
statistics to see whether a series of alternative indicators of labour markets fare
well with Marx and Keynes’ analysis of involuntary unemployment. The
survey in this paper shows that the labour (under-)utilisation framework that
the International Labor Office (ILO) has proposed is one of the broadest
measures of labour market performance, and that it allows us to examine the
relative size and different type of the presence of the reserve army of labour
and involuntary unemployment in our contemporary economies.

Keywords: Marx; reserve army of labour; Keynes; involuntary unemployment;

Bureau of Labor Statistics; multiple underemployment rates; International
Labor Office; labour underutilisation framework.

Reference to this paper should be made as follows: Shin, H-Y. (2016)

‘Marx-Keynes on involuntary unemployment and alternative labour market
indicators’, Int. J. Pluralism and Economics Education, Vol. 7, No. 1,
pp.45–58.

Biographical notes: Hee-Young Shin is an Assistant Professor of Economics

at Wright State University. His research interests include macro and labour
market measurement issues, income and wealth inequality, and financial crises.

1 Introduction

The paper revisits Marx and Keynes’ analysis of involuntary unemployment and
discusses how to account for this phenomenon by developing a series of alternative
labour market indicators. Both Marx and Keynes analysed (un-)employment as a function
of capital accumulation and perceived involuntary unemployment as an inevitable
outcome of the deficient capitalist market economy. However, neither Marx nor Keynes
discussed how to measure and estimate the relative size and type of the reserve army of
industrial labour (Marx) and involuntary unemployment (Keynes). The goal of this paper

Copyright © 2016 Inderscience Enterprises Ltd.

46 H-Y. Shin

is to survey the latest developments in the labour force statistical concepts to see whether
a series of alternative labour market indicators that have been proposed by both the
US Bureau of Labor Statistics (BLS) and the International Labor Office (ILO) fare well
with Marx and Keynes’ notion of involuntary unemployment phenomena in
contemporary capitalist market economies.
It is well known that the standard labour force statistics that the governments in most
advanced capitalist economies have conventionally relied on is highly limited and of no
use at all to analyse certain quality aspects of employment. This paper reiterates the
fundamental limitations of the BLS’s standard labour force statistics and examines
whether we can find alternative indicators to overcome these problems. The paper then
examines to what extent these alternative indicators can provide necessary tools for
analysing what Marx and Keynes emphasised.
This paper is organised as follows: in the next section, the paper briefly revisits
Marx’s notion of the industrial reserve army of labour and Keynes’ involuntary
unemployment. The paper next examines the US BLS’s standard labour force statistical
concepts and their limitations, and a series of alternative indicators of labour market
performance, particularly focusing on the ILO’s labour underutilisation framework. The
last section concludes by discussing to what extent the ILO’s labour underutilisation
framework is satisfactory to meet both Marx and Keynes’ notion of involuntary
unemployment. The preliminary result of this paper suggests that the ILO’s labour
(under-)utilisation framework is one of the broadest measures of the labour market, and it
allows us to examine the relative size and type of the reserve army of labour and
involuntary unemployment.

2 Marx-Keynes on involuntary unemployment

2.1 Marx and the reserve army of labour

Marx examined the dynamic adjustment pattern of the capitalist labour markets in the
context of analysing the long-run consequences of capital accumulation. According to
Marx, the accumulation of capital typically involves a rising proportion of fixed capital
(‘constant capital’) relative to the number of workers (‘variable capital’). This historical
tendency of capital accumulation does not necessarily mean that the demand for labour is
always falling. On the contrary, the demand for labour, thus, the potential employment
opportunity for workers may rise as the size of constant capital rises. If there is not
enough labour supply, the increase in the size of constant capital may even increase
wages and salaries for workers temporarily. Over the long period, however, the
accumulation of capital involves a constantly diminishing demand for labour in
comparison to the size of constant capital.
According to Marx, this process of capital accumulation gives rise to a cycle of
‘absorption’ and ‘repulsion’ of employed labour, generating a cycle of a reduction in size
and reproduction of ‘relative surplus labouring population’. To quote, “[the] existence of
a surplus laboring population is a necessary product of accumulation, in the sense that it
is needed for the changing need of the self-expansion of capital” [Marx, (1986),
pp.632–633].
 Marx-Keynes on involuntary unemployment and alternative labour market 47

