According to many calculations carried out at intervals from 1948 (from that time quarterly GDP statistics for the USA appeared) to the present, with GDP growth, at which there is no change in the unemployment rate, averages about 3% per annum. This value can be interpreted as a result of the growth of the economically active population, capital-labor ratio and total productivity of production factors (or, if you prefer, scientific and technological progress, which is not the same, but close). A change in the unemployment rate by 1 percentage point corresponds to a deviation of real GDP growth by 2 points from this level.
But this is the American version. To check the effect of the law in Russia, we will use statistical data:
1) First, let's look at the left side of the formula. We need to calculate the size of the market gap. To do this, you should know the volume of production potentially possible with this technology Yf - national income full employment, and actual national income Y. www.gks.ru
Now we calculate the gap:
The data is calculated as a percentage for the convenience of further conversions.
|
natural rate of unemployment |
actual unemployment |
Now the market unemployment rate is:
The average will be 1.43. This means that each percentage point of short-term unemployment reduced the actual volume of GNP by 1.43% compared to full-time GNP.
During the previous recession of 1990-1998, which, judging by the dynamics of GDP, was much deeper than the current one, the problem of unemployment seemed to be less acute. What can statistics say about this? How much has employment flexibility increased in relation to output over the inter-crisis decade?
The elasticity of the unemployment rate with respect to GDP, calculated for the period from 1995 to 2008, is about 2. That is, if GDP fell by 10%, the unemployment rate on average grew by about 20% (namely, percent, not percentage points!), then instead of, say, 7 it became 8.4%. The reaction, as we see, is generally unusually weak. This is most likely due to the fact that for determining the average elasticity, the period 1995-1998 turns out to be critical here, which saw the most profound changes in both GDP and employment. And this is a completely different economy, with inelastic employment. Many people preferred to stay at their previous jobs, receiving pennies, in the hope of surviving difficult times, and the same “Soviet” principles of employment were generally adhered to by the management of enterprises.
Therefore, in 1999, employment grew very slowly, despite the rise in GDP: enterprises had large internal reserves not only of production capacity, but also of the intensity of use of available employees.
Subsequently, the reaction of employment to changes in GDP dynamics, in particular to the acceleration of growth in 2006-2007 and to the recession in 2008-2009, turns out to be much sharper than predicted by the “average interval” equation. In the period 2005-2008, a similar elasticity is already about 5, which means that a fall in GDP by 10% will cause an increase in the unemployment rate from 7 to approximately 10.5%. That is, according to Okun, the reaction is approximately 1 in 3: for 1 percentage point increase in unemployment, there is a 3% drop in GDP.
How much can unemployment rise given the current elasticity and some reasonable forecast of a decline in GDP? The Ministry of Economic Development in its forecast expects a decrease in annual GDP indicator in 2009 by 2.2%, suggesting that production will decline for at least the first two quarters. Under these assumptions and the V-shaped curve of production dynamics during this year, the decline in GDP at the bottom (that is, in the second quarter of this year) relative to the peak of the third quarter of last year will be approximately 6% (in seasonally adjusted volumes), and, based on the elasticity of the unemployment rate to GDP is at the level of 5, the latter at the lowest point of the recession will not exceed 8 percent. If, under the same assumptions, annual GDP falls by 5%, then the bottom of GDP will decrease by 11% to the peak, and the unemployment rate at the lowest point of the crisis will exceed 10%. Finally, with the same 5% annual decline in GDP, but with an L-shaped recession bottom to peak of 7%, the unemployment rate is correspondingly lower, approximately 8.5%, but it remains so for at least three quarters until the end this year.
However, the value of these arithmetic exercises is not very high. It is possible that in the interval where we assessed the elasticity of unemployment to GDP, the same wait-and-see behavior of employers was partly observed as during the 1998 crisis, and the real sensitivity of unemployment to the recession will ultimately turn out to be much higher. Expert No. 11 2009
Okun's law is most often used in analysis economic situation. The scientist introduced this coefficient to characterize the relationship between the unemployment rate and the growth rate.
In 1962, Okun derived a pattern based on empirical data. Statistics have shown that a 1% increase in unemployment can cause actual gross domestic product to fall in line with potential GDP by 2%. This ratio is not constant and differs depending on the country and time period.
Thus, Okun's law represents the relationship between quarterly changes in the unemployment rate and real GDP.
