Unemployment means lack of jobs even for those who are able and willing to work at the prevailing wage. The unemployment may be defined as the gap between the potential “full employments” and number of employed persons. Full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so. Unemployment=labor force-(no. of employed +frictionally unemployed) [2] According to International Labour Organization report, more than 197 million people globally are out of work or 6% of the world’s workforce were without a job in 2012. [3] There remains considerable theoretical debate regarding the causes, consequences and solutions for unemployment. Classical economics, New classical economics, and the Austrian School of economics argue 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.
The Research paper on Economics – Minimum Wage
South Africa’s history is riddled with economic exploitation and government has continually tried to right the socio-economic wrongs of the past, through the use of various economic policies and labour legislation. One such legislation has been highly debated in recent months. The legislation in question governs the minimum labour wage for each of the respective economic sectors. According to ...
Keynesian models recommend government interventions designed to increase demand for workers; these can include financial stimuli, publicly funded job creation, and expansionist monetary policies. 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] 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.
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 job entry threshold and wage rates. Behavioral economists highlight individual biases in decision making, and often involve problems and solutions concerning sticky wages and efficiency wages. Measuring unmployment 1. Claimant count: counting those who are in receipt of job seekers allowance 2. Labor force survey: this is the measure that is used internationally . includes those who have looked for work in the past month and are able to start a new job within two weeks.
