When there is a natural rate of unemployment in the economy. Unemployment, its essence, types and natural level

The most important macroeconomic problem is the existence of unemployment. Its size directly affects the price level and the volume of production, the structure and forms of income distribution, the state budget and public spending. And such macroeconomic indicators as the level of employment and the unemployment rate are the most important parameters that determine the effectiveness of the ongoing economic policy.

In a market economy, there is always a certain classification of the country's population. In accordance with it, the entire population is divided into institutional And non-institutional.

TO institutional usually include persons who do not temporarily or permanently have any factors of production, i.e. this is a disabled population. These include children, pensioners, the disabled, the sick, women on parental leave, and so on.

Non-institutional population- these are persons who have any factors of production, i.e. this is the able-bodied population.

The entire non-institutional population is subdivided into economically active(amateur) and economically passive(non-active).

Economically active population(labor force) is made up of people who are employed or looking for work for hire. The economically active population includes busy And unemployed.

A to economically passive include persons who are not employed and are not looking for such work (military personnel, students, housewives, freelancers, persons without a fixed place of residence, etc.).

Unemployment is a cyclical phenomenon, expressed in the excess of the supply of labor over the demand for it.

International Labor Organization (ILO ) unemployment is defined as the presence of a certain number of people of working age who do not have a job, but are able to work and are looking for it at the moment.

Thus, according to the definition of the International Labor Organization (ILO), unemployed a person who can work, wants to work, actively seeks work on his own, but cannot find a job due to lack of jobs or insufficient professional training.

Unemployment is a socio-economic phenomenon that objectively characterizes a market economy and exists even in conditions of full use of resources, the so-called moderate unemployment.

moderate unemployment necessary for the normal development of the economy, as it:

- forms a reserve of unemployed labor, which can be used if it is necessary to expand production;

- enhances incentives for work and entrepreneurship;

- is an effective means of increasing productivity and labor discipline.

At the same time, unemployment is a negative phenomenon that has a direct and strong impact on every person. Losing a job for most people means a decline in living standards and causes serious psychological trauma.

A large number of unemployed people in society leads to economic losses and social upheaval. In order for the state to be able to pursue an effective economic policy, it is necessary to assess the size of unemployment and determine its level.

Two indicators are used to characterize unemployment:

1) the duration of unemployment (the time during which a person remains unemployed);

2) Unemployment rate is the share of the unemployed in the total economically active population.

Where u- unemployment rate;

U- the number of unemployed;

E- the number of employees (employed).

The unemployment rate is an indicator that characterizes the extent of unemployment in a country.

If, for example, the number of unemployed is 10 million people, and the number of employed is 90 million, then the economically active population (labor force) is 100 (10+90) million people. Hence the unemployment rate is 10% [(10: 100) x 100%].

The economic literature distinguishes the following types (kinds) of unemployment: frictional, structural, seasonal, cyclical, stagnant.

1. Frictional unemployment this is temporary and voluntary unemployment associated with the voluntary transition of workers from one job to another and initial employment, i.e. covers workers who are looking for or waiting to get a job in the near future. This is the period between being fired from one job and entering another or returning to the same place.

Frictional unemployment always exists, it is inevitable. It is based on the natural movement of labor resources between enterprises, regions and industries. People will always seek to change jobs in order to get some kind of advantage: higher wages, promotions, less time spent in transport, more interesting work, etc. An essential feature of frictional unemployment is that people who are looking for work , have the necessary qualifications, training and skills. There is a demand from capital for their ability.

Such unemployment is short, it lasts from 1 to 3 months.

2. Structural unemployment this is a forced form of unemployment that occurs as a result of a decrease in demand for labor under the influence of structural changes in the economy, scientific and technological progress, which change the demand for certain professions and specialties.

Thus, structural unemployment is due to the emergence of a professional and qualification mismatch between the structure of vacant jobs and the structure of workers, i.e. discrepancy between the structures of demand and supply of labor in terms of qualifications, demographic, geographical and other categories.

The development of the economy is constantly accompanied by the following structural changes: new technologies appear, new goods that replace 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.

Under the influence of scientific and technological progress, some sectors of the economy are gradually dying off, disappearing, at the same time, new industries and industries are emerging. Accordingly, the structure of demand for labor is changing. For example, the emergence of automatic production lines has led to a reduction in the need for machine operators (turners, millers, etc.). The development of the production of artificial synthetic materials led to a decrease in steel production and, accordingly, to a reduction in workers in metallurgy.

