· Natural unemployment is the result of structural and frictional unemployment and is defined as their sum.
It is now believed that frictional and structural unemployment are inevitable components of the natural rate of unemployment. Therefore, when talking about full employment in economic theory, they do not take into account the general, natural level of frictional and structural unemployment.
Therefore, full employment in an economic system can be determined by the following formula:
3 full- full employment;
K tr– number of able-bodied citizens;
U eats– natural rate of unemployment.
Natural unemployment is due to the fact that in each economic system there is a certain number of people who do not want to work at the established wage rate and are in a state of choosing the best place to work or preparing for employment.
Strictly speaking, natural unemployment is an inevitable consequence of the free choice of place and time of work. In foreign practice, natural unemployment is defined as the sum of structural and frictional unemployment.
At the struk; U freak– respectively, the level of structural and frictional unemployment.
The level of natural unemployment is not given once and for all and unchangeable. Progressive changes in the economic development of industrialized countries have caused a trend towards an increase in the level of natural unemployment. For example, if in the 60s. In the 20th century in the United States, the natural unemployment rate was approximately 4%, but by the end of the century it reached the level of 5-6%.
Cyclical unemployment.
· Cyclical unemployment is unemployment caused by a general decline in production, i.e. that phase of the economic cycle that is associated with crisis phenomena in the economy, a reduction in aggregate demand, a corresponding reduction in employment and an increase in unemployment.
Cyclical unemployment is unemployment caused by a decline in industrial production, i.e. that phase of the economic cycle that is characterized by insufficient total spending. This is a situation in which the demand for goods and services in the country decreases, and unemployment increases. This is why cyclical unemployment is sometimes called demand-side unemployment. At full employment, cyclical unemployment should be zero. However, the actual unemployment rate almost always exceeds the natural unemployment rate.
Essentially, cyclical unemployment is caused by the unevenness of the reproduction process in a market economy. It increases during a crisis and decreases during recovery and economic growth.
Cyclical unemployment is defined as the difference between the unemployment rate at the current point in the economic cycle and the natural unemployment rate. In a recession, cyclical unemployment is added to frictional and structural unemployment. In an expansion, cyclical unemployment is subtracted from frictional and structural unemployment.
According to experts, during periods of economic downturns and booms, the level of cyclical unemployment can range from 0 to 10%. The cyclical nature of the industrial decline during the Great Depression of 1929 - 1933. in the United States was the main reason for unemployment, which amounted to about 25% during this period.
Institutional unemployment.
· Institutional unemployment is unemployment generated by labor market institutions and factors influencing the demand and supply of labor.
Institutional unemployment arises as a phenomenon associated with the ineffective functioning of labor market institutions. Lack of organization in the functioning of the labor market causes unemployment. For example, in Russia there is no law on mandatory registration of available jobs. In this case, the lack of information about the availability of jobs does not contribute to employment and people fall into the category of unemployed.
In addition, the scientific literature notes other reasons for institutional unemployment, including the imperfection of the taxation system, as well as the inertia of the labor market.
Along with the main forms of unemployment, there is hidden seasonal and long-term unemployment.
Hidden unemployment.
Hidden unemployment includes those employed during a part-time working week or part of the working day, as well as persons formally employed when the employee is only on the payroll. This category includes employees on forced leave without pay.
Hidden unemployment is currently a very pressing problem for many industrialized countries. It has its own specifics, which are as follows. Firstly, this type of unemployment at any time can turn into an open form of unemployment; Secondly, certain difficulties arise when calculating hidden unemployment.
Agriculture has traditionally been the most common area of hidden unemployment. Rural residents, as a rule, cannot withstand competition with large capital, and are actually in the position of unemployed or part-time workers who have not only seasonal employment, but also insignificant incomes. Lack of confidence in finding work in the city, they do not leave agriculture, therefore they are not taken into account by statistics and are not officially recognized as unemployed.
In an administrative-command economy, the formal elimination of unemployment was ensured by maintaining excess employment at enterprises. In the USSR, the last labor exchange was closed in 1930. Various forms of forced employment became widespread in the country, which were explained by the need to combat parasitism. Many enterprises were overstaffed, and the workers themselves were practically not used for their intended purpose. The surplus labor resources of enterprises, as a rule, were used for emergency and agricultural work. As a result, hidden unemployment amounted to about 15% of the total number.
The official recognition of unemployment in our country occurred in connection with the reorientation of the administrative-command economy to a market model of the economic system.
