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Unemployment Introduction Unemployment or Joblessness Is

Unemployment is defined as actively looking for employment but currently being without a job. The unemployment rate is calculated as the number of unemployed individuals divided by the total labor force. During recessions, unemployment rates are usually higher as millions can be without work. The causes of unemployment are debated, with classical, new classical, and Austrian economics arguing market mechanisms can resolve unemployment, while Keynesian economics emphasizes government intervention during downturns to increase demand and reduce unemployment. Different types of unemployment include structural focusing on skills mismatches, and frictional focusing on voluntary decisions based on wages and search costs.

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133 views1 page

Unemployment Introduction Unemployment or Joblessness Is

Unemployment is defined as actively looking for employment but currently being without a job. The unemployment rate is calculated as the number of unemployed individuals divided by the total labor force. During recessions, unemployment rates are usually higher as millions can be without work. The causes of unemployment are debated, with classical, new classical, and Austrian economics arguing market mechanisms can resolve unemployment, while Keynesian economics emphasizes government intervention during downturns to increase demand and reduce unemployment. Different types of unemployment include structural focusing on skills mismatches, and frictional focusing on voluntary decisions based on wages and search costs.

Uploaded by

Nitesh Kotian
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Unemployment Introduction

Unemployment or joblessness is the situation of actively looking


for employment, but not being currently employed.
The unemployment rate is a measure of the prevalence of unemployment and
it is calculated as a percentage by dividing the number of unemployed
individuals by all individuals currently in the labor force. During periods
of recession, an economy usually experiences a relatively high unemployment
rate.[1] Millions of people globally or 6% of the world's workforce were without
a job in 2012.[2]
The causes of unemployment are heavily debated.[3] Classical
economics, new classical economics, and the Austrian School of economics
argued that market mechanisms are reliable means of resolving
unemployment. These theories argue against interventions imposed on the
labor market from the outside, such as unionization, bureaucratic work
rules, minimum wage laws, taxes, and other regulations that they claim
discourage the hiring of workers. Keynesian economics emphasizes the
cyclical nature of unemployment and recommends government interventions
in the economy that it claims will reduce unemployment during recessions.
This theory focuses on recurrent shocks that suddenly reduce aggregate
demand for goods and services and thus reduce demand for workers.
Keynesian models recommend government interventions designed to
increase demand for workers; these can include financial stimuli, publicly
funded job creation, and expansionist monetary policies. Its namesake
economist John Maynard Keynes, believed that the root cause of
unemployment is the desire of investors to receive more money rather than
produce more products, which is not possible without public bodies producing
new money.[4] A third group of theories emphasize the need for a stable
supply of capital and investment to maintain full employment.[5] On this view,
government should guarantee full employment through fiscal policy, monetary
policy and trade policy as stated, for example, in the US Employment Act of
1946, by counteracting private sector or trade investment volatility, and
reducing inequality.[6]
In addition to these comprehensive theories of unemployment, there are a few
categorizations of unemployment that are used to more precisely model the
effects of unemployment within the economic system. Some of the main types
of unemployment include structural unemployment and frictional
unemployment, as well as cyclical unemployment, involuntary unemployment,
and classical unemployment. Structural unemployment focuses on
foundational problems in the economy and inefficiencies inherent in labor
markets, including a mismatch between the supply and demand of laborers
with necessary skill sets. Structural arguments emphasize causes and
solutions related to disruptive technologies and globalization. Discussions
of frictional unemployment focus on voluntary decisions to work based on
each individuals' valuation of their own work and how that compares to current
wage rates plus the time and effort required to find a job. Causes and
solutions for frictional unemployment often address job entry threshold and
wage rates.

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