Okun's Law Formula
The formula for Okun's law is as follows:
(Y’ – Y)/Y’ = с*(u – u’)
Here Y is the real volume of GDP,
Y’ – potential GDP,
u is the real unemployment rate,
u’ – natural unemployment rate,
c – Okun coefficient.
Since 1955, the Okun's ratio in the United States has usually been equated to 2 or 3.
This formula of Okun's law is used in rare cases, since the level of potential GDP and the unemployment rate are difficult to estimate.
There is a second version of the Okun's law formula:
∆Y/Y = k – c*∆u
Here Y is the actual production volume,
∆Y – change in the actual production level compared to last year,
∆u – change in the actual unemployment rate compared to last year,
c is the Okun coefficient,
k – average annual production growth assuming full employment.
Criticism of Okun's Law
To date, Okun's law formula has not gained acceptance and is criticized by many economists who question its usefulness in explaining market conditions.
The formula of Okun's law appeared as a result of processing statistical data that represents empirical observations. The law did not have a solid theoretical basis, tested in practice, since Okun expressed the pattern only in a study of US statistics.
These statistics are approximate, and gross domestic product can be affected by a number of factors rather than just the unemployment rate.
However, this simplified view of the relationship between macroeconomic indicators can often be useful, as Okun's study showed.
Features of Okun's law
The scientist derived a coefficient that reflects the inverse relationship between production volume and the unemployment rate. Okun believed that GDP growth of 2% is associated with the following shifts:
- a 1% drop in cyclical unemployment;
- employment growth by 0.5%;
- increase in the number of working hours of each employee by 0.5%;
- productivity growth by 1%.
It can be noted that by reducing Okun's cyclical unemployment rate by 0.1%, the expected level of increase in real GDP will be 0.2%. But for different countries and time periods this value will vary, since the dependence was practically tested for GDP and GNP.
Examples of problem solving
EXAMPLE 1
| Exercise | Applying Okun's law, calculate the volume of GDP that can be achieved in the state with natural indicator employment at 6%. Unemployment rate - 10%, Actual gross domestic product (GDP) – 7,500 billion rubles. |
| Solution | This problem can be solved using Okun's law. The formula of Okun's law shows that the excess of the actual unemployment rate over the natural rate of 1% will lead to a loss of 2% of gross domestic product. The difference between the actual and natural unemployment rates: That is, GDP lags behind its potential value by 8%. If we take the actual gross product as 100%, we get the following result: 7500 + 7,500 * 8 / 100= 8,100 billion rubles. |
| Answer | 8100 billion rubles. |
Okun's law is most often used in analyzing economic situations. The scientist introduced this coefficient to characterize the relationship between the unemployment rate and the growth rate.
In 1962, Okun derived a pattern based on empirical data. Statistics have shown that a 1% increase in unemployment can cause actual gross domestic product to fall in line with potential GDP by 2%. This ratio is not constant and differs depending on the country and time period.
Thus, Okun's law represents the relationship between quarterly changes in the unemployment rate and real GDP.
Okun's Law Formula
The formula for Okun's law is as follows:
(Y’ – Y)/Y’ = с*(u – u’)
Here Y is the real volume of GDP,
Y’ – potential GDP,
u is the real unemployment rate,
u’ – natural unemployment rate,
c – Okun coefficient.
Since 1955, the Okun's ratio in the United States has usually been equated to 2 or 3.
This formula of Okun's law is used in rare cases, since the level of potential GDP and the unemployment rate are difficult to estimate.
There is a second version of the Okun's law formula:
∆Y/Y = k – c*∆u
Here Y is the actual production volume,
∆Y – change in the actual production level compared to last year,
∆u – change in the actual unemployment rate compared to last year,
с - Okun's coefficient,
k – average annual production growth assuming full employment.
Criticism of Okun's Law
To date, Okun's law formula has not gained acceptance and is criticized by many economists who question its usefulness in explaining market conditions.
The formula of Okun's law appeared as a result of processing statistical data that represents empirical observations. The law did not have a solid theoretical basis, tested in practice, since Okun expressed the pattern only in a study of US statistics.
These statistics are approximate, and gross domestic product can be affected by a number of factors rather than just the unemployment rate.
However, this simplified view of the relationship between macroeconomic indicators can often be useful, as Okun's study showed.
