Unemployment is when a job seeker is refused employment to a preferred job, or when the job seeker cannot coordinate to an employer willing to hire them at the asked wage rate. Therefore, the unemployed coordinate and make adjustments to their choice of occupation or the amount of wage rate they and their employer are willing to accept. Employment happens between market participants because there is an infinite amount of work to be done. Ludwig von Mises termed catallactic unemployment to explain this process as a market phenomenon just like any other market phenomenon.
Alternatively, institutional unemployment is the effect of government interference with market phenomena. Note institutional employment is not individual job seekers coordinating in the free market, as the government is now enforcing and coercing job seekers and current employments by set wage rates or some other regulation. Of which the wage rates are purposefully set by trade unions higher than those that would have been determined on the unhampered market. The wage structure that is determined by trade unions distort these relative wages which tell people where there are good employments. Of which the price system can no longer accurately direct workers that otherwise would had of drawn people into occupations that are best directed to factors of production which employ labour to produce goods and services that satisfy consumer needs best. Another interference to this process can be unemployment compensation, of which is enough of a market force to disincentive workers from entering the workforce.
The bottom line: if you want to decrease unemployment don’t set a draft to full-employment, but rid minimum wage laws and unemployment compensation. For more on unemployment read this Mises Institute Wiki page on unemployment here.
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Copyright © 2016 Zoë-Marie Beesley
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