When it comes to the effect on wages, the presence of the redundant and easily
disposable ‘relative surplus population’ tends to lower the overall pressure for wage
increases. This means that employers can pay lower wages to workers, and collectively
increase the degree of their exploitation of labour power. Whenever there was pressure
for wage increases, however, capitalists in Marx’s era typically responded by displacing
or substituting skilled workers by less skilled workers, adult by child, male by female,
etc. to reduce their labour costs [Marx, (1986), p.635]. Marx observes that this
displacement of workers can be a dominant pattern of the labour practice in his lifetime
and predicts this asymmetric power relation would prevail, unless there are sufficiently
powerful countervailing social forces, including trade union activities.
Along the cycle of capital accumulation, “the general movement of wage are
exclusively regulated by the expansion and contraction of the [size of] industrial reserve
army of labor”. The pattern of wage determination again corresponds to the periodic
changes of industrial cycles. In this sense, wages in the labour market are not determined
by the change in the absolute number of the population per se, but by “the varying
proportion in which the working class is divided into active and reserve army” and by the
increase or diminution in “the relative amount of the surplus population” [Marx, (1986),
p.637]. To use contemporary labour force statistical terminology, both labour demand
and wages are mainly a function of the relative distribution and size of an economically
active population divided into either civilian labour force (both employed and
unemployed) or not-in-the labour force.
In Marx’s era, the industrial reserve army of labour took a variety of forms: that is,
the floating reserve army of labour, the latent reserve army of labour, and the stagnant
form of reserve army of labour. The floating form occurs when workers are sometimes
attracted and repelled along the cycle of capital accumulation. We may consider this
floating reserve army of labour as similar to ‘cyclical unemployment’. The latent form
becomes salient when agricultural labourers need to wait for their manual work. This
particular form of unemployment or underemployment of labour is similar to seasonal or
structural unemployment that many standard macroeconomics textbooks describe
[cf., Mankiw, (2013), pp.180–188]. Finally, the stagnant form occurs when workers are
in the active labour army, but their employment is extremely irregular and easily
displaceable. Their job is typically characterised by “maximum of working-time, and
minimum of wages” [Marx, (1986), p.643]. In contemporary economies, we may think of
casual or involuntary part-time workers as a prime example of this particular form of the
reserve army of labour.
In conclusion, Marx observes that the existence of this reserve army of labour is
functional under the capitalist labour market, i.e., its existence is not only an inevitable
consequence of, but also a necessary condition for capital accumulation at an extended
scale. To quote,

“[t]he greater the social wealth, – [the greater] the absolute mass of the
proletariat and the productiveness of its labor, the greater is the industrial
reserve army. – The mechanism of capitalist production and accumulation
constantly [a]ffects this adjustment [the accommodation of the number of
workers to capitals].” [Marx, (1986), p.644]
48 H-Y. Shin