The maximum value of hidden unemployment was observed in modern Russia during the period of market reforms, when the factors and business conditions essentially changed. The transition period was characterized by a sharp decline in the use of enterprises' production capacities (in some cases, business entities reduced industrial output by 50% or more). Under these conditions, production organizations were forced to send some workers on leave without saving their earnings and switch to a reduced work schedule. Therefore, the peak of hidden unemployment in Russia was observed precisely during this difficult period for the domestic economy.
A special place in the formation of hidden unemployment is given to the market mechanism itself. The market is a serious test of firms for stability and viability. In order to function successfully in the market, an enterprise must constantly prove its advantage over other similar business structures. Quite tough competition in the market squeezes economically weak and inefficiently operating firms out of it. At the same time, labor resources are released, i.e. unemployment of a specific origin, unrelated to structural changes in the economic system.
The concept of natural unemployment is typical for market and mixed economies. Let's find out what causes this phenomenon, whether it should be fought, and what the dangers of this fight are.
What is natural unemployment?
The term was proposed independently by economists Milton Friedman and Edmund Phelps in the 60s of the 20th century.
Natural unemployment refers to a decrease in the level of employment that occurs as a result of changes in the structure of the labor market: the emergence of new vacancies and the disappearance of old ones. Sometimes state policy contributes to its emergence.
Even if a country has a law against parasitism, there will always be a certain number of “idlers” at some point in time. There are three main reasons why a person may not have a job: unwillingness to have one, dismissal and starting work. There are always vacancies and job seekers, but this does not mean that there is really nothing to do in the country.
Strict correspondence of places of work and the number of economically active citizens with the required qualifications is not only a utopian, but also an irrational idea. If the actual level of unemployment does not exceed the natural one, then employment in society can be considered full. If it is much less than natural, then overemployment occurs.
But if the share of those who want, but cannot find a job, begins to increase, we can talk about the emergence of real problems with employment in the country. In this case, employment will be incomplete.
Causes of natural unemployment
It is advisable to talk about the need to eliminate such a phenomenon only after establishing the reasons for its occurrence. The causes of natural unemployment are due to economic progress and the presence of constitutional rights and freedoms among people. Work is a human right, but not a duty, unless, of course, the country has a law on parasitism. Likewise, a person has the right to change his place of work and look for more suitable conditions.
For example, not everyone immediately starts working in a new place after being fired. Some people have to spend some time as a job seeker. Someone passed his final exams at the university yesterday and is not yet working, but has just begun to look for his place in the sun, although he is already considered an economically active unit of society. Someone is ready to work, but he is not satisfied with the average market income, and he is waiting for better times. Natural unemployment also includes temporary downtime of people who have a seasonal profession.
Natural unemployment is also generated by large social payments. We are not considering the category of people who are satisfied with “life on welfare,” but even a hardworking person, confident that tomorrow he will have something to buy bread with, will delay agreeing to the first job offer. He will begin to sort through offers, trying to find a higher salary, more comfortable working conditions, a more convenient schedule. Perhaps he will even decide to undergo retraining.
The development of labor legislation and trade unions also contributes to some extent to the growth of unemployment. Employees know what they can expect and strive to find the best possible conditions, which in itself increases the duration of the search.
For employers, providing good conditions costs a pretty penny, and they prefer to measure seven times before offering new vacancies, or even cut staff altogether due to the inability, for example, to pay the minimum wage established by law. This reduces the supply of jobs.
Is it natural for housewives and retirees to be unemployed?
Naturally, but this is not our case. Natural unemployment does not include those categories of “vacationers” who do not intend (do not want or cannot) find a job, as well as citizens on sick leave or on vacation.
We are talking about full-time students who are engaged only in their studies and do not work part-time in their free time. About pensioners who have already worked hard enough for the good of their homeland. About housewives who realize themselves in housekeeping. About prisoners, tramps, disabled people and patients in psychiatric hospitals. Finally, about those who simply stopped looking for work and have not yet decided what to do next.
Types of natural unemployment
There are three main types of causes of low employment: frictional, structural and cyclical. Frictional and structural unemployment are types of natural unemployment.
Frictional unemployment is inevitable and even desirable for a market economy. It occurs when people change their place of employment. In this case, the person usually initiates the termination of the employment relationship: due to a change of place of residence, because of disagreements with superiors, because of low wages, because of a desire to change the field of activity. This also includes the first entry into the labor market after completing education or finishing maternity leave.
