One of the main goals of the national economy is to achieve a high level of employment. Employment should be understood as such activities of citizens that do not contradict the laws of the country, are aimed at satisfying personal or social needs and bring its subject earnings or income. The concept of “employment of the population” can also be defined as a set of economic relations associated with the activities of the able-bodied population to create a social product. It should be noted that the able-bodied population includes all those who, by age and health, are able to work.
The structure of employment of the population is characterized by the following components:
– Employed citizens;
– citizens who independently provide themselves with work (entrepreneurs, farmers, etc.);
Citizens elected or appointed to a paid position;
– Military personnel serving in the armed forces, state security and internal affairs bodies;
– pupils of general education schools, vocational schools, students of secondary specialized and higher educational institutions;
– working citizens of other countries on the territory of our republic and performing functions not related to ensuring the activities of foreign states and missions;
– Employed in the household, raising children, caring for ballrooms, disabled and disabled citizens.
It should be noted that the economically active population, in addition to the above categories, includes temporarily unemployed persons due to leave or illness, persons undergoing retraining or advanced training, as well as persons seeking employment.
In employment as an economic phenomenon, there are two aspects: quantitative (extensive) and qualitative (intensive), which in their content correspond to the concepts of full and effective employment.
The concept of “full employment” should not be confused with the concept of the so-called “total employment”, in which all able-bodied people must work. After all, such a state of the economy is almost unattainable. Therefore, even if part of the able-bodied population is not employed, but at the same time there is a corresponding number of available jobs, then this situation can be described as full employment. In other words, full-time employment is a level of employment where the number of vacancies is equal to the number of job seekers (i.e., the demand for labor is equal to the supply of labor, even if a certain part of the population is unemployed).
It is necessary to distinguish between full employment at the level of the national economy and full employment at the level of an individual, assuming that he is employed full-time, weekly, monthly, etc. Similarly, part-time employment at the level of the national economy implies an excess supply of labor in comparison with the demand for it, and at the level of the individual – employment with part-time work, week, month, etc.
Qualitative or effective employment means such a distribution of labor resources, taking into account specialization, territorial and sectoral aspects, which allows to obtain the greatest increase in the national product. Effective employment is achieved in the process of free market activity of economic units.
The optimal combination of full and effective employment is called rational employment. It involves the optimal distribution and use of labor resources for the purpose of expanded reproduction of the employee, harmonious and comprehensive development of a person. It is characterized by the compliance of workplaces with the needs and abilities of employees, their professional and qualification level.
In order to study the problem of employment in more depth, it is possible to distinguish types and forms of employment. Types of employment characterize the distribution of the active part of the labor resources by areas of application of labor, by professions, specialties, etc. The combination of these types forms the structure of employment.
Structural types of employment are classified according to the following characteristics:
– by the nature of the activity – work in enterprises of all types of ownership, work abroad, performance of state and public duties, service in the army, individual labor activity, personal subsidiary farming;
– by belonging of the employed to a certain class or social stratum – workers, engineering and technical workers and employees, peasants, managerial personnel, entrepreneurs;
– by spheres of the national economy, branches, sub-branches and sub-branches, taking into account intersectoral and intrasectoral proportions in the distribution of labor resources;
– on a territorial basis (the ratio between the number of employees by region, region, economic zone, etc.);
– by the level of urbanization – by the ratio between the number of labor resources of the city and the village;
– on a professional and qualification basis – the distribution of employees into groups, taking into account their qualifications, level of education, work experience, degree of mechanization of labor, etc .;
– sex and age composition;
– types of ownership and forms of labor organization.
Each type of employment is realized with the help of organizational and legal methods and conditions for the use of labor force, characterizing the forms of employment, which are classified taking into account the features presented in Fig. 4.2.
In addition, there is also a super-employment of the population – when pensioners, students, i.e. everyone who does not belong to the labor force under normal conditions are employed in production. This is most often due to the war, imperfect labor legislation, low living standards of the population, etc.
At the same time, there are also hidden or shadow employment that exists in the shadow sector of the economy and is not officially registered anywhere. It is particularly characteristic of an economy in transition characterized by weak institutional arrangements.
In economic theory, there are two indicators of the level of employment of the population:
1. Normal employment rate (NHS), which is determined by the formula:
NHS = | employed population | х100% |
working-age population |
The NHS is typically 94-96%.
2. The actual level of employment (FUZ) can be determined by the formula:
FUS = | number of employed population | х100% |
Labour supply |
The supply of labor consists of the sum of the employed and unemployed, but looking for work.