2.2 Keynes and involuntary unemployment

Keynes’ analysis of the capitalist labour market is equally important, and
directly relevant to our immediate discussion. Keynes develops his own economic
paradigm by questioning the validity of the then dominant thinking in economics
profession (‘classical economic theory’).
According to Keynes, classical economists have the following two fundamental
‘postulates’ in common in their economic theories. These are (1) “the real wage is equal
to the marginal product of labor,” and (2) “the utility of the real wage (when a given
volume of labor is employed) is equal to the marginal disutility of employment”
[Keynes, (1997), p.5]. With these two postulates, classical economists constructed the
condition for labour market equilibrium: they derive the labour demand curve from the
first postulate, while deriving the labour supply curve from the second postulate. At the
point of intersection, classical economists find an equilibrium employment level and real
wage, which jointly determines a particular equilibrium level of output. From this
analysis, classical economists observe that there are only two types of unemployment:
‘frictional’ or ‘voluntary’. Simply put, workers are temporarily unemployed when they
are switching their jobs, or when they voluntarily decide not to have jobs.
From Keynes’ point of view, however, this classical theory of the capitalist labour
market does not make any sense. Keynes argues that the overall price level and thus the
change in real wage is fundamentally determined by a variety of factors such as industrial
competition, cost of production, and many other variables that individual workers cannot
directly control. Thus, it is non-sense to assume, in the first place, that an individual
worker is in a position to directly control his or her real wage level and to say that labour
supply is a simple function of real wages. Admittedly, workers in trade unions may
attempt to influence the determination of nominal wages through collective bargaining.
But even in this case the actual price level that determines workers’ real purchasing
power is well beyond their collective decision. Contrary to classical economists’ belief,
this means that we cannot draw a well-behaved upward slopping labour supply curve,
which is supposed to determine jointly labour market equilibrium.
In this connection, Keynes asserts that there is a third type of unemployment,
involuntary unemployment, which occurs when people fail to find a job even when they
become willing to work at a lower real wage. To use Keynes’ own expression, workers
may not find a job even when their ‘marginal disutility of labour’ is substantially
decreasing as was in the case of the Great Depression. This involuntary unemployment
occurs whenever the economic system or a particular economic situation fails to generate
sufficient aggregate demand. To quote, “[when] effective demand is deficient, there is
under-employment of labor in the sense that there are men unemployed who would be
willing to work at less than the existing real wage” [Keynes, (1997), p.289, p.15].
From Keynes’ point of view, the laissez faire capitalist market economies in which
there is no automatic coordination mechanism rarely achieve and sustain the full
employment level of economic activity that reduces this involuntary unemployment.
Thus, involuntary unemployment is a persistent feature of contemporary capitalism, in
the absence of appropriate countervailing public policy. Just as Marx demonstrated the
existence of the industrial reserve army of labour is a functional and necessary condition
for extended capital accumulation, Keynes observes that the decentralised capitalist
labour market inevitably generates and reproduces this involuntary unemployment
phenomenon.
 Marx-Keynes on involuntary unemployment and alternative labour market 49

3 The official definitions in the BLS labour force statistics and their
limitations

With these theoretical concepts in mind, let us now turn our attention to some of the
measurement issues. One may argue that statistical measurement is largely unrelated with
a particular economic theory, thus attempts to show the connection between the two may
be misleading. I generally agree that the development of contemporary labour force
statistics, and more broadly the labour market indicators as a whole, has its own
distinctive intellectual domain, which is not necessarily well aligned with that of
economic theories. Nonetheless, I believe that underlying economic theory can and
should guide the development of labour force statistical concepts, and vice versa. On this
ground, I will examine how conventional labour force statistics, and a series of
alternative labour market indicators, can be used to account for certain labour market
outcomes emphasised by both Marx and Keynes.
Let us first examine conventional definitions and categories of labour force statistics.
Governments in most advanced capitalist economies have provided a series of statistical
information that show a certain aspect of the labour market, which includes the working
age population (economically active population), civilian labour force, the number of
employed and the number of unemployed, etc.
In the USA, the BLS has classified the economically active population according to
their own operational categories in order to provide a variety of statistical indicators of
the labour market. For example, the employed is a person who did any work for pay or
profit, or worked 15 hours or more in a family business with/or without receiving pay. An
unemployed person is not currently employed, but actively seeking a job, and
immediately available for work, given a job opportunity (BLS, 2010).