Structural unemployment is caused by structural changes in the economy, and therefore has a longer duration than frictional unemployment. Scientific and technological progress leads to the introduction of new achievements in production or to the decline of certain sectors of the economy. As a result, some skills become unclaimed. Holders of disappeared professions are forced to become unemployed, and for them the search for a new source of income is a tedious and lengthy process. They have to learn new knowledge and skills, and sometimes change their place of residence. But this phenomenon is also inevitable.
U – actual unemployment rate;
U* – natural unemployment rate;
b = 3% (Ouken parameter).
Okun's parameter is a value calculated empirically. In the 60s of the 20th century, when Okun derived his formula in relation to the American economy, he got 3%. For other countries and even for the States themselves, this parameter may be different in different years.
In addition, many economists argue that Okun's law is not a law at all, since it is valid only for the US economy, and in other countries there is no such close relationship between GNP and unemployment.
If actual unemployment is less than natural
This happens during the stages of an economic boom. The economy is growing, new businesses are opening, and the need for labor is increasing. As a result, the number of people employed may exceed the average. The economy is “overheating,” which provokes a surge in inflation and closes off opportunities for further growth.
As a result, a recession begins, which is accompanied by a slight increase in unemployment and a decrease in prices. Ideally, after this the situation will stabilize, but if the country’s economy is just developing and is unstable, then such a “balancing” threatens serious shocks and a new significant decline.
Thus, we have found out that natural unemployment is a normal and even desirable phenomenon in a market economy. There is no need to fight it, but you need to monitor its level.
The natural rate of unemployment (u*) is the level at which full employment of the labor force is ensured, i.e. its most effective and rational use. This means that all people who want to work find work. The natural rate of unemployment is therefore called the full-employment rate of unemployment, and the output corresponding to the natural rate of unemployment is called natural output. Since full employment of the labor force means that there is only frictional and structural unemployment in the economy, the natural rate of unemployment can be calculated as the sum of the levels of frictional and structural unemployment:
u * = u friction + u structure = (U friction +U structure)/L * 100%.
24. SEIGNORAGE
(seigniorage) Profit received by authorities from issuing money. Originally, the term referred to the profit from the circulation of a coin whose face value was higher than the cost of its production. Today, seigniorage refers to the government's ability to obtain goods and services in exchange for newly printed money. A growing economy needs a significant amount of money, but if the government issues too much of it, it will lead to inflation, which will reduce the real purchasing power of the money previously issued by the government.
25. Inflation tax- economic damage to which holders of money and other value equivalents are exposed. Such damage is caused by the decrease in the value of the currency due to inflation, while at the same time appropriating the benefit from the center of issue that caused the inflation. In modern conditions, emission centers are managed by states, thus a hidden tax is levied on money holders. Many economists point out that inflation tax The rich are less susceptible and the poor and middle class are more susceptible, since they are the ones who tend to keep most of their income in cash. In addition, the poor and middle class receive most of their income in a fixed form - salaries, pensions and benefits, which leads to the impossibility of timely indexation. Some economists explicitly point out that inflation is a regressive tax on consumption.
Term inflation tax is not a strict economic concept.
26. accelerator (Accelerator) is a coefficient showing how much investment increases as income increases.
Autonomous investments cause, with increasing income, stimulated investments (derivative investments), depending on the dynamics of income. This is called the accelerator effect. But the accelerator “wheel” can turn in the other direction. A reduction in income will also reduce derivative investments, and this will lead to economic stagnation.
The concept of an accelerator was first formulated by the French economist A. Aftalion in 1919. It was later developed by J. Clark, J. Tinbergen, S. Kuznets, and P. Samuelson.
The accelerator formula in a simplified form can be presented as the ratio of investments of a given year to the increase in income of the previous year.
where a is the acceleration coefficient.
From this formula it follows that investments in period t are a biased response to changes in income in the previous period:
 |
| Investments of period t |
An increase in income, other things being equal, will cause a larger increase in investment in the subsequent period, and a decrease in income will cause a multiple reduction in investment. The accelerator effect is closely related to the multiplier effect. Together they form an animation-acceleration mechanism.
The discovery of these principles made it possible to understand the mechanism of economic growth and its fluctuations. Sufficiently regular autonomous investment will cause long-term sustainable economic growth if the propensity to save, the accelerator, and the capital productivity coefficient do not change. If autonomous investment does not regularly “fuel” economic growth, the marginal propensity to consume increases, and the marginal propensity to save falls. A decrease in investment will cause a drop in income. This will lead to a further decrease in savings and investment - growth will be replaced by economic decline. This will happen until autonomous investments give impetus to economic growth. Thus, the multiplication-acceleration mechanism can be represented as a spiral that either unfolds or collapses, causing cyclical fluctuations in the economy.
