The state of being without any work yet looking for work is called unemployment. Economists distinguish between various overlapping types of and theories of unemployment, including
cyclical or Keynesian unemployment,
frictional unemployment,
structural unemployment and classical unemployment definition. Some additional types of unemployment that are occasionally mentioned are seasonal unemployment, hardcore unemployment, and hidden unemployment. Laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky. Some, such as
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 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 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, but unemployment can also be persistent, such as during the
Great Depression. 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 demand.
Keynesian economists, on the other hand, see the lack of supply of jobs as potentially resolvable by government intervention. One suggested intervention involves
deficit spending to boost employment and goods demand. Another intervention involves an expansionary
monetary policy to increase the
supply of money, which should reduce
interest rates, which, in turn, should lead to an increase in non-governmental spending.
Full employment before and after Expansionary Policy, with Long-Run Phillips Curve (NAIRU). Note, however, that the unemployment rate is an inaccurate predictor of inflation in the long term. In the long term, the
velocity of money supply measures such as the MZM ("money zero maturity", representing cash and equivalent
demand deposits) velocity is far more predictive of inflation than low unemployment. Some demand theory economists see the inflation barrier as corresponding to the
natural rate of unemployment. The "natural" rate of unemployment is defined as the rate of unemployment that exists when the labour market is in equilibrium, and there is pressure for neither rising inflation rates nor falling inflation rates. An alternative technical term for that rate is the
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. 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 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 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 (BLS), which reports current long-term unemployment rate at 1.9 percent, defines this as unemployment lasting 27 weeks or longer. Long-term unemployment is a component of
structural unemployment, which results in long-term unemployment existing in every social group, industry, occupation, and all levels of education. 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; • 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, help with
job search,
further education and
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 (investment) phase of economic growth can continue. According to
Karl Marx, unemployment is inherent within the unstable capitalist system and periodic crises of mass unemployment are to be expected. He theorized that unemployment was inevitable and even a necessary part of the capitalist system, with recovery and regrowth also part of the process. The function of the
proletariat within the capitalist system is to provide a "
reserve army of labour" that creates downward pressure on wages. This is accomplished by dividing the proletariat into surplus labour (employees) and under-employment (unemployed). 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.
Labor force participation rate The labor force participation rate is the ratio between the
labor force and the overall size of their
cohort (national population of the same age range). In the West, during the latter 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 industry or as
domestic workers. 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, 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 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%. 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, as well as the adjustment of
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, 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. A historic shift began around the end of the
Great Recession as women began leaving the labor force in the United States and other developed countries. 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%.
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 when the unemployment rate is calculated.
NEET Youth and young adult unemployment Youth unemployment refers to unemployment among people aged 15-24, while young adult unemployment refers to unemployment among ages 25-34. Youth unemployment is in many countries higher than general unemployment. Unemployment of young adults was associated with
political instability and
revolutions. ==Measurement==