The FUZ shows the real level of employment at this stage of development of the national economy.
It should be noted that the theory of employment has come a long way of evolutionary development and is characterized by a variety of conceptual approaches, methods and research tools. Theoretical views on this problem are characterized by many directions and schools in the structure of world economic thought.
In accordance with the classical concept, the equilibrium of supply and demand in the labor market is established by the corresponding rate of real wages. Free competition in the labor market leads to a single equilibrium wage rate and a level of employment that is interrelated with a single level of production and income. Thus, the classical function of the supply of labor (Fig. 4.3., a) is based on the assumption of a permanent maintenance of full employment, which corresponds to the volume of output of the product and income Qf, absolutely independent of the price level.
The neoclassical school is represented by the works of D. Gilder, A. Laffer, M. Feldstein, R. Hall, and others. These authors consider the labor market as an internally heterogeneous and dynamic system of connections, subject to market laws. Its regulator is the market mechanism. The price of labor (the level of wages) affects the supply and demand of labor, regulates their ratio and maintains the necessary balance between them. The price of labor quickly and flexibly reacts to market conditions, increases or decreases depending on its real needs. By raising or lowering wages, the demand for and supply of labor is regulated. If unemployment arises as a result of the excess of labor supply over demand, then it affects prices downwards, and consequently, lower wages until an equilibrium is established in the labor market.
The Keynesian trend considers the labor market as an inert system, where the price of labor is quite rigidly fixed. The main parameters of employment – the level of employment and unemployment, the demand for labor, the level of real wages – are not established in the labor market, but are determined by the size of the effective demand in the market of consumer and investment goods and services. In the labor market, only the level of wages and the amount of labor supply that depends on it are formed. However, the supply of labor does not play a leading role in the formation of actual employment, but characterizes only its maximum possible level at a given wage. The function of the labor sentence looks like a horizontal line (Fig. 4.3., b). The demand for labor is regulated by aggregate demand, investment and production. The presence of forced unemployment is due to the lack of aggregate effective demand, which can be eliminated by expansionary measures of budgetary and monetary regulation. The state, acting on aggregate demand in the direction of its increase, contributes to an increase in the demand for labor, which leads to an increase in employment and a decrease in unemployment.
Within the framework of the Keynesian concept, employment is affected not only by aggregate demand, but also by how the increase in total demand is distributed between different industries, that is, the structure of aggregate demand. An effective means of ensuring a sufficient level of employment is the expansion of the investment activity of the state, providing them with optimal investment sizes, taking into account the specific conditions of economic development. The Keynesian model is based on state intervention in the management of macroeconomic processes, and the mechanism of its implementation is based on patterns and phenomena of a psychological nature (a tendency to consume, a tendency to save, an incentive to invest), as well as on a multiplicative relationship between the main economic indicators.
Representatives of the monetarist school (M. Friedman, E. Phelps, and others) substantiate the position that the market economy is a self-adjusting system, a price mechanism, which itself determines the rational level of employment. Under such a system, state intervention leads to a failure of the market self-regulation mechanism, and the monetary impact on aggregate demand from the state will ultimately lead to the unwinding of the inflationary spiral.
Monetarists believe that at any given time there is a certain level of unemployment that has the property of compatibility with equilibrium in the structure of real wage rates. This level is called the “natural rate of unemployment”, which reflects the actual structural characteristics of labor and goods markets, including market imperfections, stochastic fluctuations in supply and demand, the cost of information about vacant jobs and available labor, the costs of mobility, etc.
Deviations of employment from their “natural level” can only be short-term. If the employment rate is greater than the equilibrium level, then this leads to accelerating inflation, if less, then to accelerating deflation. Policies to stabilize employment should be aimed at combating deviations in the unemployment rate from its natural norm, with fluctuations in production volumes and the number of employees. To balance the labor market, monetarists propose mainly to use the levers of monetary policy.
The institutional-sociological school, represented by such economists as T. Veblen, J. S. Dunlop, J. Galbraith, L. Ullman, is based on the proposition that employment problems can be solved through various kinds of institutional reforms. They are characterized by a departure from focusing only on macroeconomic analysis and an attempt has been made to explain the discrepancies in the labor market with the peculiarities of social, professional, sectoral, gender and age, ethnic and other differences in the structure of the labor force and the corresponding levels of wages.