27. ECONOMIC CYCLES
A term describing regular fluctuations in the level of business activity from economic boom to economic recession. The business cycle has four clearly distinguishable phases: peak, decline, bottom, or nadir, and recovery. The peak, or top of the business cycle, is the "high point" of an economic expansion. At this point, unemployment theoretically reaches its lowest level or disappears completely, and the economy operates at or near its maximum load, i.e. Almost all capital and labor resources available in the country are used in production. Typically, although not always, inflationary pressures increase during peaks. A recession is a period of declining production and declining business activity. Due to falling economic conditions, a recession is usually characterized by an increase in unemployment. Most economists believe that an official economic downturn, or recession, is only a decline in business activity that lasts at least six months. The bottom of the business cycle is the “low point” of production and employment. It is believed that reaching the bottom heralds the imminent end of the recession, since this phase of the cycle usually does not last long. However, history also knows exceptions to this rule. The Great Depression of the 1930s, despite periodic fluctuations in business activity, lasted almost ten years. After reaching the lowest point of the cycle, the recovery phase begins, which is characterized by an increase in employment and production. Many economists believe that this stage is characterized by low inflation rates, at least until the economy begins to function at full capacity, i.e. until it reaches its peak. Although it is generally accepted that changes in business activity are directly or indirectly related to the business cycle, there are other factors that influence the state of the economy. The most important of these are seasonal variations and long-term trends. The influence of seasonal fluctuations can be seen at certain times of the year, such as just before Christmas or Easter, when business activity, especially in retail trade, increases sharply. Other economic sectors, such as agriculture, automotive and construction, also experience seasonal fluctuations. Secular trends determine long-term increases or decreases in economic growth rates. The business cycle is often associated with changes in output. Many economists believe that output, usually measured by gross domestic product (GDP), is the most reliable indicator of the health of an economy. It is important to note that the economic cycle in the recovery phase does not manifest itself in GDP growth as such, but in the rate of this growth. Negative growth rates over a period of time, typically six months or more, are considered a sign of economic contraction. On the contrary, consistently high growth rates month after month indicate that the economy is booming. Economic cycle, stock market and investment. Some types of activities tend to anticipate changes in the main phases of the economic cycle. This statement, at least previously, was true for the stock market. On average, until the late 1980s, stock market peaks preceded peak business activity by about six months. Since the late 1980s, however, the established relationship between the behavior of the stock market and the economy as a whole has become much less clear, for the simple reason that the stock market began to experience only minor fluctuations against the backdrop of an overall upward trend. Moreover, in the 1990s, the situation in which stock market activity was predictive of the state of the economy as a whole was reversed. At the same time, the discrepancy between the stock market and the economy became increasingly obvious: reports of a prosperous economic situation in the country often generated a negative reaction on Wall Street. This behavior of the stock market was explained mainly by investors' fears that good economic news foreshadows inflation. Another factor that correlates with the business cycle is the overall level of net investment in the economy. Indeed, until the 1960s, rising levels of investment more or less corresponded to a phase of economic expansion, or boom. However, since the mid-1960s, although the economic cycle has not been disrupted, net investment as a percentage of GDP has declined steadily, albeit with some fluctuations. During the period 1964-1969, net investment amounted to 4.3% of GDP. Subsequently, this figure continued to decline and in 1985-1989 fell to 2.6%, and during the economic recession of 1990-1991 - to 1.4%. Some economists argue that the gradual decline in net investment has not led to a corresponding decline in business activity only because increased personal consumption, largely backed by credit, and increased government spending (largely driven by deficit financing since the late 1960s) ies to the end of the 1990s) more than compensated for the decline in private investment. Other economists believe that, despite minor fluctuations within the overall decline in economic growth that takes the form of a business cycle, a secular downward trend has emerged since the 1960s. Indeed, since the 1960s, the duration of expansions and peaks in the US economy has consistently shortened. The average annual economic growth rate in the 1960s was 3.8%, in the 1970s - 2.8%, in the 1980s - 2.5% and in the first half of the 1990s - 1.8%. This decline in rates can be explained by an increase in “speculative” investment (investments in ownership of existing assets or firms) due to a decrease in “real” investment (in the purchase of machinery and equipment and the construction of new plants and factories).