Figure 1 The BLS’s standard labour force categories and statistics since 1954
50 H-Y. Shin

These definitions had its genesis in the ILO’s international conference on labour force
statistics held in 1954. Many labour economists and statisticians agreed upon the need of
compiling labour force data in a coherent way, and, in the process, they proposed the
operational definition of economically active population, civilian labour force,
employment and unemployment that we now know (see Figure 1).
As many economists have correctly observed since then, however, this conventional
definition of employment and unemployment is too narrow and in some cases completely
misleading. For example, in defining the concept of employment, there are no particular
working hour criteria. For this reason, even if someone worked for an hour, (s)he is still
classified as the employed as long as (s)he earned profit or wage income during the
survey week. In addition, ‘15 hours or more’ work criteria used in a family-owned
enterprise is also an arbitrary, because there is no particular reason to choose this
‘15 hours or more’ working hour criteria.
The BLS’s official definition of the unemployment rate is not adequate to capture
dynamic aspects of labour markets. In this narrow definition, those once actively looking
for a job but gave up seeking work because they believed that current economic situations
would not allow them to obtain a job, are no longer classified as unemployed, but as
not-in-the labour force. Since they are no longer a member of the civilian labour force,
this group of workers is excluded from the official unemployment rate.
Furthermore, those working part-time, not because they prefer to work part-time, but
because there are no full-time job opportunities available are simply classified as
employed. If we include marginally attached workers and involuntary part-time workers
in the official unemployment statistics, the actual size of workers who are in serious
underemployment would be significantly higher than the official unemployment rate
conveys.
Last but not the least, the BLS’s official employment statistics do not convey any
meaningful information about the quality of job. Even if workers are employed (whether
part-time or full-time), if their earned labour income (wages and salaries) is not sufficient
to support their material well-being, employees will not be able to maintain a reasonably
good quality of life. In addition, even if workers are employed, if the job does not provide
them with any meaningful chance of utilising their vocational skills or expertise, or if the
job forces workers to work over-extended hours, their employment situation may not be
considered desirable. To use Marx’s terminology, the BLS’s employment statistics fail to
capture ‘stagnant form’ of relative surplus population.

4 The US BLS economists’ alternative series of underemployment rates

For these reasons, many economists and labour statisticians have developed a series of
alternative labour market indicators, and historically there have been two different
initiatives in this regard. One is the BLS alternate series of underemployment rates, and
the other is the ILO’s labour utilisation framework. Let us examine each of these
proposals.
First, labour economists working at the BLS have developed an alternate series of
underemployment rates in order to examine and compare what they called ‘real’ labour
market situations among advanced industrialised countries. Initially, the BLS researchers
began developing ‘international comparisons of labour markets’ in 1962. Like those of
the ILO and the OECD’s comparable measurements of unemployment rates, the BLS
 Marx-Keynes on involuntary unemployment and alternative labour market 51