Disproportions in the development of enterprises in different industries in the regions also lead to the emergence of structural unemployment. For example, in the 1960s and 1970s, weaving production prevailed in Ivanovo, which traditionally provided employment for women, and men turned out to be “superfluous”, so the complex development of the region was required, in particular, the creation of machine-building plants.

Structural unemployment also arises from changes in geographic distribution; work places. The labor force responds slowly to changes in demand. So, for example, a miner who lost his job due to the closure of the mine must either move to another region and enter another mine there, or undergo retraining and acquire a different profession. At the same time, finding and getting a new job requires some time, the availability of relevant information, the necessary infrastructure - a developed housing market, the absence of obstacles in choosing a place of residence (obtaining registration, registration or residence permit). An important feature of structural unemployment is that the qualifications and training of the unemployed do not fully correspond to the existing demand from capital.

One form of structural unemployment is technological unemployment, arising from the introduction of new technologies and new equipment, which leads to the replacement of people by machines and their release. At the same time, if the market volume increases, then employment increases mainly due to the involvement of workers with new professions and higher qualifications.

Thus, structural unemployment occurs when workers who have lost their jobs in some sectors of the economy as a result of structural changes cannot be employed in vacant jobs that are available in other sectors (sectors, regions). Structural unemployment differs from frictional unemployment in a longer duration and is typical for workers with low qualifications or an outdated profession, and also covers the population of economically backward areas.

Such unemployment lasts from about 3 months to 1 year.

3. Cyclical (opportunistic) unemployment this is the release of labor force caused by the general decline in production, i.e. that phase of the economic cycle, which is characterized by a reduction in aggregate demand, production and employment. It affects all spheres and sectors of the economy. The value of cyclical unemployment changes periodically, reflecting the dynamics of the economic cycle.

During a cyclical downturn, cyclical unemployment complements frictional and structural unemployment; there is no cyclical unemployment during periods of cyclical upswing.

Unemployment caused by a decline in production (opportunistic) can exist in hidden And open forms.

hidden form means a reduction in the working day or week, sending staff on forced leave and, accordingly, a decrease in wages.

open form means the dismissal of an employee, the complete loss of work and, accordingly, income.

At the same time, the decline in employment does not affect different segments of society to the same extent. First of all, insufficiently qualified workers, women, representatives of national minorities lose their jobs. Highly qualified personnel are employed in industries that are less subject to cyclical fluctuations (nuclear energy, computer science, electronics, etc.). In those sectors where there is a recession, entrepreneurs are interested in retaining qualified personnel, since solid funds have been spent on their training and education. When the economic situation recovers, a laid-off employee may not return to his original place, and the company will have to train new staff.

With cyclical (opportunistic) unemployment, the supply on the labor market is less than the demand that capital imposes on labor resources.

Cyclical unemployment is the deviation of the actual unemployment rate from the natural one. Cyclical unemployment is associated with a decrease in real GNP and the release of part of the labor force, which leads to an increase in the number of unemployed. It is also necessary to distinguish between real and fictitious unemployment. The characteristic features of the first are the ability to work and the desire to work of an employee who, for certain reasons, is unemployed; the second is the unwillingness to engage in labor activity for one reason or another.

4. Seasonal unemployment due to seasonal fluctuations in the volume of production of certain industries (i.e., depending on the time of year): agriculture, construction, crafts, in which sharp changes in the demand for labor occur during the year. Seasonal fluctuations in the demand for labor, as a rule, are determined by the peculiarities of the rhythm of the production process. Therefore, the size of seasonal unemployment in general terms can be predicted and taken into account when signing contracts between employers and employees.

5. Long-term unemployment caused by an excess of labor force, overpopulation. Covers the most professionally untrained part of the labor force. These are, as a rule, ruined peasants, former housewives, unskilled workers and others. Such unemployment can last for years. Its representatives, living on benefits or odd jobs, wander, beg, gradually turning into lumpen and sinking to the social bottom. They can only get a permanent job as a last resort, when the economy is booming and the labor force becomes severely scarce.

