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Unemployment, according to the
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental economic organisation with 38 member countries, founded in 1961 to st ...

OECD
(Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid
employment Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cropped away black border edge.jpg, 300px, ''Hip, Hip, Hurrah!'' ...

employment
or
self-employment Self-employment is the state of working for oneself rather than an employer. Generally, tax authorities will view a person as self-employed if the person chooses to be recognised as such, or is generating income such that the person is required to ...
but currently available for work during the
reference period In economics, a base period or reference period is a point in time used as a reference point for comparison with other periods. It is generally used as a benchmark for measuring financial or economic data. Base periods typically provide a reference ...
. Unemployment is measured by the unemployment rate, which is the number of people who are unemployed as a percentage of the
labour force The workforce or labour force is the labour Labour or labor may refer to: * Childbirth Childbirth, also known as labour or delivery, is the ending of pregnancy where one or more babies leaves the uterus by passing through the vagina or b ...
(the total number of people employed added to those unemployed). Unemployment can have many sources, such as the following: * new
technologies Technology ("science of craft", from Greek , ''techne'', "art, skill, cunning of hand"; and , '' -logia'') is the sum of Art techniques and materials, techniques, skills, Scientific method, methods, and Business process, processes used in the ...

technologies
and
invention An invention is a unique or novel A novel is a relatively long work of narrative fiction, typically written in prose and published as a book. The present English word for a long work of prose fiction derives from the for "new", "news", or ...

invention
s * the status of the
economy An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products ...

economy
, which can be influenced by a
recession In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
*
competition Competition is a rivalry A rivalry is the state of two people or groups engaging in a lasting competitive relationship. Rivalry is the "against each other" spirit between two competing sides. The relationship itself may also be called "a riv ...
caused by
globalization Globalization, or globalisation (Commonwealth English The use of the English language English is a West Germanic languages, West Germanic language first spoken in History of Anglo-Saxon England, early medieval England, which ha ...

globalization
and
international trade International trade is the exchange of capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscul ...
*
policies Policy is a deliberate system of guideline A guideline is a statement by which to determine a course of action. A guideline aims to streamline particular processes according to a set routine or sound practice. Guidelines may be issued by an ...

policies
of the
government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Departmen ...

government
*
regulation Regulation is the management of complex systems A complex system is a system composed of many components which may interaction, interact with each other. Examples of complex systems are Earth's global climate, organisms, the human brain, infras ...

regulation
and
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
Unemployment and the status of the economy can be influenced by a country through, for example,
fiscal policy In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of plan ...

fiscal policy
. Furthermore, the
monetary authority In finance and economics, a monetary authority is the entity that manages a country’s currency and money supply, often with the objective of controlling inflation targeting, inflation, interest rates, real GDP or unemployment rate. With its mone ...
of a country, such as the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the and of a or formal monetary union, and oversees their . In contrast to a , a central bank possesses a on increasing the . Most central banks also have ...

central bank
, can influence the availability and cost for money through its
monetary policy Monetary policy is the policy adopted by the monetary authority In finance and economics, a monetary authority is the entity that manages a country’s currency and money supply, often with the objective of controlling inflation targeting, infla ...

monetary policy
. In addition to theories of unemployment, a few categorisations of unemployment are used for more precisely
modelling In general, a model is an informative representation of an object, person or system. The term originally denoted the plans of a building in late 16th-century English, and derived via French and Italian ultimately from Latin ''modulus'', a measure. ...

modelling
the effects of unemployment within the economic system. Some of the main types of unemployment include
structural unemployment A structure is an arrangement and organization of interrelated elements in a material object or system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A sy ...
,
frictional unemployment Frictional unemployment is a type of unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is persons above a specified age (usually 15) not being in paid employment or self-employment but cu ...
,
cyclical unemployment Unemployment, according to the OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental organization, intergovernmental eco ...
,
involuntary unemployment Involuntary unemployment occurs when a person is unemployed Unemployment, according to the OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) ...

involuntary unemployment
and
classical unemployment Unemployment, according to the OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental organization, intergovernmental eco ...
. 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 Globalization, or globalisation (Commonwealth English The use of the English language English is a West Germanic languages, West Germanic language first spoken in History of Anglo-Saxon England, early medieval England, which ha ...

globalization
. Discussions of frictional unemployment focus on voluntary decisions to work based on individuals' valuation of their own work and how that compares to current wage rates added to the time and effort required to find a job. Causes and solutions for frictional unemployment often address job entry threshold and wage rates. According to the UN's
International Labour Organization The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice through setting international labour standards. Founded in October 1919 under the League of Nations, it is the fir ...
(ILO), there were 172 million people worldwide (or 5% of the reported global workforce) without work in 2018. Because of the difficulty in measuring the unemployment rate by, for example, using surveys (as in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
) or through registered unemployed citizens (as in some
Europe Europe is a continent A continent is any of several large landmass A landmass, or land mass, is a large region In geography Geography (from Greek: , ''geographia'', literally "earth description") is a field of scienc ...

Europe
an countries), statistical figures such as the
employment-to-population ratio The Organisation for Economic Co-operation and Development defines the employment rate as the employment-to-population ratio. This is a statistical ratio that measures the proportion of a country's working age population (statistics are often giv ...
might be more suitable for evaluating the status of the
workforce The workforce or labour force is the labour Labour or labor may refer to: * Childbirth Childbirth, also known as labour or delivery, is the ending of pregnancy where one or more babies leaves the uterus by passing through the vagina or b ...
and the economy if they were based on people who are registered, for example, as
taxpayer A taxpayer is a person or organization (such as a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture of both ...

taxpayer
s.


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 Frictional unemployment is a type of unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is persons above a specified age (usually 15) not being in paid employment or self-employment but cu ...
,
structural unemployment A structure is an arrangement and organization of interrelated elements in a material object or system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A sy ...
and
classical unemployment Unemployment, according to the OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental organization, intergovernmental eco ...
. 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 Involuntary unemployment occurs when a person is unemployed Unemployment, according to the OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) ...

involuntary unemployment
" in the economics literature, a simple distinction is often applied. Voluntary unemployment is attributed to the individual's decisions, but 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 Frictional unemployment is a type of unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is persons above a specified age (usually 15) not being in paid employment or self-employment but cu ...
is voluntary since it reflects individual search behavior. Voluntary unemployment includes workers who reject low-wage jobs, but involuntary unemployment includes workers fired because of an economic crisis,
industrial decline The former decline_of_the_city's_once_vibrant_Automotive_industry_in_the_United_States.html" "title="Decline_of_Detroit.html" ;"title="Detroit.html" ;"title="Packard Automotive Plant in Detroit">Packard Automotive Plant in Detroit is one of the ...
, 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, and 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 with fewer job vacancies than unemployed workers even when wages are allowed to adjust and so even if all vacancies were to be filled, some unemployed workers would still remain. That happens with cyclical unemployment, as macroeconomic forces cause microeconomic unemployment, which can boomerang back and exacerbate those macroeconomic forces.


Real wage unemployment

Classical, or real-wage, unemployment, occurs when real wages for a job are set above the
market-clearing{{Unreferenced, date=May 2009 In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (econo ...
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 labour market and no longer seek employment. That is especially true in countries in which 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 A minimum wage is the lowest remuneration Remuneration is the pay or other financial compensationFinancial compensation refers to the act of providing a person with money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, ...
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). Laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky. However, that argument overly simplifies the relationship between wage rates and unemployment by ignoring numerous factors that contribute to unemployment. Some, such as
Murray Rothbard Murray Newton Rothbard (; March 2, 1926 – January 7, 1995) was an American heterodox economist Heterodox economics is any economic thought or theory that contrasts with orthodox schools of economic thought, or that may be beyond neoclas ...