gathered various labour statistics from selected countries (Australia, Canada, Japan, and
six European countries) and generated internationally comparable labour force statistics
series for these countries1 (Meyers and Chandler, 1962; Sorrentino, 1983, 1993, 2000;
McMahon, 1986; Moy, 1988; Fullerton, 1999).
While doing so, they developed a series of alternate measures of underemployment
rates, ranging from U-1 to U-6, as a way to complement the single official unemployment
rate. After having a series of modifications in operational criteria used to measure these
multiple underemployment rates, the BLS began releasing national average data for each
category from 1994.2
The U-1 rate measures the number of persons who are unemployed 15 weeks or
longer as a percentage of the civilian labour force. There have been some internal debates
over the exact unemployment duration (whether to use ‘15 weeks or longer’ or ‘13 weeks
or longer’) for this rate. But the underlying reason for measuring this long-term duration
of unemployment remains the same, which is that the unemployment problem would be
“more severe when it lasted long enough to cause financial hardship” for households and
families.
The U-2 rate is a ratio of the number of persons who lost their jobs as a percentage of
the civilian labour force. The implication of this measurement is that the unemployment
causes much more serious social and financial difficulties for experienced workers than
for those who enter the labour market as new job seekers or those who voluntarily leave
their jobs. This rate may also indicate relative bargaining power of individual workers
and trade unions over securing job stability.
The U3 is the official unemployment rate. This measure represents the total number
of persons who did not work but sought work in a specified manner during the past four
weeks and were available for work during the survey periods, taken as a percentage of
civilian labour force.
The U4 rate is devised to measure the number of discourage workers, while U5
includes all marginally attached workers in which the discouraged workers are only a
part. The rationale behind these two measures is that both discouraged workers and, more
broadly, marginally attached workers are essentially in the same situation as that of the
unemployed persons, even though they are excluded from the conventional labour force
category of civilian labour force.
Finally, the U6 rate measures the total number of unemployed persons, all marginally
attached workers, and all persons employed part-time for economic reasons, as a
percentage of the civilian labour force plus all marginally attached workers. The reason
for this broadest indicator is that involuntarily part-time workers are also considered to be
in a serious underemployment situation, just as the official measure of the unemployment
captures (see Table 1).
The primary reason for the BLS’s economists to develop these multiple series of
underemployment rates was that they recognised that no single unemployment rate
measurement served various “analytical and ideological purposes” (Shiskin, 1976;
Sorrentino, 1993). I also believe that the BLS’s multiple underemployment rate series
convey more accurate information about different aspects of the labour markets, that the
single unemployment rate (U-3) alone cannot show.
However, these new indicators are not without problems. The most serious problem is
that even these are insufficient to integrate various types of labour underutilisation.
Simply put, there is no serious consideration of qualitative aspects of employment and
labour utilisation, arising from ‘skill-related’ and ‘income-related’ inadequate
52 H-Y. Shin

employment conditions. From a theoretical point of view, this multiple unemployment

rate series is not enough to show the cyclical absorption and repulsion of the reserve
army of labour (Marx) and different quality aspects of involuntary unemployment
(Keynes).
Table 1 Alternative multiple unemployment rates by the US BLS from 1994

Civilian Employed Those who worked for profit and wage during the survey week but its
labour persons exact amount is subject to change according to the series of
force unemployment rate mentioned below
Unemployed U-1 The number of persons being unemployed 15 weeks or longer as
persons a percentage of the civilian labour force
U-2 The number of persons who lost their last jobs as a percentage of
the civilian labour force
U-3 The standard unemployment rate for all workers aged 16 years
and over; the total number of persons not working but seeking
and available for work as a percentage of the civilian labour force
U-4 The total number of unemployed persons plus discouraged
workers as a percentage of the civilian labour force plus
discouraged workers
U-5 The total number of unemployed persons, plus all types of
marginally attached workers (including discouraged workers), as
a percentage of the civilian labour force plus all marginally
attached workers
U-6 The total number of unemployed persons, plus all marginally
attached workers, plus all persons employed part-time for
economic reasons, as a percentage of the civilian labour force
plus all marginally attached workers
Note: This new alternate series of underemployment measures has been released
intermittently together with the standard unemployment rate (U-3a and U-3b)
since 1994.
Source: Bregger and Haugen (1995)

5 The ILO’s labour (under-)utilisation framework

The ILO has developed its own alternative labour force statistics, known as
‘labour (under-)utilisation framework’. Since the 8th International Conference of Labor
Statisticians held in 1954 (from which the US BLS standard definition of employment
and unemployment concept originated), each conference and expert group has adopted
newly clarified resolutions concerning the measurement of underutilisation and
inadequate employment. Among them, most notable is the 13th resolution concerning
labour force, employment, unemployment and underemployment in 1982 and the
16th resolution regarding measurement of underemployment adopted in 1998.
In 1982, the 13th International Conference of Labor Statisticians passed the landmark
resolution that significantly impacted our perception of the unemployment rate. In this
conference, labour statisticians agreed upon the need of relaxing the narrow definition of
‘seeking work’ category. They pointed out that the conventional unemployment rate
might seriously underestimate the actual number of unemployed, especially “where
 Marx-Keynes on involuntary unemployment and alternative labour market 53