Obviously, at any given moment in the country there is a certain frictional, structural and seasonal unemployment, i.e. some of the workers are constantly away from their jobs. These workers form the so-called "natural" or "normal" unemployment that always exists in any country.

natural unemployment – stable over a long period of time the number of unemployed covered by frictional, structural and seasonal unemployment. It characterizes the state of the labor market, in which there is an approximate equality between the number of vacancies and the number of workers looking for work.

concept natural rate of unemployment , first introduced into scientific circulation by M. Friedman. According to M. Friedman, the natural rate of unemployment reflects the economic feasibility of using labor force, just as the degree of utilization of production capacities reflects the feasibility and efficiency of using fixed capital.

Forming a labor reserve, natural unemployment allows for the expansion of production without rising prices.

Since natural unemployment exists constantly and without it the normal functioning of a market economy is impossible, the concept of “full employment” does not mean 100% employment of the labor force, but implies the presence of natural unemployment. Thus, the problem of ensuring full employment of the population turns into the problem of maintaining unemployment at a natural level.

The amount of natural unemployment depends primarily on demographic, institutional and social factors. For example, an increase in the proportion of young people in the unemployed leads to an increase in frictional unemployment. The development of infrastructure in the labor market (labor exchanges, employment services, organization of public works, etc.) leads to a decrease in natural unemployment, as well as an increase in the level of the minimum wage, unemployment benefits, and social benefits.

In the real economy, the current actual unemployment rate, as a rule, is not equal to the natural level, exceeding it during the recession and being below the natural level during the recovery period.

If the actual unemployment rate is above the natural rate, the economy is in recession, and if the actual rate is below the natural rate, then inflation is expected to rise significantly (because the economy is overheating).

So what is the natural rate of unemployment and why is it not equal to zero? The natural rate of unemployment. natural rate of unemploymentis the unemployment rate that corresponds to potential GDP or, equivalently, long-term aggregate demand. In other words, the natural rate of unemployment is the rate of unemployment when the economy neither overheats nor falls into recession - the combination of frictional and structural unemployment.

For this reason, the natural rate of unemployment is the rate, where cyclical unemployment is zero. Note, however, that this does not mean that the natural rate of unemployment is zero, as there is frictional and structural unemployment.

How is natural unemployment calculated?

The overall unemployment rate is calculated by dividing the total number of unemployed people (U) by the total number of people in the labor force (LF). The labor force consists of adults of working age who want to work.

U ÷ LF = General unemployment rate

(FU + SU) ÷ LF = Natural Unemployment Rate

To calculate the natural rate, first add the frictional unemployed (FU) to the structural unemployed (SU) and then divide that number by the total labor force.

Types of unemployment

There are 3 types of unemployment:

Structural unemployment

frictional unemployment

Cyclical unemployment

The first two together are“ natural” , and the latter is the factor that causes inflation to either accelerate or slow down.

1. Structural unemployment Unemployment is unemployment that is caused by minimum wage regulation, unionization, mismatch between workers' skills and employers' needs, or social benefits. The reason why this unemployment is considered“ natural” is that, that these barriers will always exist. For example, consider the minimum wage. The minimum wage set the price of labor above value. So firms decide not to hire workers. The situation will not change in the long term.

2. Frictional unemployment is unemployment resulting from job changes, moving, finding a suitable position. Usually this is not a negative phenomenon, since this factor has a temporary significance. However, since there is always a certain proportion of the labor market looking for a new job, this unemployment will persist in the long run.

The natural rate of unemployment in the United States

Source: Fed

3. Cyclical unemployment is unemployment that is not part of the natural rate of unemployment. It is driven by a cycle of growth and decline., that is, either short-term fluctuations in aggregate demand or supply. In the long run, its equilibrium value tends to zero.

Cyclical unemployment occurs during a downturn in the business cycle when demand for goods and services declines and companies respond by cutting production and laying off workers. During an economic downturn, the number of workers exceeds the number of available jobs. The result is unemployment.

Economists use the cyclical unemployment rate to assess the health of the entire economy or its individual sectors. Cyclical unemployment can be short-term, lasting a few weeks for some people, or long term. It all depends on the extent of the economic downturn and which industries are most affected. Central bank economists typically focus on addressing the root causes of economic downturns rather than correcting cyclical unemployment.

