The Various Forms of Unemployment



There are many different senses in which the terms “employment” and “unem- ployment” can be used. It is important to recognize that full employment, which is what I shall be arguing justice requires here, does not mean an unemployment rate of zero. The labor market is dynamic, not static, so the rate of people entering and leaving the employment pool will usually not sum to zero—there will always be people looking for different jobs or better ones; some skills and the people who have them will become less marketable as a result of technological or cultural change while other skills and the people who have them will become more marketable. Every economy must leave room for such shifts in the demographics of employment to occur if it is to function smoothly and be able to reallocate labor efficiently and as needed by the development of new technologies. Efforts to reduce unemployment will accordingly always aim to allow some frictional unemployment to remain.1


Labor Market Unemployment Rate Business Cycle Moral Obligation Natural Rate 
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  1. 1.
    This point, of course, has been widely made. See, e.g., Joan Robinson, “Obstacles to Full Employment,” in Contributions to Modern Economics (New York: Academic Press, 1978), pp. 20–28CrossRefGoogle Scholar
  2. 2.
    See Keynes, General Theory, pp.118-119, 285, 303. Note that despite the rather categorical language used by Keynes in these passages, there is probably no bright line where economic stimulus stops resulting in increased employment even a little and starts resulting exclusively in inflation; some of each will probably result from all increases in effective demand, even at times of very high and very low unemployment. See Alvin H. Hansen, A Guide to Keynes (New York: McGraw-Hill, 1953), pp. 186–187.Google Scholar
  3. 3.
    See William H. Beveridge, Full Employment in a Free Society (New York: W.W. Norton & Company, 1945), pp. 127–128.Google Scholar
  4. 4.
    For example, it might be as low as 1.5 or even 1%, for that rate of unemployment has been present in certain segments of the work force in the United States in the past without causing larger difficulties. See John Kenneth Galbraith, The New Industrial State (Middlesex, UK: Penguin Books, 2nd edn., 1973), p. 243.Google Scholar
  5. Joan Robinson, “What Has Become of Employment Policy?” in Contributions to Modern Economics (New York: Academic Press, 1978), pp. 254–266CrossRefGoogle Scholar
  6. 8.
    See generally Dean Baker and Jared Bernstein, Getting Back to Full Employment (Washington, DC: Center for Economic and Policy Research, 2013).Google Scholar
  7. 10.
    See, e.g., Paul A. Samuelson and William D. Nordhaus, Economics (New York: McGraw-Hill, 13th edn., 1989), p. 289Google Scholar
  8. 11.
    See, e.g., James Tobin, “An Old Keynesian Counterattacks,” in Full Employment and Growth (Cheltenham: Edward Elgar, 1996), pp. 17–32Google Scholar
  9. 12.
    See, e.g., Janet L. Yellen, “Efficiency Wage Models of Unemployment,” American Economic Review 74 (1984): 200–205Google Scholar
  10. Carl Shapiro and Joseph E. Stiglitz, “Can Unemployment Be Involuntary?: Reply,” American Economic Review 75 (1985): 1215–1217.Google Scholar
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    Robert M. Solow, “On Theories of Unemployment,” American Economic Review 70 (1980): 1–11Google Scholar
  12. 14.
    See John Rawls, Justice as Fairness: A Restatement (Cambridge: Harvard University Press, 2001), pp. 5–6.Google Scholar
  13. W. M. Sibley, “The Rational Versus the Reasonable,” The Philosophical Review 62 (1953): 554–560.CrossRefGoogle Scholar
  14. 15.
    Mancur Olson, The Riseand Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven, CT: Yale University Press, 1982), p. 195Google Scholar
  15. 38.
    The argument that a significant amount of the unemployment we are experiencing is structural and therefore not amenable to the usual Keynesian prescriptions to reduce it is of course nothing new—it has been trotted out time and again by conservative economists and policy makers in an attempt to quell Keynesian calls for more muscular government action whenever the unemployment rate is high, and so far has always proved wrong. See Robert M. Solow, The Nature and Sources of Unemployment in the United States (Stockholm: Almqvist & Wicks ell, 1964)Google Scholar
  16. 42.
    See Oliver Blanchard, “Preface” in The Natural Rate of Unemployment, ed. Rod Cross (Cambridge: Cambridge University Press, 1995), p. xi.Google Scholar
  17. 43.
    This makes Friedman’s claim a throwback to the kind of claim made by Alfred Marshall and his followers, “one of the main effects of which (I won’t say purposes),” according to Joan Robinson back in 1936, is “the justification of the existing system,” “a plan for explaining to the privileged class that their position was morally right and was necessary for the welfare of society” on the grounds that “even the poor were better off under the existing system then they would be under any other.” Joan Robinson, “An Economist’s Sermon,” in Essays in the Theory of Employment (Oxford: Basil Blackwell, 1947 [1937]), pp. 175–182Google Scholar
  18. 44.
    See Roger E. A. Farmer, How the Economy Works (Oxford: Oxford University Press, 2010), p. 95.Google Scholar
  19. 46.
    See generally Mark Blaug, Economic Theory in Retrospect (Cambridge: Cambridge University Press, 5th edn., 1996), pp. 678–688Google Scholar
  20. George A. Akerlof, “The Phillips Curve and the NAIRU,” in Explorations in Pragmatic Economics (Oxford: Oxford University Press, 2005), pp. 482–487Google Scholar
  21. James Tobin, “Keynesian Policies in Theory and Practice,” in Policies for Prosperity (Cambridge: MIT Press, 1987), pp. 4–13Google Scholar

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© Mark R. Reiff 2015

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