Unemployment and Oaken Act

Unemployment is an involuntary unemployment of labor, arising from the constantly disturbed balance between demand and supply in the labor market. It is possible to single out such modern types as voluntary (friction), structural, cyclical, technological, seasonal, hidden and others.

Due to various factors, the level of official unemployment is far from always true, because hidden unemployment (and this category also includes rural residents from overpopulated regions) is much larger than all other species. At the same time, official statistics do not take into account the number of unemployed people who have stopped looking for work (do not register at the labor exchange), as well as those who do not want to work at all (such people in large countries of the developed market are about 1-2 million ). For official statistics, these people simply do not exist. All this affects the significant understatement of the unemployment rate.

Of great importance is the calculation of the unemployment rate. This value is calculated to determine the amount of domestic product lost to the national economy in connection with it. For economists, Oaken's law expresses a lag in the actual volume of GDP from its potential value.

American scientist A. Oaken managed to prove the existence of a correlation between the volume of the aggregate product and the level of unemployment. This ratio was called the law of Oaken. According to this law, the volume of the national product is in inverse proportion to the number of people who are not employed in the country. With the growth of unemployment by 1%, the value of real GDP decreases by at least 2%. Since natural unemployment is inevitable and of a permanent nature, only excessive unemployment is taken into account for calculating the backlog of national product volume. This last species, by the way, is today typical of more developed countries.

To estimate the level of natural unemployment, it is customary to take a value equal to 6% of the total number of able-bodied people. Earlier, about 30-35 years ago, it was determined at 3%, which indicates that labor mobility has increased (this leads to an increase in voluntary unemployment) and the pace of the NTP accelerated (this increases structural unemployment). Nowadays, the cumulative level of unemployment, as a rule, exceeds the natural level, which, according to the law of Oaken, leads to the loss of part of the GDP of market countries.

At the same time, Oaken's law demonstrates an inverse relationship. Its essence is that, subject to an annual increase in the national product by at least 2.7%, the number of unemployed people will be unchanged and will not exceed the natural value. Thus, if macroeconomic parameters fail to overcome the three percent barrier, unemployment in the country grows.

It is worth noting that Oaken's law is not a strict rule, which is certainly fulfilled under any circumstances. This is rather a trend that has for each country and period of time its limitations.

The growth of unemployment has the following negative consequences: underutilization, depreciation of the country's labor potential , quality of life worsens, pressure on the amount of wages is increasing, society's expenses on the replacement of vocational guidance or restoration of professional status are growing, and the number of offenses is growing.

The main factors affecting the unemployment rate are the following:

- organizational and economic - the state of the labor market infrastructure , the change of organizational and legal forms of organizations and enterprises, privatization, structural changes in the economy;

- economic - the level of inflation and prices, the rate of accumulation, the state in which investment activity is located, the financial and credit system and national production;

- technical and economic - the pace of scientific and technical progress, the supply-demand ratio in different spheres of the labor market, structural changes in the economy;

- Demographic - the birth rate, mortality, age and sex structure of the population, life expectancy, directions and volumes of migration flows.