Murray Rothbard
, suggest that even social taboos can prevent wages from falling to the market-clearing level. In ''Out of Work: Unemployment and Government in the Twentieth-Century America'', economists
Richard Vedder Richard K. Vedder (born November 5, 1940) is an American economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from econ ...
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.


Cyclical unemployment

Cyclical, deficient-demand, or Keynesian unemployment occurs when there is not enough
aggregate demand In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It is often called effective demand, though at other times this term is distinguished. This i ...
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. Its name is derived from the frequent ups and downs in the
business cycle The business cycle, also known as the economic cycle or trade cycle, are the fluctuations of gross domestic product Gross domestic product (GDP) is a monetary Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the pl ...

business cycle
, but unemployment can also be persistent, such as during the
Great Depression The Great Depression was a severe worldwide economic depression An economic depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a economic recession, recess ...
. With cyclical unemployment, the number of unemployed workers exceeds the number of job vacancies and so 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 demandIn economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and ...
. 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 Deficit spending is the amount by which spending exceeds revenue In accounting, revenue is the income or increase in net assets that an entity has from its normal activities (in the case of a business, usually from the sale of product (business) , ...
to boost employment and goods demand. Another intervention involves an expansionary
monetary policy Monetary policy is the policy adopted by the monetary authority In finance and economics, a monetary authority is the entity that manages a country’s currency and money supply, often with the objective of controlling inflation targeting, infla ...

monetary policy
to increase the
supply of money In macroeconomics, the money supply (or money stock) is the total value of money available in an economy at a point of time. There are several ways to define "money", but standard measures usually include Circulation (currency), currency in c ...
, which should reduce
interest rate An interest rate is the amount of interest In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investm ...
s, which, in turn, should lead to an increase in non-governmental spending.


Unemployment under "full employment"

In demand-based theory, it is possible to abolish cyclical unemployment by increasing the aggregate demand for products and workers. However, the economy eventually hits an "
inflation In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a r ...

inflation
barrier" that is 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.Chang, R. (1997
"Is Low Unemployment Inflationary?"
''Federal Reserve Bank of Atlanta Economic Review'' 1Q97:4–13
In the long term, the
velocity of money, calculated by dividing nominal GDP by the M2 stock (M1 plus time deposits), 1959–2010. The employment-to-population ratio is displayed in blue, and periods of recession are represented with gray bars. Image:M1VelocityEMratioUS052009.png, 300px ...
supply measures such as the MZM ("money zero maturity", representing cash and equivalent
demand deposit Demand deposits or non-confidential money are funds held in demand account A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit ...
s) velocity is far more predictive of inflation than low unemployment.Oliver Hossfeld (2010
"US Money Demand, Monetary Overhang, and Inflation Prediction"
''International Network for Economic Research'' working paper no. 2010.4
Some demand theory economists see the inflation barrier as corresponding to the
natural rate of unemployment The natural rate of unemployment is the name that was given to a key concept in the study of economic activity. Milton Friedman and Edmund Phelps, tackling this 'human' problem in the 1960s, both received the Nobel Prize in Economics, Nobel Prize ...
. 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 that rate is the
NAIRU Non-accelerating inflation rate of unemployment (NAIRU) is a theoretical level of unemployment Unemployment, according to the OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et ...

NAIRU
, the ''Non-Accelerating Inflation Rate of Unemployment''. Whatever its name, demand theory holds 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, and it clearly changes over time. The margin of error can be quite high relative to the actual unemployment rate, making it hard to use the NAIRU in policy-making. Another, normative, definition of full employment might be called the ''ideal'' unemployment rate. It would exclude all types of unemployment that represent forms of inefficiency. This type of "full employment" unemployment would correspond to only frictional unemployment (excluding that part encouraging the
McJob "McJob" is a slang Slang is vocabulary A vocabulary is a set of familiar words In linguistics, a word of a spoken language can be defined as the smallest sequence of phonemes that can be uttered in isolation with semantic, objective or ...
s management strategy) and so would 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."


Structural unemployment

Structural unemployment A structure is an arrangement and organization of interrelated elements in a material object or system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A sy ...
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 that it lasts longer. As with frictional unemployment, simple demand-side stimulus will not work to abolish this type of unemployment easily. Structural unemployment may also be encouraged to rise by persistent cyclical unemployment: if an economy suffers from longlasting low aggregate demand, it means that many of the unemployed become disheartened, and their skills (including job-searching skills) become "rusty" and obsolete. Problems with debt may lead to
homelessness Homelessness is the condition of lacking stable, safe, and adequate housing Housing, or more generally living spaces, refers to the construction Construction is a general term meaning the art and science to form Physical object, o ...

homelessness
and a fall into the vicious circle of poverty. That 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 Path dependence is when the decisions presented to people are dependent on previous decisions or experiences made in the past. Path Dependence exists when a feature of the economy (institution, technical standard, pattern of economic development e ...
or "
hysteresis Hysteresis is the dependence of the state of a system on its history. For example, a magnet may have more than one possible magnetic moment in a given magnetic field, depending on how the field changed in the past. Plots of a single component of t ...

hysteresis
." Much ''
technological unemployment Technological unemployment is the loss of jobs caused by technological change. It is a key type of structural unemployment. Technological change typically includes the introduction of labour-saving "mechanical-muscle" machines or more efficient ...
'', caused by 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 the problem suggests that the problem is instead one of cyclical unemployment. As indicated by
Okun's law In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods a ...
, the demand side must grow sufficiently quickly to absorb not only the growing labour force but also the workers who are made redundant by the increased labour productivity. Seasonal unemployment may be seen as a kind of structural unemployment since it is linked to certain kinds of jobs (construction and migratory farm work). The most-cited official unemployment measures erase this kind of unemployment from the statistics using "seasonal adjustment" techniques. That results in substantial and permanent structural unemployment.


Frictional unemployment

Frictional unemployment is the time period between jobs in which a worker searches for or transitions 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 Homogeneity and heterogeneity are concepts often used in the sciences Science (from the Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally ...
, 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 and 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. That 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 by multiple means including providing education, advice, training, and assistance such as
daycare center Child care, otherwise known as day care, is the care and supervision of a child or multiple children at a time, whose ages range from two weeks to twenty years. Child care is a broad topic that covers a wide spectrum of professionals, institutions ...
s. The frictions in the
labour market Labour economics seeks to understand the functioning and dynamics of the markets Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finlan ...
are sometimes illustrated graphically with a
Beveridge curve A Beveridge curve, or UV curve, is a graphical representation of the relationship between unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is persons above a specified age (usually 15) n ...
, 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 the curve. An increase or decrease in labour market frictions will shift the curve outwards or inwards.


Hidden unemployment

Official statistics often underestimate unemployment rates because of hidden, or covered, unemployment. That is the unemployment of potential workers that are not reflected in official unemployment statistics because of how the statistics are collected. In many countries, only those who have no work but are actively looking for work and/or qualifying for social security benefits are counted as unemployed. Those who have given up looking for work and sometimes those who are on government "retraining" programs are not officially counted among the unemployed even though they are not employed. The statistic also does not count the " underemployed", those working fewer hours than they would prefer or in a job that fails to 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.


Long-term unemployment

Long-term unemployment (LTU) is defined in
European Union The European Union (EU) is a political and economic union of member states that are located primarily in Europe Europe is a which is also recognised as part of , located entirely in the and mostly in the . It comprises the wester ...