The contract theory of employment (M. Bailey, D. Gordon, K. Azariadis) is a concept based on the synthesis of neoclassical ideas with Keynesian ones. On the one hand, the authors accept the Keynesian thesis on the rigidity of monetary wages and believe that adjustment in the labor market occurs due to changes in the physical volumes of production and employment, and not prices. On the other hand, this rigidity itself is derived from the optimizing behavior of individuals acting in their own economic interests.
At the heart of this theory is the proposition that employers and workers enter into long-term contractual relations with each other. An agreement arises between employees and entrepreneurs – an “implicit contract”, which is observed by them not because it is required by a legal contract, but because it is economically mutually beneficial. The firm does not reduce wages during a decline in production, and during a period of recovery it does not sharply increase the wages of qualified workers. The dynamics of monetary wages is smoothed out. During the fall of production, it does not fall, and during the rise it does not rise too much, it increases smoothly and evenly. The level of wages varies within certain projected limits.
The concept of a flexible market (R. Boae, G. Standing) became widespread in the late 70s, when the most developed countries of the West were undergoing a structural restructuring of the economy. It is based on the provision on the need to dereglocate the labor market, the transition to more flexible, functionally individualized and non-standard forms of employment (part-time, part-time or weekly, short-term contracts). This approach is designed to reduce the costs of structural adjustment of the economy and is achieved by:
– the diversity of flexibility of forms of employment (dismissal) and forms of employment;
– flexibility in the regulation of working hours, the establishment of a more mobile mode of work with irregular working hours;
– Flexibility in wage regulation on the basis of a more differentiated approach;
– flexibility of methods and forms of social protection of workers, as well as adaptation of the volume, structure, quality and price of labor to fluctuations in supply and demand in the labor market.
In general, the concept of a flexible labor market involves the formation of diverse forms of relations between entrepreneurs and employees and is aimed at rationalizing total costs, increasing profitability and maintaining a high level of employment.
Content, types, types and measurement of unemployment
The impossibility of ensuring employment of the able-bodied population leads to unemployment, which is a socio-economic phenomenon, which is expressed in the fact that a certain part of the able-bodied population cannot realize its labor potential. Unemployment is a special state of the economy, when a part of the able-bodied population, wanting to work, does not have a job and becomes forced unemployed, excessive. According to ILO definitions, the unemployed are persons who are able and willing to work, who are actively looking for work, but do not have it at the moment.
Thus, in order to obtain the status of an unemployed person, it is not enough just not to have a job, it is necessary to actively try to find it. In accordance with these conditions, persons of retirement age caring for children at home, people who have stopped looking for work, temporarily not working for any reason, do not belong to the unemployed. In the Republic of Belarus, in accordance with the Employment Act, unemployed are citizens of working age who are unemployed, are not engaged in entrepreneurial activities, do not study in full-time educational institutions, do not perform military service and are registered with the State employment service.
Depending on the chosen criteria, the following types of unemployment are distinguished:
by the duration of existence – short-term (usually up to 6 months) and long-term (more than six months); by the nature of the manifestation – open, taken into account by official statistics, and hidden, characterized by the presence of surplus workers in production; by the degree of coverage of various groups of the population – the main unemployment of persons of working age, youth and residual, covering workers with limited ability to work and persons of pre-retirement and retirement age; in relation to the ratio of the unemployed to employment – valid, when the unemployed are willing and able to work, and fictitious, when the unemployed have no desire, and eventually the ability to work; at the stage of socio-economic development of the country – natural (manifested at the stage of economic recovery of the economy), cyclical (characteristic of the stage of the economic crisis), transitional (characteristic of the economy of the transition period and is associated with the transformation of the system of socio-economic relations); on the professional and educational composition of the unemployed – unemployment of “white collar” – highly qualified workers – engineering and technical, doctors, teachers, etc .; unemployment of blue-collar workers – skilled workers with secondary and secondary specialized education; unemployment of “black collar” workers – unskilled and low-skilled workers with an elementary level of education.
In addition, unemployment is voluntary (when people do not want to work because of low wages, remoteness of the place of residence from the place of work and for other personal reasons, despite the availability of free jobs) and forced (when the level of wages is above the point of market equilibrium, resulting in a gap between the supply and demand of labor).
It should be noted that in addition to types in the economic literature, the following types of unemployment are distinguished: frictional, structural, technological, cyclical and natural.
Frictional unemployment. There is always a certain level of unemployment in the labour market associated with the movement of people from one area to another, from one enterprise to another.
It takes time for workers to find jobs that suit them, and employers to find a workforce of certain qualifications. This time of job search forms the basis of frictional unemployment. It is due to the fact that there is always a certain discrepancy between employees and vacant workplaces, when there is no complete information about available vacancies or this information is too expensive. Its level is determined by the total time spent on finding a new job (from 1 to 3 months).
