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Okun's law is an empirical relationship. In Okun's original statement of his law, a 2% increase in output corresponds to a 1% decline in the rate of cyclical unemployment; a 0.5% increase in labor force participation; a 0.5% increase in hours worked per employee; and a 1% increase in output per hours worked (labor productivity).
In the introduction to The Wealth of Nations, Smith spoke of the "annual labour" and "the necessaries and conveniences" a nation "annually consumes" before explaining that one of the two steps to increase wealth is reducing the amount of "unproductive labour". "Annual" and "annually" refer to a cyclical reproduction process; "unproductive labor ...
This is an instance of wages being fixed in real terms. He attributes the second postulate to the classics subject to the qualification that unemployment may result from wages being fixed by legislation, collective bargaining, or 'mere human obstinacy' (p6), all of which are likely to fix wages in money terms.
The unemployment level is defined as the labour force minus the number of people currently employed. The unemployment rate is defined as the level of unemployment divided by the labour force. The employment rate is defined as the number of people currently employed divided by the adult population (or by the population of working age).
In labour economics, Shapiro–Stiglitz theory of efficiency wages (or Shapiro–Stiglitz efficiency wage model) [1] is an economic theory of wages and unemployment in labour market equilibrium. It provides a technical description of why wages are unlikely to fall and how involuntary unemployment appears.
Among other applications, it has been used as a framework for studying frictional unemployment. One of the founders of search and matching theory is Dale T. Mortensen of Northwestern University. A textbook treatment of the matching approach to labor markets is Christopher A. Pissarides' book Equilibrium Unemployment Theory. [1]
Typically, employment and the labour force include only work that is done for monetary gain. Hence, a homemaker is neither part of the labour force nor unemployed. Also, full-time students and prisoners are considered to be neither part of the labour force nor unemployed. [70] The number of prisoners can be important.
In the Great Depression of the 1930s, for example, about one-quarter of the workers became unemployed; as a result of the 2008–9 slump, the unemployed labour force increased by about 30 million workers (a number approximately equal to the total workforce of France, or Britain). [6]