European Union
statistics as unemployment lasting for longer than one year (while unemployment lasting over two years is defined as ''very long-term unemployment''). The United States
Bureau of Labor Statistics The Bureau of Labor Statistics (BLS) is a unit of the United States Department of Labor The United States Department of Labor (DOL) is a cabinet-level department of the U.S. federal government responsible for occupational safety and health, ...
(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 A structure is an arrangement and organization of interrelated elements in a material object or system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A sy ...
, which results in long-term unemployment existing in every social group, industry, occupation, and all levels of education. In 2015 the European Commission published recommendations on how to reduce long-term unemployment. These advised governments to: * encourage long-term unemployed people to register with an
employment service Employment is a relationship between two party (law), parties, usually based on employment contract, contract where work is paid for, where one party, which may be a corporation, for profit, not-for-profit organization, co-operative or other ent ...
; * provide each registered long-term unemployed person with an individual in-depth assessment to identify their needs and potential within 18 months; * offer a tailor-made job integration agreement (JIA) to all registered long-term unemployed within 18 months. These might include measures such as
mentoring Mentorship is the influence, guidance, or direction given by a mentor. Mentor is someone who teaches or gives help and advice to a less experienced and often younger person. In an organizational setting, a mentor influences the personal and pro ...
, help with job search,
further education Further education (often abbreviated FE) in the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a s ...
and
training Training is teaching, or developing in oneself or others, any skill A skill is the learned ability to perform an action with determined results with good execution often within a given amount of time, energy, or both. Skills can often be divid ...

training
, support for housing, transport, child and care services and rehabilitation. Each person would have a single point of contact to access this support, which would be implemented in partnership with employers. In 2017–2019 it implemented the Long-Term Unemployment project to research solutions implemented by EU member states and produce a toolkit to guide government action. Progress was evaluated in 2019.


Marxian theory of unemployment

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 Capital accumulation (also termed the accumulation of capital) is the dynamic that motivates the pursuit of profit, involving the investment Investment is the dedication of an asset to attain an increase in value over a period of time. Inve ...
(investment) phase of economic growth can continue. According to
Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher A philosopher is someone who practices philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about reason, M ...

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. The function of the
proletariat The proletariat (; ) is the social class A social class is a set of concepts in the social sciences and political theory Political philosophy is the philosophical study of government A government is the system or group of p ...

proletariat
within the capitalist system is to provide a "
reserve army of labourReserve army of labour is a concept in Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher A philosopher is someone who practices philosophy. The term ''philosopher'' comes from the grc, φιλόσοφο ...
" that creates downward pressure on wages. This is accomplished by dividing the proletariat into surplus labour (employees) and under-employment (unemployed). 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. 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. 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.


Measurement

There are also different ways national statistical agencies measure unemployment. The differences may limit the validity of international comparisons of unemployment data. To some degree, the differences remain despite national statistical agencies increasingly adopting the definition of unemployment of the International Labour Organization.International Labour Organization Bureau of Statistic
Measurement of employment, unemployment and underemployment – Current international standards and issues in their application
Retrieved August 2010
To facilitate international comparisons, some organizations, such as the
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental economic organisation with 38 member countries, founded in 1961 to st ...

OECD
,
Eurostat Eurostat (European Statistical Office) is a Directorate-General Within the European Union, directorates-general are departments of the European Union government with specific zones of responsibility, the equivalent of Ministry (government depar ...

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, which corrects for the normal increase in the number of people employed caused by increases in population and increases in the labour force relative to the population. The unemployment rate is expressed as a
percentage In mathematics Mathematics (from Greek: ) includes the study of such topics as numbers (arithmetic and number theory), formulas and related structures (algebra), shapes and spaces in which they are contained (geometry), and quantities a ...

percentage
and calculated as follows: :\text=\frac \times 100 As defined by the
International Labour Organization The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice through setting international labour standards. Founded in October 1919 under the League of Nations, it is the fir ...
, "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. 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. 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 who are still attending college. According to the OECD, Eurostat, and the US
Bureau of Labor Statistics The Bureau of Labor Statistics (BLS) is a unit of the United States Department of Labor The United States Department of Labor (DOL) is a cabinet-level department of the U.S. federal government responsible for occupational safety and health, ...
the unemployment rate is the number of unemployed people as a percentage of the labour force. "An unemployed person is defined by Eurostat, according to the guidelines of the International Labour Organization, as: * someone aged 15 to 74 (in Italy, Spain, the United Kingdom, Iceland, Norway: 16 to 74 years); * without work during the reference week; * available to start work within the next two weeks (or has already found a job to start within the next three months); * actively having sought employment at some time during the last four weeks." The labour force, or workforce, includes both employed (employees and self-employed) and unemployed people but not the economically inactive, such as pre-school children, school children, students and pensioners. The unemployment rate of an individual country is usually calculated and reported on a monthly, quarterly, and yearly basis by the National Agency of Statistics. Organisations like the OECD report statistics for all of its member states. Certain countries provide unemployment compensation for a certain period of time for unemployed citizens who are registered as unemployed at the government
employment agency An employment agency is an organization which matches employers to employees. In developed countries, there are multiple private businesses which act as employment agencies and a publicly-funded employment agency. Public employment agencies One ...
. Furthermore, pension receivables or claims could depend on the registration at the government employment agency. In many countries like in
Germany ) , image_map = , map_caption = , map_width = 250px , capital = Berlin Berlin (; ) is the Capital city, capital and List of cities in Germany by population, largest city of Germany by both area and population. Its 3,769,495 inh ...

Germany
, the unemployment rate is based on the number of people who are registered as unemployed. Other countries like the United States use a labour force survey to calculate the unemployment rate. The ILO describes four different methods to calculate the unemployment rate: * ''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 because if the expiration of benefits before the person finds work. * ''Employment Office Statistics'' are the least effective since they include only a monthly tally of unemployed persons who enter employment offices. This method also includes those who are not unemployed by 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, in the 1990s and 2000s, the United States had lower unemployment levels than many countries in the
European Union The European Union (EU) is a political and economic union of member states that are located primarily in Europe Europe is a which is also recognised as part of , located entirely in the and mostly in the . It comprises the wester ...

European Union
, which had significant internal variation, with countries like the United Kingdom and
Denmark Denmark ( da, Danmark, ) is a Nordic country The Nordic countries, or the Nordics, are a geographical and cultural region In geography, regions are areas that are broadly divided by physical characteristics ( physical geography), hu ...

Denmark
outperforming
Italy Italy ( it, Italia ), officially the Italian Republic ( it, Repubblica Italiana, links=no ), is a country consisting of a peninsula delimited by the Alps The Alps ; german: Alpen ; it, Alpi ; rm, Alps; sl, Alpe ) are the highest ...

Italy
and
France France (), officially the French Republic (french: link=no, République française), is a transcontinental country This is a list of countries located on more than one continent A continent is one of several large landmasses ...

France
. However, large economic events like the Great Depression can lead to similar unemployment rates across the globe. In 2013, the ILO adopted a resolution to introduce new indicators to measure the unemployment rate. *LU1: Unemployment rate: ersons in unemployment / labour force× 100 *LU2: Combined rate of time-related underemployment and unemployment: persons in time-related underemployment + persons in unemployment) / labour forcex 100 *LU3: Combined rate of unemployment and potential labour force: persons in unemployment + potential labour force) / (extended labour force)× 100 *LU4: Composite measure of labour underutilization: persons in time-related underemployment + persons in unemployment + potential labour force) / (extended labour force)× 100


European Union (Eurostat)

Eurostat Eurostat (European Statistical Office) is a Directorate-General Within the European Union, directorates-general are departments of the European Union government with specific zones of responsibility, the equivalent of Ministry (government depar ...

Eurostat
, the statistical office of the
European Union The European Union (EU) is a political and economic union of member states that are located primarily in Europe Europe is a which is also recognised as part of , located entirely in the and mostly in the . It comprises the wester ...

