Involuntary unemployment
Topic: Employment, Unemployment and Informalisation · NCERT: Beyond NCERT
Meaning
Involuntary unemployment affects people who are willing to work at the prevailing wage (the wage currently being paid) but still cannot find a job. The idea comes from Keynes. He argued that in a slump there are simply not enough jobs, however willing people are. Things that stop wages from falling, such as efficiency wages, can also cause it.
Example
In a recession, a factory worker who would happily take the going wage keeps applying to firms but gets no offer, because the firms are cutting output. That worker is involuntarily unemployed.
Don't confuse with
- Voluntary unemployment: the person chooses not to work at the prevailing wage, or waits for a better job. The involuntarily unemployed would accept the job but none is available.
Related concepts
- Voluntary unemployment
- Frictional unemployment
- Structural unemployment
- Cyclical unemployment
- Technological unemployment
- Natural rate of unemployment
- Hysteresis
- Okun's law
- Efficiency wage
- Labour arbitrage