With high cyclical unemployment, we are in a situation of imbalance. And when the economy is in disequilibrium, it will eventually return to equilibrium.. As this happens, the price level will change, and a change in the price level will lead to inflation. Thus, inflation will accelerate to equilibrium.

Thus, since frictional and structural unemployment will always exist, there will always be a natural rate of unemployment.

conclusions

A long-term stable unemployment rate, which is characterized by a stable healthy change in wages and inflation. Attempts to shift the economy to a lower unemployment rate (than its natural rate) through fiscal policy or monetary easing will be unsuccessful, as market expectations from this kind of stimulus will lead to faster inflation and wage growth. And an excessively high level of inflation is unfavorable for the Central Bank. Therefore, subsequently the regulator will have to take inflation under control by tightening monetary policy or reducing government spending, which will bring the unemployment rate to its previous natural level.

The natural rate of unemployment may change in response to changes in the structure of the labor force. On a graph, the natural rate of unemployment is usually marked by a vertical Phillips curve.

Allocate the following types of unemployment :

• Voluntary- associated with the unwillingness of people to work, for example, in conditions of lower wages. Voluntary unemployment increases during an economic boom and decreases during a recession; its scope and duration are different for people of different professions, skill levels, as well as for different socio-demographic groups of the population.
• forced (waiting unemployment) - occurs when an employee can and wants to work at a given level of wages, but cannot find a job. The reason is the imbalance in the labor market due to the inflexibility of wages (due to minimum wage laws, the work of trade unions, raising wages to improve the quality of work, etc.). When the real wage is above the level corresponding to the equilibrium of supply and demand, the supply in the labor market exceeds the demand for it. The number of applicants for a limited number of jobs increases, and the likelihood of real employment decreases, which increases the unemployment rate. Varieties of involuntary unemployment:
• cyclic- caused by recurring declines in production in a country or region. It is the difference between the unemployment rate at the current moment of the economic cycle and the natural rate of unemployment. For different countries, different levels of unemployment are recognized as natural.
• seasonal- depends on fluctuations in the level of economic activity during the year, typical for some sectors of the economy.
• technological- unemployment associated with the mechanization and automation of production, as a result of which part of the workforce becomes redundant or needs a higher level of qualification.
• Registered- unemployed population engaged in job search and officially registered.
• Marginal- Unemployment of poorly protected sections of the population (youth, women, the disabled) and the social lower classes.
• unstable- caused by temporary reasons (for example, when employees voluntarily change jobs or are fired in seasonal industries).
• Structural- due to changes in the structure of demand for labor, when a structural mismatch is formed between the qualifications of the unemployed and the demand for vacant jobs. Structural unemployment is caused by a large-scale restructuring of the economy, changes in the structure of demand for consumer goods and production technology, the elimination of obsolete industries and professions, and there are 2 types of structural unemployment: stimulating and destructive.
• institutional- Unemployment arising from the intervention of the state or trade unions in the establishment of wage rates that are different from those that could be formed in a natural market economy.
• Friction- the time of the employee's voluntary search for a new job that suits him to a greater extent than the previous job.
• Hidden:
• formally employed but actually unemployed persons; as a result of the decline in production, the labor force is not fully used, but it is not fired either.
• the presence of persons wishing to work, but not registered as unemployed. In part, hidden unemployment is represented by people who have stopped looking for work.

Since the existence of frictional and structural unemployment is inevitable, economists call their sum natural unemployment.

Natural rate of unemployment (u*) - this is the level at which full employment (full-employment) of the labor force is ensured, i.e. the most effective and rational use of it. This means that all people who want to work find work. The natural rate of unemployment is therefore called the full-employment rate of unemployment, and the output corresponding to the natural rate of unemployment is called the natural output. Since full employment of the labor force means that there is only frictional and structural unemployment in the economy, the natural rate of unemployment can be calculated as the sum of frictional and structural unemployment rates:

u * = u Friction + u Struct = (U Friction +U Struct)/L * 100%.

Unemployment rate is the share of the unemployed in the total labor force.

It is measured as a percentage and is calculated using the formula:

- unemployment rate

- number of unemployed

- labor force (employed and unemployed)

Natural rate of unemployment- the sum of levels of frictional and structural unemployment.

50) Okun's law. Consequences of unemployment

A situation in society in which there is only frictional and structural unemployment is called full employment.

The unemployment rate corresponding to the reasonable level of full employment is called natural rate of unemployment(4 – 6 %).

