Unemployment

Unemployment occurs when a person who is actively seeking work is not able to find any. With this in mind, one of the most widely regarded indicators of economic strength is the unemployment rate—that is, the percentage of eligible workers who are currently without employment. Economists differ on the causes and cures of unemployment. On the one hand, Keynesian economists blame insufficient demand for good, and tend to promote governmental intervention to give workers jobs. On the other hand, classical economists argue that governmental policies (i.e., minimum wage, taxes, regulations) hinder growth, and thus discourage hiring. Proponents of this view say that the solution is to give employers incentives to hire more workers. These incentives include tax cuts, tax break for particular practices, and reducing various government-imposed regulations.

Fast Facts

  • Those who are not actively seeking employment (e.g., full-time college students) are not counted in the unemployment rate.
  • Okun's Law states that for every 3% that GDP falls, unemployment falls 1%.

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