European Union
, defines unemployed as those persons between age 15 and 74 who are not working, have looked for work in the last four weeks, and are ready to start work within two weeks; this definition conforms to ILO standards. Both the actual count and the unemployment rate are reported. Statistical data are available by member state for the European Union as a whole (EU28) as well as for the
eurozone The eurozone, officially called the euro area, is a monetary union of 19 Member state of the European Union, member states of the European Union (EU) that have adopted the euro (euro sign, €) as their primary currency and sole legal tender. T ...

eurozone
(EA19). Eurostat also includes a long-term unemployment rate, which is defined as part of the unemployed who have been unemployed for more than one year. The main source used is the European Union Labour Force Survey (EU-LFS). It 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.


United States Bureau of Labor statistics

The
Bureau of Labor Statistics The Bureau of Labor Statistics (BLS) is a unit of the United States Department of Labor The United States Department of Labor (DOL) is a cabinet-level department of the U.S. federal government responsible for occupational safety and health, ...
measures employment and unemployment (of those over 17 years of age) by using two different labor force surveys conducted by the
United States Census Bureau The United States Census Bureau (USCB), officially the Bureau of the Census, is a principal agency of the U.S. Federal Statistical System, responsible for producing data about the American American(s) may refer to: * American, something of, ...
(within the
United States Department of Commerce The United States Department of Commerce is an executive department The United States federal executive departments are the principal units of the Federal government of the United States, executive branch of the federal government of the U ...
) and/or the Bureau of Labor Statistics (within the
United States Department of Labor The United States Department of Labor (DOL) is a cabinet-level department of the U.S. federal government, responsible for occupational safety and health Occupational safety and health (OSH), also commonly referred to as occupational health ...
) that gather employment statistics monthly. The
Current Population Survey The Current Population Survey (CPS) is a monthly survey of about 60,000 U.S. households conducted by the United States Census Bureau The United States Census Bureau (USCB), officially the Bureau of the Census, is a principal agency of the Fede ...
(CPS), or "Household Survey," conducts a survey based on a sample of 60,000 households. The survey measures the unemployment rate based on the ILO definition. The Current Employment Statistics survey (CES), or "Payroll Survey," conducts a survey based on a sample of 160,000 businesses and government agencies, which represent 400,000 individual employers.U.S. Department of Labor, Bureau of Labor Statistics,
The Employment Situation: January 2008
" January 2008
Since the survey measures only civilian nonagricultural employment, it does not calculate an unemployment rate, and it differs from the ILO unemployment rate definition. Both 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's
Employment and Training Administration The Employment and Training Administration (ETA) is part of the U.S. Department of Labor. Its mission is to provide training, employment Employment is a relationship between two party (law), parties, usually based on employment contract, contra ...
. The Bureau of Labor Statistics provides up-to-date numbers via a PDF linked here. The BLS also provides a readable concise current Employment Situation Summary, updated monthly. The Bureau of Labor Statistics also calculates six alternate measures of unemployment, U1 to U6, which measure different aspects of unemployment: * U1: Percentage of labor force unemployed 15 weeks or longer. * U2: Percentage of labor force who lost jobs or completed temporary work. * U3: Official unemployment rate, per the ILO definition, occurs when people are without jobs and they have actively looked for
work Work may refer to: * Work (human activity) Work or labor is intentional activity people perform to support themselves, others, or the needs and wants of a wider community. Alternatively, work can be viewed as the human activity that cont ...
within the past four weeks. * 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 for economic reasons (
underemployment Underemployment is the underuse of a worker because a job Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cro ...
). ''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. In 2013, Representative
Hunter Hunting is the practice of seeking, pursuing and capturing or killing wildlife Wildlife traditionally refers to undomesticated animal Animals (also called Metazoa) are multicellular A multicellular organism is an organism ...
proposed that the Bureau of Labor Statistics use the U5 rate instead of the current U3 rate. Statistics for the US economy as a whole hide variations among groups. For example, in January 2008, the US 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. Also, the US unemployment rate would be at least 2% higher if prisoners and jail inmates were counted. The unemployment rate is included in a number of major economic indices including the US Conference Board's
Index of Leading Indicators The Conference Board Leading Economic Index is an American economic leading indicator intended to forecast future economic activity. It is calculated by The Conference Board The Conference Board, Inc. is a 501(c) organization, 501(c)(3) non-pro ...
a
macroeconomic Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...
measure of the state of the economy.


Alternatives


Limitations of 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 US prisons (who may or may not be working while they are incarcerated); those who have lost their jobs and have become discouraged over time from actively looking for work; those who are
self-employedSelf-employment is the state of working for oneself rather than an employer. Generally, tax authorities will view a person as self-employed if the person chooses to be recognised as such, or is generating income such that the person is required to fi ...
or wish to become self-employed, such as tradesmen or building contractors or information technology consultants; those who have retired before the official retirement age but would still like to work (involuntary early retirees); those on
disability A disability is any condition that makes it more difficult for a person to do certain activities or effectively interact with the world around them (socially or materially). These conditions, or impairments, may be Cognitive disability, cogn ...

disability
pensions who do not possess full health but still wish to work in occupations that 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. The last people are "involuntary part-time" workers, those who are underemployed, such as 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 are unable to find worthwhile jobs after they graduated with their bachelor's degrees. Internationally, some nations' unemployment rates are sometimes muted or appear less severe because of the number of self-employed individuals working in agriculture. Small independent farmers are often considered self-employed and so cannot be unemployed. That can impact non-industrialized economies, such as the United States and Europe in the early 19th century, since overall unemployment was approximately 3% because so many individuals were self-employed, independent farmers; however, non-agricultural unemployment was as high as 80%. Many economies industrialize and so 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 and 97% in 2000. The shift away from self-employment increases the percentage of the population that is included in unemployment rates. When unemployment rates between countries or time periods are compared, 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 Unemployment benefits, also called unemployment insurance, unemployment payment, unemployment compensation, or simply unemployment, are payments made by authorized bodies to unemployed Unemployment, according to the OECD The Organisatio ...
can inflate statistics by giving an incentive to register as unemployed. People who do not seek work may choose to declare themselves unemployed to get benefits; people with undeclared paid occupations may try to get unemployment benefits in addition to the money that they earn from their work. However, in the United States, Canada, Mexico, Australia, Japan, and the European Union, unemployment is measured using a sample survey (akin to a Gallup poll). According to the BLS, a number of Eastern European nations have instituted 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 by being outside of the "labour force." Such people have no job and are not looking for one. Many of them go to school or are retired. Family responsibilities keep others out of the labour force. Still others have a physical or mental disability that prevents them from participating in the labour force. Some people simply elect not to work and prefer to be dependent on others for sustenance. Typically, employment and the labour force include only work that is done for monetary gain. Hence, a
homemaker Homemaking is mainly an American American(s) may refer to: * American, something of, from, or related to the United States of America, commonly known as the United States The United States of America (USA), commonly known as the United ...
is neither part of the labour force nor unemployed. Also, full-time students and prisoners are considered to be neither part of the labour force nor unemployed. The number of prisoners can be important. In 1999, economists Lawrence F. Katz and Alan B. Krueger estimated that increased incarceration lowered measured unemployment in the United States by 0.17% between 1985 and the late 1990s. In particular, as of 2005, roughly 0.7% of the US population is incarcerated (1.5% of the available working population). Additionally, children, the elderly, and some individuals with disabilities are typically not counted as part of the labour force and so are 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 The business cycle, also known as the economic cycle or trade cycle, are the fluctuations of gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a sp ...
, unemployment often rises. That 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 In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
, 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 The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental economic organisation with 38 member countries, founded in 1961 to st ...