conventional means of seeking work are of limited relevance, where the labor market is
largely unorganized, and – where the labor force is largely self-employed” (ILO, 1982).
At the same conference, labour statisticians introduced a new concept of ‘visible
underemployment’. This category includes those who are “involuntarily working less
than the normal duration of work” and who “are seeking or available for additional work”
(ILO, 1982). According to the conventional measure of labour force, this group of worker
was classified as employed to which no further attention was paid. By introducing the
visible underemployment concept, labour statisticians emphasised the importance of this
group of labour force involuntarily working less than normal hours of work due to
economic reasons.
Finally, labour statisticians officially acknowledged the need of introducing a new
concept of ‘invisible underemployment’ (or ‘disguised unemployment’). The invisible
underemployment concept captures those desperately looking for new jobs even when
they are working full time, partly because their labour income is not adequate to afford
ordinary living expenditures and/or partly because their current jobs do not offer adequate
skills and technologies that match their education attainment level and acquired skills
(ILO, 1982).
The 16th international conference of labour statisticians went one step further:
Recognising the need to revise existing standards concerning the measurement of
underemployment and to enhance the standards’ usefulness as a technical guide, the
conference clarified the concept of underemployment and inadequate employment
framework (ILO, 1998).
First, labour economists and statisticians introduced the concept of ‘time-related
underemployment’ in order to offer a more useful guide for a type of invisible
underemployment of labour, defined as “when the hours of work of employed persons are
insufficient” compared to “an alternative employment situation”. More specifically,
workers in time-related underemployment situations comprise (1) “those willing to work
[for] additional hours” (2) “those available to work [for] additional hours” and (3) “those
who worked less than a threshold working time” during the reference period (ILO, 1998).
Second, labour economists and statisticians also recognised the existence of
‘skill-related’ and ‘income-related’ inadequate employment situations, and the
conference resolution introduced various indicators for these. For example, if the
workplace “reduces the capacities and well-being of workers” compared to “an
alternative employment opportunity”, we should classify those working under these
conditions as in inadequate employment situations.
More specifically, if the workplace does not provide adequately skilful jobs for
workers, we should consider those employees as in skill-related inadequate employment.
If the employees cannot sustain their basic material well-being because of insufficient
labour incomes, we should also classify them as income-related inadequate employment.
Finally, if there are many employed workers who are involuntarily working more
than the normal duration of working hours, according to the resolution, we should
analyse this group of workers as “inadequate employment related to excessive working
hours” (Ibid).
As in the case of time-related underemployment, the ILO resolution suggested
governments introduce this new broader framework in their labour force survey and
should develop various such indicators, alongside the single standard employment and
unemployment rate, such as releasing information about the ratio of the total number in
54 H-Y. Shin

inadequate employment situations relative to the total employed, and to the total labour
force.
Table 2 summarises these alternative measurements of labour underutilisation
framework suggested by the two ILO resolutions.
Table 2 The labour underutilisation frameworks proposed by the ILO conference

The 13th int’l conference The 16th int’l conference

resolution in 1982 resolution in 1998
Total Inadequate 1 Visible underemployment; 1 Unemployment
labour labour those unemployed plus 2 Time-related inadequate employment
force utilisation involuntarily working fewer
than the normal duration of
work and thus seeking for
additional work
2 Invisible underemployment; 3 Skill-related inadequate employment
those who did work but are 4 Income-related inadequate
seeking new jobs because of employment
low incomes,
underutilisation of skill and 5 Inadequate employment situations
low productivity, etc. due to excessive working hours and
low income
Adequate Employment with proper hours of work, incomes, and occupational skills
labour
utilisation
Notes: Statistical indicators:
1 The total number of those in time-related (skill-related and income-related)
underemployment as a percent of employed persons.
2 The total number of those in time-related (skill-related and income-related)
underemployment as a percentage of economically active population.
3 The duration (weeks, months, years) of time-related (skill-related and income-
related) underemployment.
The biggest merit of this labour underutilisation framework is that it attempts to show
various quality aspects of employment and provides a series of criteria with which
economists and policy makers can evaluate the relative performance of labour markets. In
this sense, these new international standards for labour underutilisation measurements are
the most advanced labour market indicators when compared to any other framework
suggested so far.3 Compared to the BLS’s multiple underemployment rate series,4 the
ILO’s labour underutilisation framework not only shows a certain quantity aspect of
employment and underemployment, but also succeeds in conveying some quality aspects
of employment within a coherent framework.5