The economic costs of unemployment are expressed in the fact that the country's economy irrevocably loses the amount of goods and services that it could potentially produce from available resources. The maximum volume of output that can be produced at existing capacities at the top of the economic cycle with full employment of the population is called potential GNP. Thus, the economic loss from unemployment is the difference between the potential and actual GNP produced at any given moment at any stage of the economic cycle.

The mathematical expression of the lag between the actual volume of GNP and the potential one was calculated by the American economist Arthur Ouken (1928-1980). Potential GNP is the output that would be produced if the economy were operating at a natural rate of unemployment.

A. Okun's law states: "If the actual unemployment rate exceeds the natural rate by 1%, then the gap between the actual GNP and the potential one is 2.5%".

For example, if the actual unemployment rate in a country is 10%, then the unemployment rate exceeds the natural rate of 6% by 4% (10 - 6). Thus, to determine by what percentage the actual volume of national production lags behind the potential volume, it is necessary to multiply 4% by the Okun coefficient (2.5). In this case, we get 10% (4 x 2.5). Consequently, in a given period of time, the country loses 10% of the volume of national production that could be produced in the absence of unemployment.

Unemployment has a negative impact on the development of the economy and the social situation in society. Thus, the consequences of unemployment include the lag of real GNP from potential GNP, social differentiation of society, the growth of social tension in society, and a decrease in living standards. Therefore, government intervention is needed to solve this problem.

Employment is a very important indicator in macroeconomics. It refers to the number of able-bodied adults (over 16 years old) who have a job. Unfortunately, not all adults have a job, there are also unemployed citizens. Unemployment in a market economy characterizes the number of adult able-bodied population who do not have a job, but are actively looking for it. The total number of unemployed and employed citizens is

Unemployment is calculated using various indicators, but generally accepted, incl. and in the International Labor Organization, the unemployment rate is considered.

Unemployment in a market economy is a socio-economic phenomenon in which a certain proportion of the labor force is not used in the production of services and goods. The labor force refers to the number of employed and unemployed.

There are the following types of unemployment:

• Friction
• Structural
• institutional
• cyclic
• Seasonal

Unemployment related to the time it takes to find a new job is referred to as frictional unemployment. Its duration can be a period of time from 1 to 3 months.

Frictional unemployment arises as a consequence of the dynamic development of the labor market. Some of the workers voluntarily decided to change jobs, finding, for example, a better paid or more interesting job. Another part of the workers are actively looking for work due to dismissal from their current job. A third of the workers are just entering the labor force or entering it for the first time due to natural movement from the category of the inactive population, from an economic point of view, to the opposite category.

Unemployment associated with technological changes occurring in production and changing the structure of demand for workers - structural unemployment. It occurs if an employee who was fired from one industry, in another industry.

Structural unemployment occurs when the territorial or sectoral structure of labor demand changes. Over time, significant changes occur in production technology and in the structure of consumer demand, which are the reason for the change in the structure of the total demand for labor. If the demand for labor in a particular profession or region falls, the result is unemployment. Workers who are released from production are not able to quickly change their qualifications and profession or change their place of residence, therefore they are forced to remain unemployed for some time.

Economists, as a rule, do not draw clear boundaries between structural and frictional unemployment, since in both cases, laid-off workers are actively looking for a new job.

It is worth noting that these types of unemployment in the economy exist constantly, since it is impossible to completely reduce them to zero or eliminate them. People will look for new jobs in pursuit of financial well-being, and firms, in turn, will seek to hire the most qualified employees, as this is justified by their desire to maximize profits. That is, in a market economy, the labor market constantly fluctuates supply and demand.

Since the existence of structural and frictional unemployment is inevitable, economists formulate their sum as the natural rate of unemployment.

The natural rate of unemployment implies a level of unemployment that corresponds to full employment (consists of structural and frictional reasons for the natural rate of unemployment due to natural causes, such as migration, staff turnover, demographic reasons.

If the economy has only a natural rate of unemployment, then this situation is called full employment.

The reasons for the natural level of unemployment are the balance of labor markets, when the number of workers seeking is equal to the number of vacancies. Therefore, full employment does not mean 100% absence of unemployment, but only a certain minimum required level of unemployment. The natural rate of unemployment is, to a certain extent, a positive phenomenon.