OECD

Employment Outlook 2005
), normalized unemployment for men aged 25 to 54 was 4.6% in the US 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 US and 86.7% in France. That example shows that the unemployment rate was 60% higher in France than in the US, but more people in that demographic were working in France than in the US, which is counterintuitive if it is expected that the unemployment rate reflects the health of the labour market. Those deficiencies make many
labour market Labour economics seeks to understand the functioning and dynamics of the markets Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finlan ...
economists prefer to look at a range of economic statistics such as labour market participation rate, the percentage of people 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
National Bureau of Economic Research The National Bureau of Economic Research (NBER) is an American private nonprofit A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and op ...
does not use the unemployment rate but prefers various employment rates to date recessions.


Labor force participation rate

The labor force participation rate is the ratio between the
labor force The workforce or labour force is the labour Labour or labor may refer to: * Childbirth Childbirth, also known as labour or delivery, is the ending of pregnancy where one or more babies leaves the uterus by passing through the vagina or ...

labor force
and the overall size of their
cohort Cohort or cohortes may refer to: * Cohort (educational group), a group of students working together through the same academic curriculum * Cohort (floating point), a set of different encodings of the same numerical value * Cohort (military unit), ...
(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 because of an increase in the number of women entering the workplace. In the United States, there have been four significant stages of women's participation in the labour force: increases in the 20th century and decreases in the 21st century. Male labor force participation decreased from 1953 to 2013. Since October 2013, men have been increasingly joining the labour force. From the late 19th century to 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. Such women worked primarily in the
textile manufacturing Textile manufacturing is a major Textile industry, industry. It is largely based on the conversion of fibre into yarn, then yarn into fabric. These are then Dyeing, dyed or printed, fabricated into cloth which is then converted into useful good ...
industry or as
domestic worker A domestic worker is a person who works within the scope of a residence. The term "domestic service" applies to the equivalent occupational category. In traditional English contexts, such a person was said to be "in service". Domestic workers p ...
s. That 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 because of the increased demand for office workers, women's participation in the high school movement, and
electrification Electrification is the process of powering by electricity Electricity is the set of physical Physical may refer to: *Physical examination, a regular overall check-up with a doctor *Physical (album), ''Physical'' (album), a 1981 album by O ...

electrification
, which reduced the time that was spent on household chores. From the 1950s to the early 1970s, most women were secondary earners working mainly as secretaries, teachers, nurses, and librarians ( pink-collar jobs). From the mid-1970s to the late 1990s, there was a period of revolution of women in the labor force brought on by various factors, many of which arose from the
second-wave feminism Second-wave feminism was a period of Feminism, feminist activity that began in the early 1960s and lasted roughly two decades. It took place throughout the Western world, and aimed to increase equality for women by building on previous feminist ...
movement. Women more accurately planned for their future in the work force by 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%.Civilian Labor Force Participation Rate: Women
Federal Reserve Bank of St. Louis
A common theory in modern economics claims that the rise of women participating in the US labor force in the 1950s to the 1990s was caused by the introduction of a new contraceptive technology,
birth control pills Oral contraceptives, abbreviated OCPs, also known as birth control pills, are medication A medication (also called medicament, medicine, pharmaceutical drug, medicinal drug or simply drug) is a drug used to medical diagnosis, diagnose, cure, ...
, as well as the adjustment of
age of majority The age of majority is the threshold of adulthood as recognized or declared in law. It is the moment when minor (law), minors cease to be considered such and assume legal control over their persons, actions, and decisions, thus terminating the ...

age of majority
laws. The use of birth control gave women the flexibility of opting to invest and to advance their career while they maintained 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. That implies that other factors may have contributed to women choosing to invest in advancing their careers. One factor may be that an increasing number of men delayed the age of marriage, which allowed women to marry later in life without them worrying about the quality of older men. Other factors include the changing nature of work, with machines replacing physical labor, thus eliminating many traditional male occupations, and the rise of the service sector in which many jobs are gender neutral. Another factor that may have contributed to the trend was the
Equal Pay Act of 1963 The Equal Pay Act of 1963 is a United States labor law United States labor law sets the rights and duties for employees, Labor unions in the United States, labor unions, and employers in the United States. Labor law's basic aim is to remedy the "i ...
, 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 the 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. The labor force participation rate can decrease when the rate of growth of the population outweighs that of the employed and the unemployed together. The labor force participation rate is a key component in long-term economic growth, almost as important as
productivity Productivity is the efficiency Efficiency is the (often measurable) ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do th ...
. A historic shift began around the end of the
Great Recession The Great Recession was a period of marked general decline (recession In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution ( ...
as women began leaving the labor force in the United States and other developed countries. 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%. Participation rates are defined as follows: 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.


Unemployment-to-population ratio

The unemployment-to-population ratio calculates the share of unemployed for the whole population. This is in contrast to the unemployment rate, which calculates the percentage of unemployed persons in relation to the ''active'' population. Particularly, many young people between 15 and 24 are studying full-time and so are neither working nor looking for a job. That means that they are not part of the labor force, which is used as the
denominator A fraction (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally spoken in the area around Rome, known as Latium. Through the power of the Rom ...
when the unemployment rate is calculated. The
youth unemployment Youth unemployment is the situation of young people who are looking for a job, but cannot find a job, with the age range being that defined by the United Nations The United Nations (UN) is an intergovernmental organization that aims to ...
ratios in the European Union range from 5.2 (Austria) to 20.6 percent (Spain). They are considerably lower than the standard youth unemployment rates, ranging from 7.9 (Germany) to 57.9 percent (Greece).


Effects

High and the persistent unemployment, in which
economic inequality There are wide varieties of economic inequality, most notably measured using the distribution of incomeIn economics Economics () is the social science that studies how people interact with value; in particular, the Production (econom ...
increases, has a negative effect on subsequent long-run economic growth. Unemployment can harm growth because it is a waste of resources; 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. The 2013 winner of the Nobel Prize in Economics, Robert J. Shiller, said that rising inequality in the United States and elsewhere is the most important problem.


Costs


Individual

Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay mortgage payments or to pay rent may lead to
homelessness Homelessness is the condition of lacking stable, safe, and adequate housing Housing, or more generally living spaces, refers to the construction Construction is a general term meaning the art and science to form Physical object, o ...

homelessness
through
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or
eviction 250px, Two men with children, being evicted, stand with their possessions on the sidewalk, circa 1910, on the New_York_City.html"_;"title="Lower_East_Side_of_New_York_City">Lower_East_Side_of_New_York_City. Eviction_is_the_removal_of_a_ Lower_ ...
. Across the United States the growing ranks of people made homeless in the foreclosure crisis are generating
tent cities A tent city is a temporary housing facility made using tents A tent () is a shelter Shelter often refers to: * Shelter (building), a basic architectural structure or building that provides cover * Animal shelter, a facility that houses homel ...
. Unemployment increases susceptibility to
cardiovascular disease Cardiovascular disease (CVD) is a class of diseases that involve the heart The heart is a cardiac muscle, muscular Organ (biology), organ in most animals, which pumps blood through the blood vessels of the circulatory system. The pumped ...
,
somatizationSomatization is a tendency to experience and communicate psychological distress in the form of somatic symptoms and to seek medical help for them. More commonly expressed, it is the generation of physical symptoms of a psychiatric condition such a ...
,
anxiety disorder Anxiety disorders are a cluster of mental disorder A mental disorder, also called a mental illness or psychiatric disorder, is a behavioral or mental pattern that causes significant distress or impairment of personal functioning. Such fe ...
s,
depression Depression may refer to: Mental health * Depression (mood), a state of low mood and aversion to activity * Mood disorders characterized by depression are commonly referred to as simply ''depression'', including: ** Dysthymia ** Major depressive ...
, and
suicide Suicide is the act of intentionally causing one's own death Death is the permanent, irreversible cessation of all biological functions that sustain a living Living or The Living may refer to: Common meanings *Life, a condition t ...

