Unemployment

Because of its traumatic effects on those who experience it, unemployment is a matter of widespread concern. Its causes and consequences have been topics of investigation and of controversy in economics, and in psychology and sociology. On some occasions its limitation has been made a policy objective, and on others it has been used as an instrument of policy. Its harm can be mitigated but there is no prospect of its elimination.

Terminology

Economics textbooks sometimes refer to four categories of unemployment:

• frictional unemployment, which happens to people who leave one job to search for another; * frictional unemployment, which happens to people who leave one job to search for another;

   * structural unemployment, which happens to people whose skills are no longer needed because of changes in technology or industry structure;
   * wage-rigidity, or "classical", unemployment, which happens when wages are maintained at a level at which the

• structural unemployment, which happens to people whose skills are no longer needed because of changes in technology or industry structure;
• wage-rigidity, or "classical", unemployment, which happens when wages are maintained at a level at which the demand for labour falls short of its supply; and
• demand-deficient, or Keynesian" unemployment, which occurs in a recession when the demand for labour falls short of its supply for macroeconomic reasons.
  

The term "full employment" is usually taken to mean the absence of unemployment other than frictional and structural unemployment, although it would be wrong to suppose that neither could be reduced by employment policy.

None of those categories of unemployment can be defined with any precision for statistical purposes, and the term unemployment can itself be defined for those purposes only by drawing some arbitrary distinctions between unemployment and other forms of under-utilisation of labour.