Features of Okun's law
The scientist derived a coefficient that reflects the inverse relationship between production volume and the unemployment rate. Okun believed that GDP growth of 2% is associated with the following shifts:
It can be noted that by reducing Okun's cyclical unemployment rate by 0.1%, the expected level of increase in real GDP will be 0.2%. But for different countries and time periods this value will vary, since the dependence was practically tested for GDP and GNP.
Examples of problem solving
Unemployment rate - 10%,
Actual gross domestic product (GDP) – 7,500 billion rubles.
The difference between the actual and natural unemployment rates:
That is, GDP lags behind its potential value by 8%. If we take the actual gross product as 100%, we get the following result:
www.solverbook.com
Okun's Law
Problem No. 38. Setting government policies to stabilize the economy
In the country's economy, the natural unemployment rate is 7%, and the actual rate is 9%. Potential GDP is $3,000 billion, Okun's coefficient is 2.5. What policy should the government pursue to stabilize the economy (consider all possible instruments), if it is known that marginal propensity to consumption is equal to 0.9.
Problem No. 51. Calculation of potential GDP
Unemployment rate in this year amounted to 7.5%,
and actual GDP is $1,665 billion.
The natural rate of unemployment is 5%.
Determine the value of potential GDP if the Okun coefficient is 3.
Problem No. 52. Calculation of actual GDP
The unemployment rate this year was 6.5%.
The natural unemployment rate is 5%,
and Okun's coefficient is 2.
Potential GDP is equal to 2,550 billion dollars.
Determine the lag in GDP (in %) and the loss of GDP caused by cyclical unemployment (in billions of dollars).
Problem No. 53. Calculation of Okun's coefficient and natural rate of unemployment
Potential GDP was $100 billion, actual GDP was $97 billion, and the actual unemployment rate was 7%.
When actual GDP fell by $6 billion, the unemployment rate rose to 9%.
Determine the value of the Okun coefficient and the natural rate of unemployment.
Problem No. 54. Calculation of potential GDP, actual and natural unemployment rates
The country's economy is characterized by the following indicators:
total population 400 million people,
working-age population – 280 million,
number of employed – 176 million,
number of frictional unemployed – 6 million,
number of structural unemployed – 8 million,
the number of cyclical unemployed is 10 million people.
The actual GDP is $2040 billion and the Okun ratio is 3.
Determine the value of potential GDP, the actual unemployment rate, and the natural unemployment rate.
Problem No. 55. Calculation of actual GDP and actual unemployment rate
total population – 200 million people,
working-age population – 160 million people,
number of employed – 112 million people,
natural unemployment rate – 6.4%,
the number of cyclical unemployed is 5 million people.
Potential GDP is $2,500 billion, and the Okun's coefficient is 2.4.
Determine the value of actual GDP, the actual unemployment rate, the number of frictional and structural unemployed.
Problem No. 61. Calculation of losses from unemployment
The potential volume of output at a natural unemployment rate of 6% is equal to 6000 billion den. units. When cyclical unemployment of 1% appears, the actual volume of output deviates from the potential by 120 billion. units. Determine unemployment losses if the actual unemployment rate is 8.5%
Solution
Solutions to problems using Okun's law
The country's population is 100 million people. Share work force in the population is 55%. The productivity of one employee is 12 thousand UAH per year. Actual. Country's GDP— 600 billion UAH. The natural rate of unemployment is 5%. Determine the unemployment rate of the population.
M rs = 100 million people
2. The number of employees is determined by the formula:
Where. GDPf - actual. GDP; z - productivity of one employee
3. Number of unemployed :
Bw = 55 million people - 50 million people = 5 million people
4. The unemployment rate is calculated using the formula:
The natural rate of unemployment is 5%, and its actual rate is 7%. Define. The GDP gap provided that the sensitivity coefficient to the dynamics of cyclical unemployment is 2.5, and the actual one. GDP is 900 million December.