suicide
. In addition, unemployed people have higher rates of medication use, poor diet, physician visits,
tobacco smoking Tobacco smoking is the practice of burning tobacco Tobacco is the common name of several plants in the ' of the , and the general term for any product prepared from the of these plants. of tobacco are known, but the chief commerci ...

tobacco smoking
,
alcoholic beverage An alcoholic drink is a drink A drink (or beverage) is a liquid A liquid is a nearly incompressible In fluid mechanics or more generally continuum mechanics, incompressible flow (isochoric process, isochoric flow) refers to a fluid f ...
consumption, drug use, and lower rates of exercise. 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. In 1979, M. Harvey 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 Cardiovascular disease (CVD) is a class of diseases that involve the heart The heart is a cardiac muscle, muscular Organ (biology), organ in most animals, which pumps blood through the blood vessels of the circulatory system. The pumped ...
, 1.3% more
cirrhosis Cirrhosis, also known as liver cirrhosis or hepatic cirrhosis, and end-stage liver disease, is the impaired liver function caused by the formation of scar tissue known as fibrosis Fibrosis, also known as fibrotic scarring, is a pathological wo ...
cases, 1.7% more suicides, 4.0% more arrests, and 0.8% more assaults reported to the police. A study by Christopher Ruhm in 2000 on the effect of recessions on health found that several measures of health actually improve during recessions. As for the impact of an economic downturn on crime, during the
Great Depression The Great Depression was a severe worldwide economic depression An economic depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a economic recession, recess ...
, the crime rate did not decrease. The unemployed in the US often use
welfare Welfare (or commonly, social welfare) is a type of government support intended to ensure that members of a society can meet basic human needs Maslow's hierarchy of needs is an idea in psychology Psychology is the science of mind and ...
programs such as
food stamps In the United States, the Supplemental Nutrition Assistance Program (SNAP), formerly yet still commonly known as the Food Stamp Program, is a federal program that provides food-purchasing assistance for Poverty in the United States, low- and no- ...

food stamps
or accumulating
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
because unemployment insurance in the US generally does not replace most of the income that was received on the job, and one cannot receive such aid indefinitely. Not everyone suffers equally from unemployment. In a prospective study of 9,570 individuals over four years, highly-conscientious people suffered more than twice as much if they became unemployed. The authors suggested that may because of conscientious people making different attributions about why they became unemployed or through experiencing stronger reactions following failure. There is also the possibility of reverse causality from poor health to unemployment. Some researchers hold that many of the low-income jobs are not really a better option than unemployment with a
welfare state The welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity Equal o ...
, with its
unemployment insurance Unemployment benefits, also called unemployment insurance, unemployment payment, unemployment compensation, or simply unemployment, are payments made by authorized bodies to unemployed Unemployment, according to the OECD (Organisation for Ec ...
benefits. However, since it is difficult or impossible to get unemployment insurance benefits without having worked in the past, those jobs and unemployment are more complementary than they are substitutes. (They 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 Underemployment is the underuse of a worker because a job Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cro ...
, 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, which is increased when the unemployed are faced with health issues, poverty, and lack of relational support. Another personal cost of unemployment is its impact on relationships. A 2008 study from Covizzi, which examined the relationship between unemployment and divorce, found that the rate of divorce is greater for couples when one partner is unemployed. However, a more recent study has found that some couples often stick together in "unhappy" or "unhealthy" marriages when they are unemployed to buffer financial costs. 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. 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. 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. The study found that men expect themselves to be viewed as "less manly" after a job loss than they actually are and so they engage in compensating behaviors, such as financial risk-taking and increased assertiveness. Unemployment has been linked to extremely adverse effects on men's
mental health Mental health is "a state of well-being Well-being, also known as ''wellness'', ''prudential value'' or ''quality of life'', refers to what is intrinsically valuable relative ''to'' someone. So the well-being of a person is what is ultimatel ...

mental health
. Professor Ian Hickie of the
University of Sydney The University of Sydney (USYD, or informally Sydney Uni) is a public In public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization An organization, ...

University of Sydney
said that evidence showed that men have more restricted social networks than women and that men have are heavily work-based. Therefore, the loss of a job for men means the loss of a whole set of social connections as well. That loss can then lead to men becoming socially isolated very quickly. An Australian study on the mental health impacts of graduating during an economic downturn found that the negative mental health outcomes are greater and more scarring for men than women. The effect was particularly pronounced for those with vocational or secondary education. Costs of unemployment also vary depending on age. The young and the old are the two largest age groups currently experiencing unemployment. 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. Other researchers have found that today's high school seniors place a lower value on work than those in the past, which is likely because they recognize the limited availability of jobs. 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. Additionally, some older people see
age discrimination Ageism, also spelled agism, is stereotyping Police officers buying doughnuts and coffee, an example of perceived stereotypical behavior in North America. In social psychology Social psychology is the Science, scientific study of how ...
as the reason for them not getting hired.


Social

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 Production may refer to: Economics and business * Production (economics)Production is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (output). It is the act of crea ...
, it could have higher output if all of the workforce were usefully employed. However, there is a tradeoff between economic efficiency and unemployment: if all frictionally unemployed accepted the first job that they were offered, they would be likely to be operating at below their skill level, reducing the economy's efficiency. During a long period of unemployment, workers can lose their skills, causing a loss of
human capital Human capital is a concept used by human resource professionals to designate personal attributes considered useful in the production process. It encompasses employee knowledge Knowledge is a familiarity or awareness, of someone or somet ...

human capital
. Being unemployed can also reduce the
life expectancy Life expectancy is a statistical measure of the average time an organism is expected to live, based on the year of its birth, its current age, and other demographic Demography (from prefix ''demo-'' from Ancient Greek Ancien ...

life expectancy
of workers by about seven years. High unemployment can encourage
xenophobia Xenophobia () is the fear or hatred of that which is perceived to be foreign or strange. It is an expression of perceived conflict between an ingroup In sociology and social psychology, an in-group is a social group to which a person self-cate ...
and
protectionism Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. Proponents argue that protectionist policies sh ...
since workers fear that foreigners are stealing their jobs. Efforts to preserve existing jobs of domestic and native workers include legal barriers against "outsiders" who want jobs, obstacles to immigration, and/or
tariff A tariff is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelated el ...
s and similar
trade barrier Trade barriers are government-induced restrictions on international trade International trade is the exchange of capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the ...
s 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 ''The Lancet'' is a weekly peer-reviewed Peer review is the evaluation of work by one or more people with similar competencies as the producers of the work ( peers). It functions as a form of self-regulation by qualified members of a prof ...
'', estimates that unemployment causes 45,000 suicides a year globally.


Sociopolitical

High levels of unemployment can be causes of civil unrest, in some cases leading to revolution, particularly
totalitarianism Totalitarianism is a form of government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthl ...

totalitarianism
. The fall of the
Weimar Republic The Weimar Republic (german: Weimarer Republik ) was the German state from 1918 to 1933 when it functioned as a federal constitutional republic. The state was officially named the German Reich (german: Deutsches Reich, link=no, label=none), ...
in 1933 and
Adolf Hitler's rise to power Adolf Hitler's rise to power began in Weimar Republic, Germany in September 1919 when Adolf Hitler, Hitler joined the political party then known as the ''Deutsche Arbeiterpartei'' – DAP (German Workers' Party). The name was changed in 1920 to ...
, which culminated in
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a global war A world war is "a war War is an intense armed conflict between states State may refer to: Arts, entertainment, and media Literatur ...
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 rateWhy are We Afraid to Create the Jobs We Need?
Les Leopold, 5 March 2010
of above 20%; see Great Depression in Central Europe for details. However the
hyperinflation in the Weimar Republic Hyperinflation 400px, Hyperinflation in Venezuela represented by the time it would take for money to lose 90% of its value (301-day rolling average, inverted logarithmic scale). In economics, hyperinflation is very high and typically accele ...
is not directly blamed for the Nazi rise. Hyperinflation occurred primarily in 1921 to 1923, the year of Hitler's
Beer Hall Putsch The Beer Hall Putsch, also known as the Munich Putsch,Dan Moorhouse, ed schoolshistory.org.uk, accessed 2008-05-31.Known in German German(s) may refer to: Common uses * of or related to Germany * Germans, Germanic ethnic group, citizens ...
. Although hyperinflation has been blamed for damaging the credibility of democratic institutions, 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 the media in any country as a key guarantor of electoral defeat for any government that oversees it. That was very much the consensus in the United Kingdom until 1983, when Thatcher's Conservative government won a landslide in the general election, despite overseeing a rise in unemployment from 1.5 million to 3.2 million since the 1979 election.