The natural rate of unemployment is also called the rate of unemployment at full employment. How is unemployment at full employment possible? We can identify several reasons leading to unemployment in a balanced labor market.

The first reason is related to the presence of the so-called frictional unemployed. frictional unemployment is mainly due to the imperfection of information, due to which both those who enter the labor market for the first time and those who just want to change jobs have to spend time looking for a suitable option .

Another reason is related to the presence structural unemployment, which takes place due to a mismatch of qualifications or location. For example, you are looking for a job in one city (district), and the vacancies you are interested in are available in another city (district). Another example of structural unemployment occurs if your qualifications do not match the available vacancies.

The natural rate of unemployment is also referred to as classical unemployment or unemployment caused by the inflexibility of real wages. The reason for classical unemployment lies in the peculiarities of the institutional environment, which lead to the deviation of real wages from the level corresponding to the Walrasian equilibrium. This may be a consequence of the monopoly power of trade unions or the result of a minimum wage law. This phenomenon can also be explained by the theory of efficient wages. Let us consider in more detail how unemployment occurs with inflexible real wages.

So, let's consider a graphical representation of equilibrium in the labor market (see Fig. 1).

Fig.1. Equilibrium in the labor market

If all prices are perfectly flexible, information is symmetrical, and the labor market is perfectly competitive, then real wages will be established in the market, balancing the demand for labor and the supply of labor in the economy.

If, for some reason, real wages cannot fall below a certain level, and > , then there is an excess supply of labor or unemployment. The reason for this unemployment is that, in the presence of an excess supply of labor, the restriction from below on real wages does not allow it to fall to the equilibrium level.

What are the possible reasons for this rigidity of real wages? One such reason is the minimum wage law. For most workers, this law does not really matter, since their salaries are significantly higher than the established minimum level, however, for some categories of workers, this law has a significant impact on both the amount of wages and the ability to find work. These categories include workers with low wages: low-skilled workers and newcomers to the labor market (mainly teenagers). Thus, the impact of the minimum wage law on these categories of workers is ambiguous: those who manage to get a job benefit, but the well-being of others (who did not get a job) worsens, although they would be willing to work at lower wages.

Another reason for wage rigidity may be the active role of trade unions in the labor market. Trade unions, acting as the main seller of labor, use their monopoly power and demand higher wages for their members, which inevitably leads to a reduction in employment.

Another reason for the rigidity of real wages can be the theory of efficient or incentive wages. Efficiency wage theory assumes that firms cannot fully control the efforts of workers. A low level of effort (“ditching” at work) has a negative impact on the profits of firms and, accordingly, reduces the income of owners. By offering workers higher-than-market wages, firm owners create an incentive to perform well, because workers know that if they are fired, they will not be able to find a job with the same level of pay. Below we consider in detail the Shapiro-Stiglitz efficient wage model.

So, the unemployment behind the natural rate of unemployment is highly heterogeneous. If frictional unemployment seems to be even partially beneficial (society benefits from the fact that people do not take the first job that comes along, but try to find the most suitable one for them), then unemployment caused by the aggressive behavior of unions worsens public welfare.

Cyclical unemployment.

Unlike unemployment compatible with full employment, cyclical unemployment certainly leads to losses for society, since it is a potential source of economic resources that could be used to increase output, but are not being used. The relationship between cyclical unemployment and underproduced output, as mentioned earlier, reflects Okun's Law.

Job search model

Consider a simple model illustrating the factors that affect the natural rate of unemployment. Equilibrium in the labor market, and, consequently, employment change continuously: part of the employed leave the labor market, and part of the unemployed, on the contrary, finds work. Consider a labor market in a state of dynamic equilibrium in which the number of those who lose their jobs is equal to the number of those who find this job, and, therefore, the unemployment rate does not change.

Denote by L labor force, which consists of employed ( E) and unemployed ( U): L=E+U. Let s is the proportion of employees who lose their jobs during the period, f- the proportion of unemployed who find work during the period. According to the definition of dynamic equilibrium, we are interested in a state in which the number of jobless people is equal to the number of job seekers: sE= fU. Then the unemployment rate will be:

Thus, the unemployment rate depends positively on the rate of layoffs among the employed ( s) and negatively on the level of employment of the unemployed ( f). It follows from the analysis carried out that a policy aimed at reducing the natural rate of unemployment should lead either to a decrease in the level of layoffs or to an increase in the level of employment of the unemployed.