Structural unemployment. The main cause of structural unemployment is the professional-qualification and territorial disparity between vacant jobs and the unemployed as a result of structural shifts in the economy. The development of the economy is constantly accompanied by structural changes: new technologies arise, new goods that displace the old ones. There are shifts in the structure of demand in the capital market, the goods market and the labor market. As a result, there are changes in the professional and qualification structure of the labor force, which requires its constant territorial and sectoral redistribution. Structural unemployment occurs when workers who have lost their jobs in some sectors of the economy as a result of structural shifts cannot be placed in the vacant jobs that are available in other industries (sectors, regions).
Structural unemployment differs from frictional unemployment in its longer duration (usually more than six consecutive months) and is characteristic of workers with low qualifications or outdated occupations, and also covers the population of economically backward areas.
Technological unemployment means forced unemployment of workers due to the introduction of new equipment and technology, inability or inability to work in new technological conditions. No economy is immune from technological unemployment. However, such unemployment is especially felt where the rapid development of NTP is combined with a high level of income of the employed, which gives greater economic efficiency and leads to a reduction in the number of jobs.
Associated with economic cycles is cyclical unemployment resulting from cyclical declines in production and crises. When aggregate demand for goods and services decreases, employment declines and unemployment rises. For this reason, cyclical unemployment is sometimes called unemployment associated with a shortage of demand. The fall in aggregate demand for labor occurs in conditions of inflexibility of real wages and their decline.
Three forms of unemployment – frictional, structural and technological – exist almost always. Therefore, an unemployment rate equal to the sum of frictional, structural and technological unemployment is called natural. It is constantly growing and currently in economically developed countries is about 5-6% compared to 3-4% in the 60s. Accordingly, the state of full employment in the national economy presupposes the presence of unemployment not higher than its natural level. According to M. Friedman, the natural level of unemployment reflects the economic feasibility of using labor power, just as the degree of utilization of production capacities reflects the expediency and efficiency of using fixed capital.
The natural unemployment rate is determined as a result of averaging the actual unemployment rate in the country for the previous 10 years (or a longer period) and the next 10 years (forecast estimates are used taking into account the probabilistic dynamics of the expected inflation rate).
In industrialized countries (for example, in the United States), in order to obtain appropriate monitoring, the statistical office of the Ministry of Labor conducts monthly sample surveys of about 60 thousand families about the attitude to employment. However, statistical errors are inevitable, since, for example, persons who are not actively looking for work can indicate in the questionnaire to receive unemployment benefits that they are looking for jobs. As a result, both actual and natural unemployment rates will be inflated. On the other hand, those who are employed in the “shadow” economy often call themselves unemployed – as a result, the higher the unemployment rate, the greater the share of the “shadow” sector. The latter is especially relevant for economies in transition, where a significant share of people employed in the “shadow” business is combined with the lack of adequate statistical monitoring of the economy, the underdevelopment of the labor market infrastructure, the maintenance of “hidden” unemployment as a factor in the relative stabilization of public spending and the reduction of social risk.
The main reasons for the existence of a natural (sustainable) unemployment rate are as follows.
1) Increase in the time of job search under the conditions of the unemployment insurance system. The payment of unemployment benefits relatively reduces the incentives for quick employment – the time for finding a suitable job, for retraining, etc. increases. At the same time, the increase in unemployment benefits and the period of their payment contributes to an increase in the number of unemployed and an increase in the unemployment rate. The tool for resolving this problem is public investment in the infrastructure of the labor market (deployment of various systems of retraining of personnel, increasing their professional and geographical mobility, improving information about vacancies, etc.). In the short term, the financing of employment regulation programs may increase the burden on the state budget, but in the medium term this will help reduce the natural unemployment rate.
2) The stability (rigidity) of wages gives rise to “waiting unemployment”. Unemployment of expectation arises as a result of the excess of the level of real wages over its equilibrium value (see Fig. 4.4.).
The “rigidity” of wages leads to a relative shortage of jobs: workers become unemployed because, with a rigid wage level (W/P1), the supply of L2 labor exceeds the demand for L1 labor and people simply “wait” for the opportunity to get a job at a fixed rate of pay.