Benefits

The primary benefit of unemployment is that people are available for hire, without being headhunted away from their existing employers. That permits both 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
MarxianMarxian is a term generally used to refer to things related to Karl Marx other than Marxism. It can refer to: * Marxian economics * Marxist philosophy * Marxian class theory See also

* Marxism, which is usually referred to as "Marxist", rathe ...
terms) a
reserve army of labourReserve army of labour is a concept in Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher A philosopher is someone who practices philosophy. The term ''philosopher'' comes from the grc, φιλόσοφο ...
, which keeps wages in check. However, the direct connection between full local employment and local inflation has been disputed by some because of the recent increase in
international trade International trade is the exchange of capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscul ...
that supplies low-priced goods even while local employment rates rise to full employment. Full employment cannot be achieved because workers would shirk if they were not threatened with the possibility of unemployment. The curve for the no-shirking condition (labelled NSC) thus goes to infinity at full employment. The inflation-fighting benefits to the entire economy arising from a presumed optimum level of unemployment have been studied extensively. The Shapiro–Stiglitz model suggests that wages never bid down sufficiently to reach 0% unemployment. That 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. The higher wages perpetuate unemployment, but the threat of unemployment reduces shirking. Before current levels of world trade were developed, unemployment was shown to reduce inflation, following the Phillips curve, or to decelerate inflation, following the NAIRU/
natural rate of unemployment The natural rate of unemployment is the name that was given to a key concept in the study of economic activity. Milton Friedman and Edmund Phelps, tackling this 'human' problem in the 1960s, both received the Nobel Prize in Economics, Nobel Prize ...
theory since it is relatively easy to seek a new job without losing a current job. When more jobs are available for fewer workers (lower unemployment), that 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 that theory, unemployment may promote general labour
productivity Productivity is the efficiency Efficiency is the (often measurable) ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do th ...
and profit (economics), profitability by increasing employers' rationale for their monopsony-like power (and profits). Optimal unemployment has also been defended as an environmental tool to brake the constantly-accelerated growth of the GDP to maintain levels that are sustainable in the context of resource constraints and environmental impacts. However, the tool of denying jobs to willing workers seems a blunt instrument for conserving resources and the environment. It reduces the consumption of the unemployed across the board and only in the short term. Full employment of the unemployed workforce, all focused toward the goal of developing more environmentally-efficient methods for production and consumption, might provide a more significant and lasting cumulative environmental benefit and reduced resource consumption. Some critics of the "culture of work" such as the anarchist Bob Black see employment as culturally overemphasized in modern countries. Such critics often propose quitting jobs when possible, working less, reassessing the cost of living to that end, creation of jobs that are "fun" as opposed to "work," and creating cultural norms in which work is seen as unhealthy. These people advocate an "anti-work" ethic for life.


Decline in work hours

As a result of productivity, the work week declined considerably during the 19th century. By the 1920s, the average workweek in the US was 49 hours, but it was reduced to 40 hours (after which overtime premium was applied) as part of the 1933 National Industrial Recovery Act. During the Great Depression, the enormous productivity gains caused by
electrification Electrification is the process of powering by electricity Electricity is the set of physical Physical may refer to: *Physical examination, a regular overall check-up with a doctor *Physical (album), ''Physical'' (album), a 1981 album by O ...

electrification
, mass production, and agricultural mechanization were believed to have ended the need for a large number of previously-employed workers.


Remedies

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, and in Australia, the 1945 ''White Paper on Full Employment in Australia'' established a government policy of full employment, which lasted until the 1970s. However, mainstream economics, mainstream economic discussions of full employment since the 1970s suggest that attempts to reduce the level of unemployment below the
natural rate of unemployment The natural rate of unemployment is the name that was given to a key concept in the study of economic activity. Milton Friedman and Edmund Phelps, tackling this 'human' problem in the 1960s, both received the Nobel Prize in Economics, Nobel Prize ...
will fail but result only in less output and more inflation.


Demand-side solutions

Increases in the demand for labour 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 that is proposed. Increased wages are believed to be more effective in boosting demand for goods and services than central banking strategies, which put the increased money supply mostly into the hands of wealthy persons and institutions. Monetarists suggest that increasing money supply in general increases short-term demand. As for the long-term demand, the increased demand is negated by inflation. A rise in fiscal expenditures is another strategy for boosting aggregate demand. Providing aid to the unemployed is a strategy that is 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 and demand. Many countries aid the unemployed through social
welfare Welfare (or commonly, social welfare) is a type of government support intended to ensure that members of a society can meet basic human needs Maslow's hierarchy of needs is an idea in psychology Psychology is the science of mind and ...
programs. Such unemployment benefits include
unemployment insurance Unemployment benefits, also called unemployment insurance, unemployment payment, unemployment compensation, or simply unemployment, are payments made by authorized bodies to unemployed Unemployment, according to the OECD (Organisation for Ec ...
, unemployment compensation, welfare, and subsidies to aid in retraining. The main goal of such 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 in which 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. That is attributed to the public sector jobs' existence depending directly on the tax receipts from private sector employment. In the US, the unemployment insurance allowance is based solely on previous income (not time worked, family size, etc.) and usually compensates for one third of previous income. To qualify, people 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. However, the number applying for and receiving benefits increases during recessions. For highly-seasonal industries, the system provides income to workers during the off-season, thus encouraging them to stay attached to the industry. According to classical economic theory, markets reach equilibrium where supply equals demand; everyone who wants to sell at the market price can do so. Those who do not want to sell at that 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 that too many people want to sell their labour at the going price but cannot. That 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 the problem by making the labour market more flexible. These include removing the minimum wage and reducing the power of unions. Supply-siders argue that their reforms increase long-term growth by reducing labour costs. The 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 labor'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, which often prevent individuals from having the capital to create their own jobs to be self-employed. An individual who cannot 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 then, traditional Self-sustainability, 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 vagrancy (people), vagrants and the jobless; both were simply categorized as "sturdy beggars", who were to be punished and moved on. The closing of the monastery, monasteries in the 1530s increased poverty, as the Roman Catholic Church had helped the poor. In addition, there was a significant rise in enclosures 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, which were to be funded by a tax on income and capital. A law that was passed a year later allowed vagabonds to be whipped and hanged. In 1547, a bill was passed that subjected vagrants to some of the more extreme provisions of the criminal law: two years' servitude and branding with a "V" as the penalty for the first offense and death for the second. During the reign of Henry VIII, as many as 72,000 people are estimated to have been executed. In the 1576 Act, each town was required to provide work for the unemployed. The Act for the Relief of the Poor 1601, 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. Under the Poor Law systems of English Poor Laws, England and Wales, Scottish Poor Laws, Scotland and Irish Poor Laws, Ireland, a workhouse was a place For people unable to support themselves could go to live and work.