1. Find the percentage deviation of the actual. GDP from natural result of cyclical unemployment according to the formula:
2. Now let's calculate the natural one. GDP:
GDP * 0.05 =. GDP * - 900
GDP * = 947,360,000 UAH
So,. GDP growth rate: 947.36
900 = 47.36 million UAH
Determine the unemployment rate in national economy under the following conditions:
1) the population of the country is 100 million people;
2) population under the age of 16 years - 20 million people;
3) are in special institutions - 4 million people;
4) natural. GDP - UAH 940 billion b) natural rate of unemployment - 6%;
6) actual. GDP is 85% natural. GDP;
7) persons who left the workforce - 26 million. Solution:
1. Determine the size of the workforce:
2. Number of people employed at the natural rate of unemployment: 50 million people
3. Then the productivity of one employee:
4. Actual volume. GDP:
0.85 940 billion UAH = 799 billion UAH
5. Number of employees:
6. Number of unemployed:
Bw = 50 million people - 39950000 people = 10050000 people
7. The unemployment rate is determined by the formula:
In 2000, the country's economy developed at full employment (the natural unemployment rate was 6%). Actual. GDP was equal to potential and amounted to 300 billion UAH. In 2005 actual. GDP amounted to 371 1 billion UAH, potential - 412 billion UAH on December.
In 2005, determine the level of actual unemployment (with
1. Using the law. Okun, we calculate the level of actual unemployment using the formula:
2 will be the proportion:
3. Determine the unemployment rate:
The natural unemployment rate in the country is 6%, the actual rate is 15%. Coefficient p = 2.5
Determine the relative lag of the actual one. GDP from potential; losses. GDP caused by cyclical unemployment, if actual. GDP is 150 billion UAH
1. The volume of the relative actual lag. GDP versus potential is determined by the formula. Okena
2. Volume of potential. GDP is
GDP * = 193,550,000,000 UAH
3. Losses caused by cyclical unemployment are nothing less than. We calculate the GDP gap as follows:
GDP gap = UAH 193,550,000,000 —
— 150 billion UAH = 43550000000 UAH
Tasks for independent completion
IN reporting year the region's labor resources amounted to 1,810 thousand people, including 1,720 thousand people of working age; older working people and teenagers - 120 thousand people, of which: those employed in the national economy (without personal peasant farms) - 1571 thousand people, students - 129 thousand people, unemployed citizens of working age - 189 thousand people, including involuntarily unemployed (looking for this slave) - 73 thousand. osib.
Determine the level of employment of the working-age population in the national economy of the region for the reporting year, the level of employment of students, the level of unemployed working-age citizens, including those looking for a job.
The unemployment rate in the region in the reporting year was 12%. This figure needs to be reduced to 5%. Using the law. Okun, calculate the rate of change required for this. GDP
If the unemployment rate is 7.8%, then at what rate should it grow? GDP to reduce the unemployment rate to 6.5%: a) in one year b) in two years?
Analyze the number of employees by all types economic activity and separately in trade in the western regions and in Ukraine as a whole for 2003-2007 pp (Table 1)
Using MS Excel spreadsheets, build a calculation and analytical table in which to determine the specific gravity (in percent) of the crushed indicator. Construct a line diagram illustrating the dynamics of changes in workers by type of economic activity.
Using MS Excel spreadsheets, based on the indicators in Table 2, analyze the dynamics of the number of employed citizens in the western regions of Ukraine in 2003-2007 pp, and also calculate the share of women in total number employed people draw conclusions.
Make a forecast for the next five years, using the model to build on. Your choice, statistical functions linest, trend, forecast, logest, growth. Present the conclusions in the form of a linear diagram of the equation and trend.
uchebnikirus.com
Solution. Examples of problem solving;
Examples of problem solving
Formulas for solving problems
1. Okun's law formula
Y – actual production volume;
Y* – potential volume of GNP;
u* – natural unemployment rate;
c – empirical coefficient of sensitivity of GNP to the dynamics of cyclical unemployment;
2. The general level of labor resources is determined by the formula:
R – actual availability of labor resources;
L – working population;
3. The overall level of unemployed is determined by the formula:
U – actual unemployment rate;
F – officially registered
R is the total number of people willing to work.
1. Actual GDP is 3712 billion dollars, potential GDP is 4125. Determine the level of actual unemployment if the actual level is 6% (at β = 2.5).
To determine the actual level of unemployment, we apply the formula of Okun's law:
After algebraic transformations:
Thus, the actual unemployment rate was 10%
2. Calculate cyclical unemployment under the following conditions: labor force – 4 million people, number of employed – 3.5 million people, natural unemployment – 6%. What will be the difference between actual and potential GDP under these conditions?
