Unemployment, as defined by the International Labor Organization, occurs when people are without jobs and they have actively looked for work within the past four weeks. 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 thelabour force.
There remains considerable theoretical debate regarding the causes, consequences and solutions for unemployment. Classical, neoclassical and the Austrian School of economics focus on market mechanisms and rely on the invisible hand of the market to resolve unemployment.These theories argue against interventions imposed on the labour market from the outside, such as unionization, minimum wage laws, taxes, and other regulations that they claim discourage the hiring of workers. Keynesian economics emphasizes the cyclical nature of unemployment and potential interventions to reduce unemployment during recessions. These arguments focus on recurrent supply 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, job creation, and expansionist monetary policies. Marxism focuses on the relations between the controlling owners and the subordinated proletariat whom the owners pit against one another in a constant struggle for jobs and higher wages. This struggle and the unemployment it produces benefit the system by reducing wage costs for the owners. For Marxists the causes of and solutions to unemployment require abolishing capitalism and shifting to socialism or communism.
In addition to these three comprehensive theories of unemployment, there are a few types of unemployment that are used to more precisely model the effects of unemployment within the economic system. The main types of unemployment include structural unemployment which focuses on structural problems in the economy and inefficiencies inherent in labour 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 barriers to entry and wage rates. Behavioral economists highlight individual biases in decision making and often involve problems and solutions concerning sticky wages and efficiency wages.
History
Because it has not always been acknowledged or measured systematically, there are limited historical records on unemployment. Industrialization involves economies of scale that often prevent individuals from having the capital to create their own jobs to be self-employed. An individual who cannot either 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. 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 vagrants and the jobless; both were simply categorized as "sturdy beggars", to be punished and moved on. The closing of themonasteries in the 1530s increased poverty, as the church had helped the poor. In addition, there was a significant rise in enclosure 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, to be funded by a tax on income and capital. A law 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, namely 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 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 England and Wales, Scotland and Ireland a workhouse was a place where people who were unable to support themselves, could go to live and work. In the early 18th century, there were roughly 10 million people living in England, and an estimated two million were, “vagrants, rogues, prostitutes, beggars or indigents. In 18th century England, half the population was at least occasionally dependent on charity for subsistence. By 1776 some 1,912 parish and corporation workhouses had been established in England and Wales, housing almost 100,000 paupers.
The decade of the 1930s saw the Great Depression impact unemployment across the globe. One Soviet trading corporation in New York averaged 350 applications a day from Americans seeking jobs in the Soviet Union. In Germany the unemployment rate reached nearly 25% in 1932. In some towns and cities in the north east of England, unemployment reached as high as 70%. Unemployment in Canada reached 27% at the depth of the Depression in 1933. In 1929, the U.S. unemployment rate averaged 3%. In 1933, 25% of all American workers and 37% of all nonfarm workers were unemployed. In Cleveland, Ohio, the unemployment rate was 60%; in Toledo, Ohio, 80%. There were two million homeless people migrating across the United States. Over 3 million unemployed young men were taken out of the cities and placed into 2600+ work camps managed by the CCC.
About 25 million people in the world's 30 richest countries will have lost their jobs between the end of 2007 and the end of 2010 as the economic downturn pushes most countries into recession. In April 2010, the U.S. unemployment rate was 9.9%, but the government’s broader U-6 unemployment rate was 17.1%. There are six unemployed people, on average, for each available job. Men account for at least 7 of 10 workers who lost jobs, according to Bureau of Labor Statistics data. The youth unemployment rate was 18.5% in July 2009, the highest July rate since 1948. 34.5% of young African American men were unemployed in October 2009. Officially, Detroit’s unemployment rate is 27%, but the Detroit News suggests that nearly half of this city’s working-age population may be unemployed. 3.8 million Americans lost their jobs in 2009.
The official unemployment rate in the 16 EU countries that use the euro rose to 10% in December 2009. Latvia had the highest unemployment rate in EU at 22.3% for November 2009.Europe's young workers have been especially hard hit. In November 2009, the unemployment rate in the EU27 for those aged 15–24 was 18.3%. For those under 25, the unemployment rate in Spain was 43.8%.
A flood of inexpensive consumer goods from China has recently encountered criticism from Europe, the United States and some African countries. In South Africa, some 300,000 textile workers have lost their jobs due to the influx of Chinese goods. The increasing U.S. trade deficit with China has cost 2.4 million American jobs between 2001 and 2008, according to a study by the Economic Policy Institute (EPI). A total of 3.2 million – one in six U.S. factory jobs – have disappeared between 2000 and 2007.
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