The Shapiro-Stiglitz Efficient Wage Model.

In the model under consideration, unemployment is the result of a deviation from the market equilibrium, which is necessary to provide incentives for good work in the conditions of unobservable efforts of workers.

So, consider an economy in which workers and firms. Every worker enjoys consumption, but does not like to work. Let a worker's preferences be described by a utility function that increases with wages (more income allows more goods to be consumed) and falls with effort (efforts are associated with costs): . If a person does not work, then the level of utility will be zero. We will assume that the efforts are discrete and take two values: if the employee "jumps" and if he works conscientiously. Each worker maximizes the expected discounted utility , where is the time discount. In the utility maximization problem, we assume an infinite time horizon.

At any moment in time, an employee can be in one of three states: he can be unemployed, he can "slack off" at work, and, finally, he can work conscientiously. If the employee is unemployed, then the probability of getting a job at a given time is . If a person is currently working, then no matter how much effort he puts in, he is likely to lose his job at the present time due to reorganization (structural adjustment). If the worker "jumps", then he risks losing his job. The probability that at a given moment of time "drainage" will be revealed, which means that the employee will be fired, will be denoted by . Thus, for an unscrupulous employee, the cumulative probability of dismissal (due to both reorganization and due to the detection of “ditching”) is equal to . All the probabilities discussed above are instantaneous characteristics. So, if we are interested in the probability of continuing work, if a person had a job at the moment and worked conscientiously, then the probability that he will work at the moment t, is equal to . In general, transitions from one state to another can be represented in a diagram (see Fig. 2).

Rice. 2. Employee flows in the efficient wage model.

In order to find equilibrium in the labor market, we need to know the labor demand function and the labor supply function. We assume that firms maximize expected profits by using efficient labor as the sole factor of production. The output is given by the production function depending on effective employment, and . In addition, we will assume that if firms hire all available workers, i.e. each firm will hire workers, then the marginal product at full employment will be higher than the cost of effort: or .

The worker chooses the level of effort that maximizes his discounted utility. Since the level of effort is discrete, we need to compare utility at low and high levels of effort. Let us denote by the expected discounted utility of a worker if he chooses a low level of effort (“jump”), by - the expected discounted utility of a worker who works conscientiously, i.e. makes efforts and through - the expected discounted utility of the unemployed. In what follows, we will consider only stationary states.

Consider an employee who is currently working conscientiously at an effort level of . Assume that time is divided into periods of length and that a worker who loses his job during a given period of time cannot start looking for a job until the next period begins. Then the expected discounted utility of a given worker can be written as:

Let us comment on the resulting expression. The integral represents the utility over the considered period of length, given the probability that the employee will remain employed during the period (i.e., not be fired due to reorganization). The second term corresponds to the expected discounted utility after the period and includes: 1) utility in retaining employment, adjusted for the probability of retaining employment, and 2) utility in transitioning to the unemployed, adjusted for the probability of this event occurring during the period under consideration.

Let us calculate the integral and rewrite expression (2) in the form:

Combining like terms, we get:

Letting in (4) the length of the interval to zero (), we find:

.

Let us explain the meaning of the obtained condition. Consider an asset that at any point in time pays dividends equal to if the worker has a job. The price of an asset is equal to if the person is employed and if he is unemployed. In equilibrium, the expected return () is equal to the sum of dividends per unit of time and the expected gain (losses) per unit of time:

By analogy, we write down the conditions for and (however, these conditions can also be obtained formally according to the same scheme that was used in the derivation of relation (5)):

Now we can determine under what condition it would be unprofitable for the worker to "loose". To do this, its expected discounted utility in conscientious work should not be lower than in the case of "sinking": .

Substituting (5) and (6), we get:

(8) .

It can be seen from this condition that if the employee could find a job immediately after the dismissal (i.e., the right side would be equal to zero), then the condition of no slippage would never be satisfied. Condition (8), taking into account relation (7), can be written differently. Adding to the left and right parts of relation (5), we write: , from where, taking into account (7), we find the wage:

Taking into account condition (8), we obtain the wage constraint:

Thus, in order for "netting" to be unprofitable, wages must exceed the costs of effort.