Industrial Revolution to late 19th century

By 1776, some 1,912 parish and corporation workhouses had been established in England and Wales and housed 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''. In the preface to the 1892 edition, Engels noted that the extreme poverty he had written 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 the high price of labor in the US in 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." 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 were conducted, land had to be cleared and new homesteads established. Hundreds of thousands of immigrants annually came to the US 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 since 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 by allowing workers to maintain or to increase their nominal wages during the secular deflation that caused real wages to rise at various times in the 19th century, especially in its final decades.


20th century

There were labor shortages during World War I. Ford Motor Co. doubled wages to reduce turnover. After 1925, unemployment gradually began to rise. The 1930s saw the
Great Depression The Great Depression was a severe worldwide economic depression An economic depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a economic recession, recess ...
impact unemployment across the globe. In Germany and the United States, the unemployment rate reached about 25% in 1932. In some towns and cities in the northeast of England, unemployment reached as high as 70%; the national unemployment level peaked at more than 22% in 1932. Unemployment in Canada reached 27% at the depth of the Depression in 1933. In 1929, the U.S. unemployment rate averaged 3%. In the US, 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. During the New Deal, over three million unemployed young men were taken out of their homes and placed for six months into more than 2600 work camps managed by the Civilian Conservation Corps. Unemployment in the United Kingdom fell later in the 1930s as the Depression eased, and it remained low (in six figures) after
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a global war A world war is "a war War is an intense armed conflict between states State may refer to: Arts, entertainment, and media Literatur ...
. Fredrick Mills found that in the US, 51% of the decline in work hours was due to the fall in production and 49% was from increased productivity. By 1972, unemployment in the United Kingdom had crept back up above 1,000,000, and it was even higher by the end of the decade, with inflation also being high. Although the monetarist economic policies of Margaret Thatcher's Conservative Party (UK), Conservative government saw inflation reduced after 1979, unemployment soared in the early 1980s and in 1982, it exceeded 3,000,000, a level that had not been seen for some 50 years. That represented one in eight of the workforce, with unemployment exceeding 20% in some places that had relied on declining industries such as coal mining. However, it was a time of high unemployment in all other major industrialised nations as well. By the spring of 1983, unemployment had risen by 6% in the previous 12 months, compared to 10% in Japan, 23% in the US, and 34% in West Germany (seven years before Reunification of Germany, Reunification). Unemployment in the United Kingdom remained above 3,000,000 until the spring of 1987, when the economy enjoyed a boom. 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. Another early 1990s recession, recession occurred from 1990 to 1992. Unemployment began to increase, and by the end of 1992, nearly 3,000,000 in the United Kingdom were unemployed, a number that was soon lowered by a strong economic recovery. With inflation down to 1.6% by 1993, unemployment then began to fall rapidly and stood at 1,800,000 by early 1997.


21st century

The official unemployment rate in the 16
European Union The European Union (EU) is a political and economic union of member states that are located primarily in Europe Europe is a which is also recognised as part of , located entirely in the and mostly in the . It comprises the wester ...

European Union
(EU) countries that use the euro rose to 10% in December 2009 as a result of late 2000s recession, another recession. Latvia had the highest unemployment rate in the EU, at 22.3% for November 2009. Europe's young workers have been especially hard hit. In November 2009, the unemployment rate in the 2007 enlargement of the European Union, EU27 for those aged 15–24 was 18.3%. For those under 25, the unemployment rate in Spain was 43.8%. Unemployment has risen in two thirds of European countries since 2010. Into the 21st century, unemployment in the United Kingdom remained low and the economy remaining strong, and several other European economies, such as France and Germany, experienced a minor recession and a substantial rise in unemployment. 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. In early 2009, unemployment passed the 2 million mark, and economists were predicting it would soon reach 3 million. However, the end of the recession was declared in January 2010 and unemployment peaked at nearly 2.7 million in 2011, appearing to ease fears of unemployment reaching 3 million. The unemployment rate of Britain's young black people was 47.4% in 2011. 2013/2014 has seen the employment rate increase from 1,935,836 to 2,173,012 as supported by showing the UK is creating more job opportunities and forecasts the rate of increase in 2014/2015 will be another 7.2%. The 2008–2012 global recession has been called a "mancession" because of the disproportionate number of men who lost their jobs as compared to women. The gender gap became wide in the United States in 2009, when 10.5% of men in the
labor force The workforce or labour force is the labour Labour or labor may refer to: * Childbirth Childbirth, also known as labour or delivery, is the ending of pregnancy where one or more babies leaves the uterus by passing through the vagina or ...

labor force
were unemployed, compared with 8% of women. Three quarters of the jobs that were lost in the recession in the US were held by men. A 26 April 2005 ''Asia Times'' article noted, "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". The increasing Economy of the United States#International trade, US trade deficit with China cost 2.4 million American jobs between 2001–2008, according to a study by the Economic Policy Institute (EPI). From 2000–2007, the United States lost a total of 3.2 million manufacturing jobs. 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. As of September 2016, the total veteran unemployment rate was 4.3 percent. By September 2017, that figure had dropped to 3 percent. About 25,000,000 people in the world's 30 richest countries lost their jobs between the end of 2007 and the end of 2010, as the economic downturn pushed most countries into
recession In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
. In April 2010, the US unemployment rate was 9.9%, but the government's broader U-6 unemployment rate was 17.1%. In April 2012, the unemployment rate was 4.6% in Japan. In a 2012 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." In March 2018, according to US Unemployment Rate Statistics, the unemployment rate was 4.1%, below the 4.5–5.0% norm.


See also


Notes


References

* * * * * *


Historical: Europe and Japan

*, in Great Britain. * Broadberry, Stephen N., and Albrecht Ritschl. "Real Wages, Productivity, and Unemployment in Britain and Germany during the 1920′s." ''Explorations in Economic History'' 32.3 (1995): 327-349. * Dimsdale, Nicholas H., Nicholas Horsewood, and Arthur Van Riel. "Unemployment in interwar Germany: an analysis of the labor market, 1927-1936." ''Journal of Economic History'' (2006): 778-808
online
* Heimberger, Philipp, Jakob Kapeller, and Bernhard Schütz. "The NAIRU determinants: What’s structural about unemployment in Europe?." ''Journal of Policy Modeling'' 39.5 (2017): 883-908
online
* Kato, Michiya. "Unemployment and Public Works Policy in Interwar Britain and Japan: An International Comparison." (2010): 69-101
online
* Kaufman, Roger T. "Patterns of Unemployment in North America, Western Europe and Japan." ''Unemployment in Western countries'' (Palgrave Macmillan, 1980). 3-35. * Nickell, Stephen, Luca Nunziata, and Wolfgang Ochel. "Unemployment in the OECD since the 1960s. What do we know?." ''Economic Journal'' 115.500 (2005): 1-2
online
* Stachura, Peter D., ed. ''Unemployment and the great depression in Weimar Germany'' (Springer, 1986). * Topp, Niels-Henrik. "Unemployment and Economic Policy in Denmark in the 1930s." ''Scandinavian Economic History Review'' 56.1 (2008): 71-90. *, in Great Britain


Historical: United States

* Jensen, Richard J. "The causes and cures of unemployment in the Great Depression." ''Journal of Interdisciplinary History'' 19.4 (1989): 553-58
online
* * Margo, Robert A. "Employment and Unemployment in the 1930s." ''Journal of Economic Perspectives'' 7.2 (1993): 41-59
online
* Stricker, Frank. ''American Unemployment: Past, Present, and Future'' (University of Illinois Press, 2020
online review
* Sundstrom, William A. "Last hired, first fired? Unemployment and urban black workers during the Great Depression." ''Journal of Economic History'' (1992): 415-429
online
* Temin, Peter. "Socialism and Wages in the Recovery from the Great Depression in the United States and Germany." ''Journal of Economic History'' (1990): 297-30
online


External links

*
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