The “freezing” of the labor market in a non-equilibrium state is associated with:
the establishment of a minimum wage by law, which restricts its free fluctuations. The limiting effect of the minimum wage is all the more significant the higher the proportion of young people, women, persons of low-skilled labor in the labor force, since for these categories of employees the equilibrium wage rate is lower than the legally established minimum;
2) fixing the level of wages in collective agreements with trade unions and individual labor agreements;
the lack of interest of firms in reducing the level of wages due to the risk of losing skilled labor, increasing the overall turnover of personnel, reducing labor productivity, labor discipline and profits.
It should be emphasized that the quantitative unemployment rate in any country is reflected in the unemployment rate, which shows the ratio of the number of unemployed registered by official services to the total number of workers. For its calculation, the entire population is usually divided into three groups:
persons who have not joined the labour force, i.e. under the age of 16, as well as persons in specialized institutions. They are not considered potential components of the workforce; persons who have left the labour force. This group consists of people who are potentially able to work, but are not working or looking for work, including non-working people who have come out of working age, as well as potentially unable to work; Labor force – this group consists of working and unemployed people actively looking for work.
Thus, the unemployment rate can be calculated by the formula:
Unemployment rate= | number of unemployed | х100% |
Labour supply |
In any society, unemployment is always associated with certain social and economic costs. The economic losses of society are measured by the value of unproduced goods and services, the reduction in tax revenues to the state budget, the increase in the cost of paying unemployment benefits, the maintenance of a significant apparatus of state bodies for labor, employment and social security.
Unemployment leads to an increase in socio-negative processes, an increase in tension, social pathology in society. The American scientist M. Harvey Brener, based on an analysis of data on the US population in 1970, noted that for 30 years, an increase in unemployment by 1% while maintaining it over a six-year period leads to an increase in indicators of “social pathology”: total mortality by 2%, suicide by 4.1%, murder rate by 5.7 ° / o, an increase in the number of prisoners in prisons by 4%, an increase in the number of patients as a result of mental illness by 4%. In general, the total costs of society associated with the growth of public spending to overcome the socially negative consequences of unemployment are quite significant.
If the actual unemployment rate exceeds the natural unemployment rate, the country loses part of GNP. The calculation of potential losses of products and services as a result of rising unemployment is carried out on the basis of a law formulated by the American economist A. Oaken:
where Qppz is the level of output at full employment;
Qf – actual output;
Uf – actual unemployment rate;
Uppz – unemployment rate at full employment (natural rate of unemployment);
a is the coefficient calculated empirically, and = 2.5.
According to Okun’s law, exceeding the actual unemployment rate by 1% above its natural level leads to a decrease in actual GNP compared to potential GNP by an average of 2.5 %. So, for example, if last year the actual GNP amounted to 4500 billion dollars, the actual unemployment rate was 9%, and its natural level was 6%, then the economy lost products by 337.5 billion dollars, which is 2.5% × 3.0% = 7.5% of the actually produced GNP. The potential GNP at full employment would be 4837.5 billion dollars.
It should be noted that unemployment also has some positive effects on the economy and society, since, for example, frictional unemployment contributes to rational employment as a result of workers finding jobs more adequate to their needs. Structural and technological unemployment stimulates the improvement of the qualification and educational level of workers and optimizes the professional structure of the total labor force. In the long term, this has a positive impact on the dynamics of GNP and the standard of living of the population.
The complexity and inconsistency of the unemployment problem underscore the particular importance of public employment policies.
With regard to unemployment, the State has three types of policies: social, macroeconomic and employment. The function of social policy is to assist the unemployed in order to maintain their standard of living. Macroeconomic policy involves the use of monetary and fiscal measures to reduce unemployment. Employment policy is aimed at creating new jobs, retraining systems, employment centers, etc.
All methods and measures by which the state affects employment and unemployment can be divided into two groups: active and passive.
Active measures to reduce unemployment are aimed at creating additional jobs. Active measures include:
Keynesian macroeconomic policy aimed at stimulating aggregate demand at the expense of the state budget;
organizational legislative and financial measures of the state, which include the organization of the education system and industrial and technical training of personnel on the basis of employment services; regulation of sectoral and regional mobility of personnel; expansion of the production of goods and services through the growth of state subsidies; implementation of public works programmes in public utilities, construction, repair and restoration works; job creation for young people; employment subsidies for persons in need of social protection; investing in the most promising or labor-intensive industries; measures to reduce labour market supply; stimulation of self-employment of the population; assistance in the development of small and medium-sized businesses.
Passive employment policy includes the creation of a system of social insurance and material assistance to the unemployed. The social insurance system provides for the payment of unemployment benefits taking into account previous earnings, the material assistance system is aimed at ensuring the subsistence minimum for the unemployed.