From the point of view of firms, it makes no sense to overcompensate workers and pay them wages that exceed the critical level defined by equation (9). Thus, wages will be set at a minimum level that encourages workers to put in a high level of effort:

(10) .

Note that wages increase according to , that is, the easier it is for an unemployed person to find a job, the higher the wage should be, which guarantees the absence of “slippage”. This is because workers value high wages not only in and of themselves, but they also take into account the fact that, due to the presence of unemployment, it will be difficult to find a job in the event of dismissal.

We find the demand for labor from the problem of maximizing the expected profit:

The first order condition is:

(11) , from where we determine the demand for labor.

Now we can move on to the definition of market equilibrium. We will consider a stationary state, i.e. a state in which the number of workers who lose their jobs is equal to the number of unemployed who get jobs. Formally, this condition can be written as follows:

(12) ,

since the number of workers laid off at one firm is , and the total number of firms is ; on the other hand, the number of unemployed is equal to the difference between the population and the number of employed, and the number of those who have found a job is equal to the product of the number of unemployed and the probability of finding a job.

From the equilibrium condition (12) we find: and substitute into (11):

We can now define equilibrium employment and equilibrium wages. Let us graphically depict the demand for labor, given by condition (11) and the supply of labor, which is given by the aggregated condition for the absence of “jumping” (13). So, by virtue of the assumption of a decrease in the marginal product of labor, the demand for labor decreases with an increase in employment. In addition, we assumed that the marginal product at full employment would be higher than the cost of effort: , which is shown in Figure 3.

The labor supply with perfect information will be equal to zero if the salary does not cover the costs of efforts, will be any number from zero to if the salary exactly compensates for the efforts and if the salary exceeds the efforts, the supply of labor is equal to the population. The labor supply curve for observed efforts is depicted in Figure 3 by a double line. As we can see, with the observed efforts, the entire population is employed in equilibrium, and the equilibrium wage exceeds the costs of efforts.

Fig.3. Equilibrium in the labor market in the Shapiro-Stiglitz model

Let us turn to equilibrium under unobservable forces. In this case, the labor supply curve is given by the no-slip condition (13), which shows that at each point wages must be higher than the cost of effort and, as a result, this curve will lie higher than the supply curve for observed efforts. In addition, it also follows from the condition of the absence of "network" that wages increase with employment ().

Comparing the equilibrium under unobserved effort (at point A) with the equilibrium under symmetric information (at point B), we see that wages under unobserved effort will be higher and employment will be lower, which leads to unemployment. The presence of unemployment is due to the fact that wages exceed the competitive level, which, in turn, is due to the need to create incentives for conscientious work. Thus, the equilibrium with unobserved efforts is inefficient, since point B dominates it: since in equilibrium with imperfect information, wages are higher than the costs of efforts, the entire population would prefer to work, and, on the other hand, firms would also be interested in hiring additional workers if we could pay them less but still control their efforts, as happens at point B.

Comparative statics.

Let us consider the influence of exogenous parameters on the equilibrium in the efficient wage model.

If the netting were more easily detected (that is, increased), then this would not affect the demand for labor in any way, but would shift the labor supply curve down, that is, the effective wage would be lower at each level of employment. As a result, this would lead to a fall in the equilibrium effective wage and an increase in employment.

A decrease in the probability of losing a job (fall) as well as a decrease in the probability of getting a job for the unemployed (fall) also shift the labor supply curve upward, since it leads to an increase in effective wages at each level of employment. As a result, as in the previous case, this leads to a fall in the equilibrium effective wage and an increase in employment.

It should be noted that, nevertheless, even if (and hence ) fall to zero, unemployment may still persist. Indeed, if , then condition (13) will take the form: , that is, the effective wage will not depend on the level of employment and the supply curve will be horizontal at a given level of wages, as shown in Figure 4.

Fig.4. Equilibrium in the labor market in the Shapiro-Stiglitz model with a=b=0.

Population growth (an increase in ) will shift the supply curve down as it decreases in . As a result, as in the previous cases, employment will increase and wages will fall.

Finally, let's analyze the impact of a positive multiplicative technological shock. Let the production function be represented as , where is the parameter reflecting technological progress. If it increases, then the demand curve for labor will shift up (to the right) due to an increase in the marginal product of labor. This will lead to a fall in employment and an increase in effective wages.