A distinction made by some economists is that between voluntary and involuntary unemployment. Many economists would regard
Question:
A distinction made by some economists is that between voluntary and involuntary unemployment. Many economists would regard equilibrium unemployment as voluntary. If people choose not to accept a job at the going wage, even though there are jobs available, then in a sense they could be said to have voluntarily chosen to be unemployed. Disequilibrium unemployment, according to these economists, would be classed as involuntary. Workers want to work at the current wage, but there are not enough jobs available.
Some economists would also include real wage unemployment as voluntary. If people, through their unions, have chosen to demand a higher wage than the equilibrium wage, then they could be said to have collectively ‘volunteered' to make themselves unemployed. According to these economists, then, only demand-deficient unemployment would be classed as involuntary.
Some economists go even further and argue that all unemployment should be classed as voluntary. If the cause of disequilibrium unemployment is a downward stickiness in real wage rates, then workers, either individually or collectively, are choosing not to accept work at a lower wage.
Other economists would go to the other extreme and claim that all disequilibrium unemployment and most equilibrium unemployment is involuntary. Structural unemployment, for example, results from changes in demand and/or supply patterns in the economy and a resulting mismatching of unemployed workers' skills to the person specifications of vacant jobs. Workers can hardly be said to have volunteered for these changes in demand. True, people can be retrained, but retraining takes time, and in the meantime they will be unemployed. Similarly with frictional unemployment, if the cause of some people being unemployed is initial ignorance of job opportunities and hence the time it takes to search for a job, they cannot be said to have volunteered to be initially poorly informed.
The terms ‘voluntary' and ‘involuntary' unemployment are not only ambiguous, they are also unfortunate because they have strong normative overtones. ‘Voluntary' unemployment tends to imply that the blame for unemployment lies with the unemployed person and not with ‘market forces' or with inadequate government policies. While in one sense, at a low enough wage rate there would probably be a job for virtually any unemployed person, the unemployed cannot be said to be voluntarily unemployed if they are choosing to turn down jobs at pitifully low wages.
Although the concepts of voluntary and involuntary unemployment are commonly used, for the above reasons we shall avoid them.
Question
If I offered a job to someone to clean my house at $1 per hour, and unemployed people chose not to take the job, should they be classed as ‘voluntarily' unemployed?
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