6 Marx-Keynes on involuntary unemployment and the labour

underutilisation framework

Let us now discuss how well these two alternative labour market indicators account for
Marx-Keynes’ notion of involuntary unemployment, and how important it is to
understand their relationships.
Most standard textbooks treat the labour market as a mere extension of the supply and
demand analysis, and classifies unemployment as either
 Marx-Keynes on involuntary unemployment and alternative labour market 55

1 voluntary or frictional unemployment

2 frictional, structural, and cyclical unemployment.
In the first classification, there is no conceptual understanding of involuntary
unemployment emphasised by Marx and Keynes. Except for a temporal unemployment
between jobs (frictional unemployment), all unemployment phenomena are explained by
households’ voluntary decisions over labour supply, hedonistically weighing between
marginal utility of labour income and disutility of labour.
In the second classification, structural unemployment occurs given a skill and
technological mismatch, whereas the cyclical unemployment is associated with the
business cycle. Though this classification is better than the first one, it does not explain
why there exists ‘structural’ and/or ‘cyclical’ unemployment in the first place.
From a theoretical point of view, Marx’s notion of the reserve army of labour and
Keynes’ involuntary unemployment is not necessarily contradictory to the structural and
cyclical unemployment, because both structural and cyclical unemployment are part of
involuntary unemployment. Thus, a certain number of workers unemployed because of
the skill mismatch problem or because of the business cycle are involuntarily
unemployed or underemployed (according to Keynes), which is again an inevitable
consequence of the capital accumulation (according to Marx).
Nonetheless, both cyclical and structural unemployment per se are not sufficient to
explain the cause of the unemployment. Both of them are a mere description, rather than
an explanation of unemployment phenomena analysed within a broader context of
macroeconomic activities. In this sense, Marx’s concept of reserve army of labour, or his
explanation of the functional reproduction of the relative surplus labour is a broader and
much more coherent conceptual tool than the mere description of cyclical and/or
structural unemployment. The same is true for Keynes’ involuntary unemployment,
which successfully integrates both cyclical and structural unemployment as specific cases
of involuntary unemployment, which is, in turn, an unavoidable outcome of laissez faire
capitalism.
Pertaining to the relationship between Marx-Keynes’ involuntary unemployment
concept and labour force statistics, it is clear that the standard single unemployment rate
(U-3 in the USA) is insufficient to capture dynamic aspects of the labour market
adjustment process. If employment and unemployment phenomena are primarily
determined by private corporate investment decision, which, in turn, must be explained in
the broader macroeconomic context, it is also necessary to explain varying aspects of
unemployment and a certain quality aspect of employment within a coherent theoretical
framework. In this regard, the single official unemployment rate alone cannot serve this
purpose, and both BLS’s multiple underemployment rate series and the ILO’s labour
utilisation framework, in particular, are far more superior to the conventional practice of
labour force statistics.
Admittedly, neither Marx nor Keynes provided any comprehensive solution to
potential debates over the relevant statistical measurement issue. Partly because Marx
believed that other superior socioeconomic systems would replace capitalism; and for
Keynes, he mainly focused on the role of the state in reforming capitalism in order to
achieve and maintain full employment.
Nonetheless, I believe the BLS’s alternative multiple underemployment rate series,
and the ILO’s labour utilisation framework, in particular, are broadly consistent with
what both Marx and Keynes emphasised in their respective theoretical frameworks. Even
56 H-Y. Shin

though it is not necessary to have a one-to-one correspondence between a theoretical

concept and a relevant statistical measurement in economics, it would be always better to
have a more accurate indicator that shows what the relevant conceptual framework
suggests. In this regard, the ILO’s labour underutilisation framework is one of the closest
statistical indicators to Marx-Keynes’s notion of involuntary unemployment.