Macroeconomics tasks
Example 1. Suppose that in given year The natural rate of unemployment was 5%, and the actual rate was 9%. Using Okun's law, determine the value of the lag in the volume of GNP as a percentage. If nominal GNP in the same year was 50 billion rubles, how much output was lost due to unemployment.
Problem No. 303 (calculating the inflation rate and price index)
If the price index was 110 last year and 121 this year, what will the inflation rate be this year? What does the "rule of magnitude 70" mean?
Problem No. 18 (calculating the unemployment rate)
The table presents data on labor resources and employment in the first and fifth years of the period under review (in thousands of people): First year Fifth year.
Task No. 14 (calculation of macroeconomic indicators)
Problem No. 415 (problem according to Okun's law)
Example 1: Suppose that in a given year the natural rate of unemployment was 5% and the actual rate was 9%. Using Okun's law.
Task No. 15 (calculation of GNP, NNP, consumption and investment)
National production includes two goods: X ( consumer product) and U (means of production). 500 units of X were produced this year.
Okun's Law - economic law, according to which an increase in the share of unemployed in the total labor force above the natural unemployment rate by 1% leads to a decrease in the volume of gross output national product by 2.5%. The excess of the actual unemployment rate over the natural level is 4% (9%-5%), therefore, the backlog of gross national product production is:
If the size of GNP in the same year was 50 billion rubles, then the volume of production that was lost due to unemployment was:
50*10/100=5 billion rubles.
Example 2. Calculate, in accordance with Okun's law, the loss of actual GDP due to cyclical unemployment under the following conditions:
- actual unemployment – 8%;
- natural unemployment – 5%;
- nominal GDP– 900 billion units;
- price index – 120%.
The excess of the actual unemployment rate over the natural level is 3% (8%-5%), therefore, the loss of GDP is:
Actual (real) GDP, i.e. nominal GDP adjusted for price index is:
GDPf=900/(120/100)=750 billion.
So, if the actual size of GDP was CU750 billion, then the GDP loss (i.e., the amount of output that was lost due to unemployment) was:
750*7.5/100=56.25 billion.
Example 3. The economy is described by the following data: the natural rate of unemployment is 6%, the actual rate of unemployment is 7.33%, potential GDP increases by 3% per year. How quickly must actual output increase to ensure full employment of resources at the natural rate of unemployment next year? The sensitivity coefficient of GDP to the dynamics of cyclical unemployment is 3.
For every percentage point that the actual unemployment rate exceeds the natural rate, GDP losses amount to 3% (this relationship is known as Okun's law). According to the conditions of the problem, this excess is 1.33% (7.33-6). Therefore, the GDP loss is equal to:
dGDP=1.33*3=4% of potential GDP.
Therefore, with other equal conditions For full employment to be achieved, actual GDP must be increased by an amount equivalent to 4% of potential GDP.
Next year, potential GDP increases by 3%; in order to ensure full employment, the same 3% must be increased in actual GDP.
The total growth of actual GDP should be equivalent to a value equal to 7% (4+3) of potential GDP.
The actual unemployment rate is 10.5%, the natural unemployment rate is 6.5%. Potential GDP is 76 billion. units Okun's number was 2.5. Calculate actual GDP.
Solution.
Conclusion:In an economy with the parameters specified in the problem statement, the actual level of GDP will be 68.4 billion. units
The real volume of GDP in the current year is equal to 920 billion cu, and the potential GDP is 1000 billion. Find the actual unemployment rate if the natural rate of unemployment is 6%. Okun's number was 2.5.
Solution. Let's substitute the known values into the formula of Okun's law:
Conclusion:In an economy with the parameters specified in the problem statement, the actual unemployment rate will be 9.2%.
The unemployment rate will be 12% this year, the natural unemployment rate will be 8%. Calculate potential GDP if actual GDP is 1000 billion cu and Okun's number is 2.5.
Solution. Let's substitute the known values into the formula of Okun's law:
Conclusion:In an economy with the parameters specified in the problem statement, the potential level of GDP will be 1111.1 billion USD.
| TASKS FOR INDEPENDENT SOLUTION |
Task 1. The actual unemployment rate is 7.7%, the natural unemployment rate is 4.5%. Potential GDP is 100 billion. units Okun's number was 3. Calculate actual GDP.
Task 2. The actual unemployment rate is 10%, the natural unemployment rate is 5.5%. Potential GDP is 50 billion. units Okun's number was 2. Calculate actual GDP.
