Chapter 10: Unemployment

Chapter 10: Unemployment
10-1. Definition of Unemployment: is the
condition of not having a job, often
referred to as being "out of work”. It is
measured in time of the unemployment
rate, which is the number of unemployed
workers divided by the total civilian (labor
10-2. Labor Force:
employed and unemployed people. To be
unemployed a person must be at least 16
years old, actively looking for work and
not working at all.
310-3. Duration of Unemployment: The
average duration of unemployment for
all unemployed workers over the past
decade is 15.2 weeks.
10-4. Discouraged Workers :Workers who
have dropped out of the labor force and
are not looking for work because of the
poor job market.
10-5. Underemployed:
People who are in
a job that they don’t belong (either overskilled or under-skilled).
10-6.Types of unemployment
10-6.1. Frictional : This unemployment
includes people being temporarily
between jobs, searching for new ones.
It arises because either employers fire
workers or workers leave, usually
because the individual characteristics
of the workers do not fit the individual
characteristics of the job.
The solve: The best way to lower this
kind of unemployment is to make
available more and better information
to job-seekers and employers, perhaps
through job-banks in centralized
computers (as in some countries in
10-6.2. Structural : This contain a difference
between the workers looking for jobs
and the job available. Even though the
number of job may be equal to the
number of the unemployed, but the
unemployed workers haven’t the
skills needed for the jobs — or are in
the wrong part of the country to take
the jobs offered.
Structural unemployment is a result of
the dynamic changes of a capitalist
economy (such as technological
The solve: Structural unemployment
may be solved by rises the aggregate
demand. This means, they may fit the
job vacancies that are created when
the economy recovers.
10-6.3. Cyclical:
unemployment exists due to not
enough effective aggregate demand.
Gross domestic product is not as high
as possible because of demand failure.
In this case, the number of
unemployed workers over the number
of job vacancies, so that if even all
open jobs were filled, some workers
would remain unemployed. This kind
of unemployment happens together
with unused industrial capacity.
The Solve: Keynesian economists see
it as possibly being solved by
government deficit spending or by
expansionary monetary policy, which
aims to increase non-governmental
spending by lowering interest rates.
10-6.4. Technological :Caused by the
replacement of workers by machines.
10-6.5. Classical : In this case, the number
of job-seekers over the number of
jobs. However, the problem here is
not aggregate demand failure but the
fact that real wages are too high
relative to the market-equilibrium
The solve: Some economists argue
that minimum wages encourage low
wage employers to invest in employee
training, reducing staff turnover.
10-6.6. Marxian : When unemployment is
needed to encourage workers to work
hard and to keep wages down.
As Karl Marx said (and Michal
Kalecki stress), some unemployment
— the keep army of the unemployed
— is normally needed in order to
maintain work discipline in jobs, keep
wages down, and protect business
profitability. If profitability suffers a
sustained depression, capitalists can
and will punish people by imposing a
recession via their control over
investment decisions (a capital strike).
Incidentally, in this section the term
"capitalism" is used to refer to a
person who owns economic capital,
whether or not s/he holds "capitalist"
political views. To the Marxian
school, these strikes are rare, since in
normal times the government,
responding to pressure from their
most important constituencies, will
encourage recessions before profits
are hurt.
unemployment cannot be stopped
without remove capitalism from
power as an economic system and
replacing it with democratic socialism
under which profitability is protected
by the systematic use of direct force.
10-6.7. Seasonal :where special industries
or occupations are characterised by
seasonal work which may lead to
unemployment. Examples include
workers employed during farm
harvest time, or those working Winter
jobs in the snowfields.
10-6.8. Hidden unemployment: Hidden,
or covered, unemployment is the
unemployment of possible workers
that is not shown in official
unemployment statistics, due to the
way the statistics are collected.