The influence of economic cycles. Among the economic sectors, the services and non-durable goods industries are somewhat less affected by the most devastating effects of the economic downturn. The recession is even helping to intensify some types of activity, in particular increasing the demand for the services of pawnshops and lawyers specializing in bankruptcy. Firms producing capital goods and durable consumer goods are most sensitive to cyclical fluctuations. Not only are these firms the hardest hit by a business downturn, but they also benefit the most from an economic recovery. There are two main reasons: the possibility of postponing purchases and monopolization of the market. The purchase of capital equipment can most often be postponed to the future; During difficult economic times, manufacturers tend to refrain from purchasing new machinery and equipment and constructing new buildings. During a prolonged downturn, firms often choose to repair or upgrade outdated equipment rather than spend heavily on new equipment. As a result, investment in capital goods declines sharply during economic downturns. The same applies to durable consumer goods. Unlike food and clothing, the purchase of a luxury car or expensive household appliances can be postponed until better times. During economic downturns, people are more likely to repair rather than replace durable goods. While sales of food and clothing also tend to decline, the decline is typically smaller compared to the decline in demand for durable goods. Monopoly power in most capital goods and durable consumer goods industries stems from the fact that the markets for these goods are typically dominated by a few large firms. Their monopoly position allows them to keep prices the same during economic downturns, reducing production in response to falling demand. Consequently, falling demand has a much greater impact on production and employment than on prices. A different situation is typical for industries producing non-durable goods. These industries typically respond to falling demand by lowering prices overall, since no single firm has significant monopoly power.
Causes of cycles. Because the business cycle is often at the center of the problems facing businesses, governments, and communities, the question of what causes booms and busts is important. Numerous schools of economic thought answer this question in different ways. For example, some economists associate periods of prosperity with important inventions (such as railroads or synthetic materials); The irregularity of such inventions determines the cyclical nature of economic development. According to another point of view, the reasons for the existence of the economic cycle should be sought in external events, such as wars and the periods of peaceful life that follow them. Another group of economists argues that the business cycle is almost entirely determined by events occurring in the monetary sphere. For example, a Federal Reserve-ordered increase in the money supply, which includes both cash and credit instruments, stimulates the economy, while a contraction in the money supply depresses it. History in most cases confirms the close connection of the business cycle with fluctuations in the volume of the money supply. However, facts dating back to the end of the 20th century contradict this theory. Despite the steady decline in the real money supply in the first half of the 1990s, the economy continued to experience a protracted, albeit weak, recovery. However, few economists are willing to insist on continuous expansion of the money supply, since it is widely believed that over-stimulation of the economy leads to excessive inflation. Some other theories directly contradict each other. For example, some theorists argue that a capitalist economy naturally tends to reach an equilibrium state, and therefore, if governments did not intervene in the economy, there would be no fluctuations in employment levels and prices. Other economists attribute fluctuations in the economy not to “monetary” factors such as prices, interest rates and unemployment, but to “real” factors such as new technologies, resource scarcity and changes in labor productivity. Adherents of both theories believe that the economic policy of the state - regulation, redistribution, artificial stimulation - at best does not benefit the economy, and at worst directly harms it. There is a third point of view: the modern economic system is characterized by instability and even a tendency towards catastrophic collapse, therefore, in order for the economy to move in the right direction, even with some deviations, government intervention is required. This theory owes its appearance largely to the events of the Great Depression, such as the massive dumping of securities and depositor runs on banks. Finally, according to another theory, business cycles are inherent in the economic system. The line of reasoning here is as follows. When profits are high, firms have an incentive to expand production and hire more workers, a trend that gradually spreads throughout the economy. However, as a result of such actions by firms, unemployment is reduced, which may result in a decrease in their profits due to the strengthening of workers' positions in the labor market and increased wages. When profits fall, companies begin to lay off workers, increasing the country's unemployment rate and reducing wages, and thereby restore their previous levels of profitability. However, mass layoffs, in turn, lead to a drop in demand for manufactured goods and, accordingly, to a recession in the economy. The process then begins again, thus opening a new cycle.
