Involuntary unemployment

involuntarily unemployedinvoluntaryunable to work
Involuntary unemployment occurs when a person is willing to work at the prevailing wage yet is unemployed.wikipedia
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Unemployment

unemployedunemployment ratejob creation
Involuntary unemployment occurs when a person is willing to work at the prevailing wage yet is unemployed.
Some of the main types of unemployment include structural unemployment and frictional unemployment, as well as cyclical unemployment, involuntary unemployment, and classical unemployment.

Efficiency wage

efficiency wagesefficiency wage hypothesisefficiency wage theories
Economists have several theories explaining the possibility of involuntary unemployment including implicit contract theory, disequilibrium theory, staggered wage setting, and efficiency wages.
But since all firms do this the market wage itself is pushed up, and the result is that wages are raised above market-clearing, creating involuntary unemployment.

Disequilibrium macroeconomics

disequilibrium economicsdisequilibrium theory
Economists have several theories explaining the possibility of involuntary unemployment including implicit contract theory, disequilibrium theory, staggered wage setting, and efficiency wages.
Involuntary unemployment

Great Depression

Depressionthe Great DepressionDepression-era
Mancur Olson argued that real world events like the Great Depression could not be understood without the concept of involuntary unemployment.
Involuntary unemployment

Reservation wage

Involuntary unemployment is distinguished from voluntary unemployment, where workers choose not to work because their reservation wage is higher than the prevailing wage.

Supply and demand

demandsupplylaw of supply and demand
Involuntary unemployment cannot be represented with a basic supply and demand model at a competitive equilibrium: All workers on the labor supply curve above the market wage would voluntarily choose not to work, and all those below the market wage would be employed.

Implicit contract theory

Implicit contractimplicit contract theories
Economists have several theories explaining the possibility of involuntary unemployment including implicit contract theory, disequilibrium theory, staggered wage setting, and efficiency wages.

Robert Barro

BarroRobert J. Barro
Following earlier disequilibrium research including that of Robert Barro and Herschel Grossman, work by Edmond Malinvaud clarified the distinction between classical unemployment, where real wages are too high for markets to clear, and Keynesian unemployment, involuntary unemployment due to inadequate aggregate demand.

Herschel Grossman

Following earlier disequilibrium research including that of Robert Barro and Herschel Grossman, work by Edmond Malinvaud clarified the distinction between classical unemployment, where real wages are too high for markets to clear, and Keynesian unemployment, involuntary unemployment due to inadequate aggregate demand.

Edmond Malinvaud

Following earlier disequilibrium research including that of Robert Barro and Herschel Grossman, work by Edmond Malinvaud clarified the distinction between classical unemployment, where real wages are too high for markets to clear, and Keynesian unemployment, involuntary unemployment due to inadequate aggregate demand.

Mancur Olson

Olson, MancurM OlsonMancur Olson, Jr.
Mancur Olson argued that real world events like the Great Depression could not be understood without the concept of involuntary unemployment.

Robert Lucas Jr.

Robert LucasRobert E. Lucas, Jr.Lucas
Robert Lucas claims "...there is an involuntary element in all unemployment in the sense that no one chooses bad luck over good; there is also a voluntary element in all unemployment, in the sense that, however miserable one's current work options, one can always choose to accept them" and "the unemployed worker at any time can always find some job at once".

Real business-cycle theory

real business cycle theoryreal business cyclebusiness cycle model
Along those lines real business cycle and other models from Lucas's new classical school explain fluctuations in employment by shifts in labor supply driven by changes in workers' productivity and preferences for leisure.

New classical macroeconomics

new classicalnew classical economicsnew classical school
Along those lines real business cycle and other models from Lucas's new classical school explain fluctuations in employment by shifts in labor supply driven by changes in workers' productivity and preferences for leisure.

Matching theory (economics)

matching theorysearch and matching theorymarkets with search frictions
Involuntary unemployment is also conceptually problematic with search and matching theories of unemployment.

Occupational health psychology

demand-control modelindustrial organization in occupational health psychologyoccupational
OHP addresses a number of major topic areas including the impact of occupational stressors on physical and mental health, the impact of involuntary unemployment on physical and mental health, work-family balance, workplace violence and other forms of mistreatment, accidents and safety, and interventions designed to improve/protect worker health.

Employment Promotion and Protection against Unemployment Convention, 1988

Employment Promotion and Protection against Unemployment Convention, 1988 is an International Labour Organization Convention to promote employment especially vocational guidance, training and rehabilitation, offer the best protection against the adverse effects of involuntary unemployment, but that involuntary unemployment nevertheless exists and that it is therefore important to ensure the social security systems should promote employment assistance and economic support to those who are involuntary unemployed.

Structural unemployment

skills gapstructuralmajor skills shortage
Structural unemployment is one of several major categories of unemployment distinguished by economists, including frictional unemployment, cyclical unemployment, involuntary unemployment, and classical unemployment.

American Recovery and Reinvestment Act of 2009

ARRAAmerican Recovery and Reinvestment Actstimulus
Senate – $21 billion to subsidize the cost of continuing health care insurance for the involuntarily unemployed under the COBRA program; $87 billion to help states with Medicaid; $22 billion to modernize health information technology systems; and $10 billion for health research and construction of National Institutes of Health facilities.

Nominal rigidity

stickysticky pricesprice stickiness
This can lead to involuntary unemployment as it takes time for wages to adjust to equilibrium, a situation he thought applied to the Great Depression.

Causes of unemployment in the United States

followed
Frictional unemployment is always present in an economy, so the level of involuntary unemployment is properly the unemployment rate minus the rate of frictional unemployment.

Full employment

full-employmentemploymentEmployment for all
Put differently, while Classical economists saw all unemployment as "voluntary", Keynes saw the possibility that involuntary unemployment can exist when the demand for final products is low compared to potential output.

Workers' compensation

workers compensationworker's compensationworkmen's compensation
The amount transferred by the INSS is used to replace the income of the worker taxpayer, when he or she loses the ability to work, due to sickness, disability, age, death, involuntary unemployment, or even pregnancy and imprisonment.

James Tobin

J. TobinTobinTobin, James
Tobin graduated summa cum laude in 1939 with a thesis centered on a critical analysis of Keynes' mechanism for introducing equilibrium involuntary unemployment.

Aggregate demand

disaggregationeffective aggregate demandaggregate
First, he argued that with a lower ‘effective aggregate demand’, or the total amount of spending in the economy (lowered in the Crash), the private sector could subsist on a permanently reduced level of activity and involuntary unemployment, unless there were active intervention.