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Unemployment, as defined by the International Labour 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 the labour force.
The 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.
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.
The 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.
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.