Task 3. The actual unemployment rate is 9%, the natural unemployment rate is 8%. Potential GDP is 200 billion. units Okun's number was 2.5. Calculate actual GDP.
Task 4. The actual volume of GDP in the current year is 90 billion cu, and the potential GDP is 100 billion. Find the actual unemployment rate if the natural rate of unemployment is 5%. Okun's number was 2.
Task 5. The actual volume of GDP in the current year is equal to 4800 billion cu, and the potential GDP is 5000 billion. Find the actual unemployment rate if the natural rate of unemployment is 3%. Okun's number was 3.
Task 6. The actual volume of GDP in the current year is equal to 240 billion cu, and the potential GDP is 300 billion. Find the actual unemployment rate if the natural rate of unemployment is 8%. Okun's number was 2.5.
Task 7. The unemployment rate will be 9% this year, the natural unemployment rate will be 6%. Calculate potential GDP if actual GDP is 100 billion cu and Okun's number is 2.
Task 8. The unemployment rate will be 5% this year, the natural unemployment rate will be 4%. Calculate the potential GDP if the actual GDP of ramen is 900 billion cu and the Okun number is 3.
Task 9. The unemployment rate will be 7% this year, the natural unemployment rate will be 5%. Calculate the potential GDP if the actual GDP of ramen is 4000 billion cu and the Okun number is 2.5.
Problem 10. The unemployment rate will be 15% this year, the natural unemployment rate will be 6%. Calculate the potential GDP if the actual GDP of ramen is 800 billion cu and the Okun number is 2.
| ANALYTICAL TASKS |
In which of the following cases has the number of involuntary unemployed increased, and in which has the number of voluntary unemployed increased? Determine also what type of unemployment each case is: frictional, cyclical or structural.
A. Ivan left his previous job because he was moving to another city for family reasons.
b. Marina's relationship with her boss has deteriorated. She was forced to quit and start looking for another job.
V. Sergei’s plant went bankrupt, and at a neighboring plant they don’t want to pay him the same salary for the same work - they offer him less.
G. Natasha quit her job, believing that she was underpaid, but she could not find the same job with a higher salary.
d. Vladimir quit his old job, where he worked as a mechanic, but was unable to get a job in a new place, since a mechanic of a higher level was required there.
1. Zadoya A.A. Macroeconomics. - K.: Znannya, 2006.
2. Dolan E., Lindsay D. Macroeconomics. - St.-Pb.: 1994.
3. Radionova I. Macroeconomics and economic policy: Pidruchnik. - K.: Vikar, 2006. - 239 p.
4. Abel E., Bernanke B. Macroeconomics. 5th bridle – St. Petersburg: Peter, 2008. – 768 p.
5. Stankovskaya I.K., Strelets I.A. Economic theory: Textbook. – 2nd bridle, reworked. and additional – M.: Eksmo Publishing House, 2006. – 448 p.
Signed for seal “__”_________2010 Paper format 60x84 1/16
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Unemployment leads to significant economic losses in goods and services not created due to equipment downtime. As a result, a certain part of GDP is not produced (the danger of cyclical unemployment).
The relationship between GDP losses and unemployment is determined by Arthur Okun's law (1928-1979): every 1% increase in unemployment above its natural level leads to a lag in GDP by 2.5%.
where Y is actual GDP;
Y′ - potential GDP;
U – actual unemployment rate:
Un – natural unemployment rate;
λ is the sensitivity coefficient (in absolute terms) of GDP to changes in cyclical unemployment - the Okun coefficient.
Assume that frictional, structural and cyclical unemployment are 3% each. What will be the loss of GDP at this level of unemployment in the country? The natural rate of unemployment (frictional plus structural) is 6%, and the rate of actual unemployment (natural plus cyclical) will be 9%, i.e. 3% higher than natural level. The GDP loss will be 3% 2.5 (Ouken's number) - 7.5%.
The transition to a market economy is accompanied by rising unemployment. Special employment services deal with the problems of employment of the population, their career guidance and retraining, and the issuance of unemployment benefits.
The state provides certain social guarantees to the unemployed. Thus, they are paid unemployment benefits, provided with financial assistance to the unemployed and members of his family, paid a stipend during the period of professional retraining, reimbursed expenses and given compensation in connection with moving to another area to a new place of residence, to a place of work in the direction of the state employment service.