History and long cycles. Business cycles are not truly "cyclical" in the sense that the length of the period from, say, one peak to another has fluctuated significantly throughout history. Although economic cycles in the United States lasted on average about five years, cycles lasting from one to twelve years were known. The most pronounced peaks (measured as percentage increases above trend in economic growth) coincided with the major wars of the 20th century, and the deepest economic declines, excluding the Great Depression, occurred after the end of the First World War. It should be noted that, along with the described economic cycle, the theory also distinguishes the so-called. long cycles. Indeed, at the end of the 20th century. The American economy appears to have entered a period of prolonged recession, as evidenced by some economic indicators, in particular the level of real wages and the level of net investment. However, even with a long-term downward trend in growth, the US economy continues to grow; Although the country recorded negative GDP growth in the early 1980s, it remained positive in all subsequent years except 1991. Symptomatic of the long-term recession that began in the 1960s, although growth rates have rarely been negative, the level of economic activity in the United States has almost never exceeded trend growth since 1979.
28. economic growth- is an increase in the volume of production in the national economy over a certain period of time (usually a year).
The foundations of the theory of economic growth and development were created by Joseph Schumpeter at the beginning of the twentieth century. Simon Kuznets, Fernand Braudel, Theodore Schultz, Gary Becker, Michael Porter, Nikolai Kondratiev and other scientists also contributed to the theory of growth and development.
Joseph Schumpeter was the first to introduce differences between economic growth and development and define the essence of innovation as the main driver of economic growth.
In his basic scientific work, the monograph “The Theory of Economic Development,” first published in 1911, Joseph Schumpeter defined economic growth as quantitative changes - an increase in production and consumption over time of the same goods and services.
Joseph Schumpeter defined economic development as positive qualitative changes, innovations in production, products and services, in the field of management, in other spheres of life and types of economic activity.
In other words, Joseph Schumpeter defined innovation as the main locomotive of development and progress, as well as the entrepreneurial resource that creates demand for innovation and its excess supply.
Briefly: growth is quantitative changes, and development is qualitative positive changes aimed at growth and, most importantly, at improving the quality of life.
Unlike a set of indicators for economic development, economic growth is a simpler quantitative indicator. Real output is usually understood as real (that is, cleared of inflation factors) gross domestic product (GDP), less often - real gross national product (GNP), net national product (NNP), or national income (NI). .
Economic growth is closely related to the growth of the general level and quality of life of the population - growth in life expectancy, quality of medical care, availability of quality education, reduction in working hours, safety of citizens, etc.
Theories of growth and development were created by the same authors within the framework of a single approach in which the main factors of growth and development are human capital and innovation. At the same time, qualitative positive changes (development) of intensive factors of growth and development of the economy are primary, which serve as the foundation for its growth.
Types of Economic Growth
Distinguish extensive And intensive types of economic growth. In the first case, growth is achieved by increasing extensive growth factors. In the second - due to intensive growth factors. With the development and assimilation of modern achievements of science and technology, intensive growth factors become predominant. In real life, extensive and intensive types of economic growth do not exist in their pure form. There is their interweaving and interaction.
In modern growth theory, four types of economic growth are usually distinguished: uniform growth leading countries (observed in the USA, Europe), miracles of growth(Japan, South Korea, Hong Kong), tragedy of growth(some Central African countries) and lack of economic growth(eg Zimbabwe).
Russia experienced relatively uniform economic growth from 2000 to 2008.
According to the nature of its manifestation and the reasons causing unemployment, it is divided into several types.
The classification of unemployment generally accepted in the world includes three main types (types): frictional, structural and cyclical.
Frictional unemployment is temporary unemployment due to the voluntary transition of people to another job, associated with its search and expectation. This is unemployment among individuals for whom finding a job that matches their qualifications and individual preferences takes time.
Frictional unemployment is caused by changes in labor supply, is voluntary and is associated with the freedom to choose a profession, place and time of work. It is an inevitable product of the dynamism of the labor market. Its magnitude depends on the frequency of movement of labor and vacancies, as well as the speed and efficiency with which job seekers and vacancies find each other.
Its features:
- a) it covers a fairly large number of people in all demographic groups, industries and regions;
- b) it lasts a relatively short period of time;
- c) a certain amount of frictional unemployment is inevitable under any conditions.
Structural unemployment is associated with technological shifts in production that change the structure of labor demand. This is unemployment among persons whose professions turned out to be “outdated” or less necessary for the economy due to scientific and technological progress. Due to the impossibility of quickly training new and retraining previously employed workers, the supply of labor does not correspond in qualitative terms to the changed demand for labor. This unemployment is involuntary.
Its features:
- a) it affects certain groups of the workforce as a result of technological shifts, the decline of major economic sectors or regional displacement of jobs;
- b) as a rule, is of a rather long-term nature.