7 Conclusions

The paper has examined the limitations of the standard labour force statistics and two sets
of alternative indicators of labour market performance proposed by both the BLS and the
ILO. We also examined to what extent these alternative labour market indicators are
consistent with what Marx and Keynes emphasised regarding the reserve army of labour
and involuntary unemployment. Even though economic theories and labour force
statistics are separate areas of research, it is argued that the latest conceptual
developments in labour force statistics, especially the ILO’s labour underutilisation
framework can be used as a reasonable first approximation of the relative size and
different forms of the reserve army of labour and involuntary unemployment phenomena.

Acknowledgements

The author would like to thank the three anonymous reviewers.

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Notes
1 If we broaden our scope of analysis, we will soon realise that each country has its own
definitions and practices for compiling labour force statistics. Each government might have
different definitions of an economically active population, civilian labour force, employment,
unemployment, and not-in-the labour force. For these reasons, international organisations such
as the ILO and OECD have attempted to make governments’ labour force statistics
internationally comparable, by adjusting statistics using common universal criteria. In addition
to the US BLS, three organisations have developed these internationally comparable
employment and unemployment datasets. First, the OECD, which has adjusted its 24 member
countries’ employment-related data to its ‘standardised unemployment rates’, following the
recommendation from “working party on employment and unemployment statistics” since the
early 1980s. The Statistical Office of European Community (Eurostat) has also offered
EU-wide common measurements and labour market statistics. European countries have
developed their common measures and indicators alongside their national statistics through
this organisation. Finally, since 1981 the ILO has compiled labour market information on
32 countries and has published data on 24 countries since the late 1980s. Since then, the ILO
58 H-Y. Shin

has expanded the number of countries, labour force categories and time series. For more
information on and comparisons of internationally standardised series of unemployment, see
Eurostat (2003), ILO (2004), OECD (1999, 2002), Moy (1988) and Sorrentino (1993, 2000).
2 The BLS labour economists initially proposed (in 1976) seven underemployment rates,
ranging from U1 to U7, and in 1993 they reduced this to six. For the underlying motivations
and measurement criteria used for this first U1-U7 series, see Shin (2016, pp.27–29).
3 The ILO economists introduced more detailed indicators of labour underutilisation and
proposed ‘framework of decent work’ built upon the previous proposal in the successive
international conferences (ILO, 2008). The author is grateful to a reviewer who suggested this
latest development.
4 One anonymous reviewer suggested an interesting idea that the US BLS economists might
have significantly contributed to the development of the ILO’s labour underutilisation
framework. The author is grateful to this suggestion. However, the author was not able to find
any specific publications indicating how the ILO framework originated (other than ILO
official publications) and what role the BLS economists played in the process.
5 The problem is that only few countries even among OECD countries have actually adopted
this resolution. Most OECD member countries have systematically resisted incorporating
these new international standards into their labour statistics, and the ILO does not have any
legal mechanism for enforcing this new measurement. This is the main reason why the ILO’s
internationally comparable estimates projects on labour force participation, employment and
unemployment have to be based on the narrowest standard definition of unemployment (rate).
Since its inception in early 1980s, the ILO has gathered data for total population, economically
active population, employment and unemployment classified by age, sex, industries and
occupations from 32 countries including OECD member states. Until now, the ILO has
published this internationally comparable data from 1994 to present. However, its measure of
unemployment has remained the same as that of international conference resolution adopted in
1954 on which the US BLS and many other countries’ official unemployment rate measures
are based (ILO, 1996, 2010).