2.4 Socio-economic consequences of unemployment
Are the effects of unemployment a serious problem? Without a doubt. The socio-economic consequences of unemployment are considered, along with the problems of poverty and social instability, as one of the most pressing global and national problems.
Indeed, in transition period the only way to encourage large masses of people to move in order to more rationally form the employment structure is to oust them from inefficient industries. At the same time, it is obvious that the implementation of ultra-strict measures can cause massive bankruptcy of enterprises and the emergence of a wave of unemployment that will inevitably lead to a social explosion. A “reasonable measure” of severity must be observed.
Very often, only the economic effect of unemployment is assessed in the form of the number of laid-off workers and the amount of benefits paid, and the social consequences, which are difficult to distinguish and are cumulative in nature, are practically not assessed. However, the degree of negative impact of unemployment on the situation in the country depends on the specific parameters of the social situation.
It should be noted that it is necessary to determine not just the ability to assess social damage or indirect losses in the economy (from a decrease in the amount of time worked, a drop in labor intensity and productivity), but also direct costs associated with the increase in government spending to overcome socially negative processes. Such studies are of undoubted interest, since they allow us to more clearly define the boundaries of the problem and outline ways out of the crisis situation, in accordance with the characteristics of the social, economic and political development of the country at the present stage.
I. Social consequences of unemployment
Negative
1. Aggravation of the crime situation.
2. Increased social tension.
3. Increase in the number of physical and mental illnesses.
4. Increasing social differentiation.
5. Decrease in labor activity.
Positive
1. Increasing the social value of the workplace.
2. Increase in personal free time.
3. Increased freedom to choose where to work.
4. Increasing the social significance and value of work.
II. Economic consequences of unemployment
Negative
1. Devaluation of the consequences of learning.
2. Reduction in production.
3. Costs of helping the unemployed.
4. Loss of qualifications.
5. Declining living standards.
6. Underproduction of national income.
7. Decrease in tax revenues.
Positive
1. Creation of a labor reserve for structural restructuring of the economy.
2. Competition between workers as a stimulus for the development of work abilities.
3. A break from employment for retraining and improving the level of education.
4. Stimulating the growth of labor intensity and productivity.
During the development of economic theory (in particular the theory of unemployment, its types and causes), various economists offered their options for reducing the unemployment rate. For example, Keynesians believed that a self-regulating economy could not overcome unemployment. The level of employment depends on the so-called “effective demand” (simply - the level of consumption and investment). J.M. Keynes wrote: “The chronic tendency towards underemployment that characterizes modern society has its roots in underconsumption...”. Underconsumption is expressed in the fact that as the consumer’s income increases, due to psychological factors, his “propensity to save” exceeds the “incentive to invest,” which leads to a decline in production and unemployment.
Thus, the Keynesians, having shown the inevitability of a crisis in a self-regulating economy, pointed to the need for government economic influence to achieve full employment. First of all, effective demand should be increased by reducing interest rates and increasing investment. Monetarists opposed Keynesian methods.
In 1967, M. Friedman suggested the existence of a “natural level of unemployment,” which is strictly determined by labor market conditions and cannot be changed by measures public policy. If the government tries to maintain employment above its “natural level” using traditional fiscal and credit methods of increasing demand, then these measures will have a short-term effect and will only lead to higher prices.
Monetarist methods of regulating employment are quite radical. They blame the workers for abstaining from work and receiving compensation in the form of benefits. Hence the recommendations to cancel these benefits in order to force people to work. Monetarists propose to abandon stimulating economic growth by increasing demand. However, a policy of limiting demand can cause a sharp deterioration in the living standards of the population, which will affect the social situation. What steps can the state take to reduce the unemployment rate?
The variety of types of unemployment makes the task of reducing it extremely difficult. Since there is no single way to combat unemployment, any country has to use different methods to solve this problem.
There are four main areas of state regulation of the labor market.
First, these are programs to stimulate employment growth and increase the number of jobs;
Secondly, programs aimed at training and retraining the workforce;
Third, labor recruitment assistance programs;
Fourthly, social insurance programs for the unemployed.
In addition, there is indirect regulation of the labor market:
Tax;
Monetary;
Depreciation policy.
Measures of indirect regulation of the labor market are at the same time measures of general economic regulation and affect the dynamics of employment and unemployment.