Cyclical unemployment (sometimes called underdemand unemployment, or Keynesian unemployment) results from the failure of aggregate demand in the economy to create enough jobs for everyone willing to work, i.e., it is a consequence of an absolute reduction in aggregate demand.
Cyclical unemployment is closely related to the movement of the economic cycle: in the boom phase the unemployment rate decreases, and in the depression phase it increases. At the same time, unemployment of insufficient demand can arise not only due to cyclical economic development, but also as a result of chronic economic stagnation, which is commonly called “long-term stagnation.”
Its features (compared to frictional and structural unemployment):
- a) the presence of significant annual fluctuations in employment associated with the general economic cycle;
- b) widespread throughout the economy;
- c) the duration of cyclical unemployment, as a rule (but not necessarily), exceeds the duration of frictional unemployment, but is inferior to the duration of structural unemployment.
The socio-economic processes characteristic of frictional and structural unemployment are objective and natural for a market economic system. They are due to the imperfect functioning of the labor market, its delayed reaction to changes in supply and demand. Therefore, the presence of these two forms of unemployment is a natural phenomenon in the labor market. The American monetarist M. Friedman combined frictional and structural unemployment into one concept - “natural unemployment”, matching it with the concept of “full employment” of the population. Thus, the axiom was put forward that in a real economy there cannot be one hundred percent involvement of the entire working population of the country in production.
“Full employment” in the economy implies the presence of “natural unemployment,” which is the share of frictional and structural unemployed in the labor force that is stable over a long period (the level of natural unemployment). Full employment is called normal unemployment.
Thus, natural unemployment reflects the equilibrium state of the labor market under conditions of full employment, when the number of job seekers coincides with the number of vacancies. An excess of the actual level of unemployment compared to the natural one disrupts the balance of the labor market, which is expressed in the appearance in the economy of cyclical unemployed people who want to work, but cannot find work due to an absolute reduction in the demand for labor during a period of decline in production.
The level of natural (normal) unemployment (or the level of unemployment at full employment) is a combination of frictional and structural unemployment corresponding to potential GNP. This is the “normal”, minimum possible level of unemployment in the country. In most developed countries this figure is 4-6%.
If actual unemployment is fixed at 8%, this means that it operates under conditions of underemployment, while 2-3% of unemployment occurs in its cyclical form.
The level of natural unemployment has shown a steady upward trend in recent years. So, if in the 60s in industrialized countries this figure was 4-5%, then in the 70-80s it increased to 7-8%. This is explained by the high social protection of citizens in these countries (an increase in unemployment and poverty benefits, an increase in the minimum wage, easing requirements for those receiving benefits), leading to a long search for work, increased demands of the unemployed on the offered work, and a preference for high social benefits over employment.
At the same time, an increase in the period of job searches causes a partial loss of the professional and qualification qualities of the workforce. All this changes the real operating conditions of the labor market towards its greater inertia, which is expressed in the growth of natural unemployment.
The trend towards an increase in the natural rate of unemployment in the long term is associated with an increase in the share of youth and women in the labor force, and more frequent structural changes in the economy.
In addition to the main types of unemployment, there are other types in the labor market:
Seasonal unemployment is usually identified with frictional unemployment and arises as a result of seasonal fluctuations in the demand and supply of labor. Associated with the release of employees after the end of harvesting, fishing, logging and other work. The level of labor supply may change due to the influx of school and university graduates during the summer months, which often directly causes an increase in unemployment. Seasonal unemployment is rarely a serious problem for the economy of a country as a whole, but it can create very unpleasant and sensitive problems for some regions and societies that are closely associated with seasonal business.
Regional unemployment occurs in certain areas due to the massive closure of enterprises.
Hidden unemployment includes people who are formally working, but in fact occupy an extra job. Significant scales of hidden (latent) unemployment are characteristic of the modern economy of Russia and Bashkortostan. This is explained by the large number of large defense and city-forming enterprises. Defense companies are not closing or restructuring in anticipation of large federal orders. Employees of these enterprises are not being laid off. They are either considered to be on administrative leave for years or go to work once a week. If the enterprise is a city-forming enterprise and the labor market is local, then mass layoffs can lead to a sharp aggravation of the social situation in the region.
Highlight the following types of unemployment :
- Voluntary- is associated with people’s reluctance to work, for example, in conditions of lower wages. Voluntary unemployment increases during an economic boom and decreases during a recession; its scale and duration vary among people of different professions, skill levels, as well as among different socio-demographic groups of the population.
- Forced (unemployment waiting) - occurs when an employee is able and willing to work at a given wage level, but cannot find a job. The reason is an imbalance in the labor market due to the inflexibility of wages (due to minimum wage laws, the work of trade unions, raising wages to improve the quality of labor, etc.). When real wages are above the level corresponding to the equilibrium of supply and demand, supply in the labor market exceeds demand for it. The number of applicants for a limited number of jobs increases, and the likelihood of actual employment decreases, which increases the unemployment rate. Types of involuntary unemployment:
- cyclical- caused by repeated declines in production in a country or region. It represents the difference between the unemployment rate at the current moment of the economic cycle and the natural unemployment rate. It is natural for different countries to have different levels of unemployment.
- seasonal- depends on fluctuations in the level of economic activity during the year, characteristic of certain sectors of the economy.
- technological- unemployment associated with mechanization and automation of production, as a result of which part of the workforce becomes redundant or requires a higher level of qualifications.
- Registered- unemployed population searching for work and officially registered.
- Marginal- unemployment of weakly protected segments of the population (youth, women, disabled people) and the lower social classes.
- Unstable- caused by temporary reasons (for example, when employees voluntarily change jobs or quit in seasonal industries).
- Structural- is caused by changes in the structure of demand for labor, when a structural mismatch is formed between the qualifications of the unemployed and the demand for available jobs. Structural unemployment is caused by large-scale restructuring of the economy, changes in the structure of demand for consumer goods and production technology, the elimination of obsolete industries and professions, and there are 2 types of structural unemployment: stimulating and destructive.
- Institutional- unemployment that occurs when the state or trade unions intervene in establishing wage rates different from those that could be formed in a natural market economy.
- Friction- the time of voluntary search by an employee for a new job that suits him to a greater extent than his previous workplace.
- Hidden:
- formally employed but actually unemployed persons; As a result of the decline in production, the labor force is not fully used, but is not fired either.
- the presence of people willing to work, but not registered as unemployed. Hidden unemployment is partly represented by people who have stopped looking for work.
Since the existence of frictional and structural unemployment is inevitable, economists call their sum natural unemployment.
Natural rate of unemployment – u*) - this is the level at which full employment of the labor force is ensured, i.e. its most effective and rational use. This means that all people who want to work find work. The natural rate of unemployment is therefore called the full-employment rate of unemployment, and the output corresponding to the natural rate of unemployment is called natural output. Since full employment of the labor force means that there is only frictional and structural unemployment in the economy, the natural rate of unemployment can be calculated as the sum of the levels of frictional and structural unemployment:
u * = u friction + u structure = (U friction +U structure)/L * 100%.
Unemployment rate is the share of unemployed people in the total labor force.
It is measured as a percentage and calculated using the formula:
- unemployment rate
- number of unemployed
- labor force (employed and unemployed)
Natural rate of unemployment- the sum of the levels of frictional and structural unemployment.
50) Okun's Law. Consequences of unemployment
A situation in society in which only frictional and structural unemployment exists is called full employment.
The level of unemployment corresponding to the appropriate level of full employment is called natural rate of unemployment(4 – 6 %).
The economic costs of unemployment are expressed in the fact that the country's economy irreversibly loses the amount of goods and services that it could potentially produce from existing resources. The maximum volume of output that can be produced at existing capacity at the top of the economic cycle with full employment is called potential GNP. Thus, economic losses from unemployment are the difference between potential and actual GNP produced at any given moment at any stage of the economic cycle.
The mathematical expression for the gap between the actual volume of GNP and the potential volume was calculated by the American economist Arthur Okun (1928–1980). Potential GNP is the output that would be produced if the economy operated at the natural rate of unemployment.
A. Okun's law states: “If the actual unemployment rate exceeds the natural rate by 1%, then the lag of actual GNP from potential is 2.5%.”
For example, if the actual unemployment rate in a country is 10%, then the unemployment rate exceeds the natural rate of 6% by 4% (10 – 6). Thus, to determine by what percentage the actual volume of national production lags behind the potential volume, you need to multiply 4% by the Okun coefficient (2.5). In this case we get 10% (4 x 2.5). Consequently, in a given period of time, the country loses 10% of the volume of national output that could have been produced in the absence of unemployment.
Unemployment has a negative impact on both economic development and the social situation in society. Thus, the consequences of unemployment include the lag of real GNP from potential GNP, social differentiation of society, growth of social tension in society, and a decrease in living standards. Therefore, government intervention is necessary to solve this problem.
