Cyclical fluctuations in the economy are accompanied by changes in the level of employment. During recessions, employment declines as a result of declining output. During the recovery stage, business activity in the economy increases and employment increases. The problem of employment and unemployment arises in the national economy.

Unemployment statistics classify any person into one of three groups:

Working (busy).

Unemployed.

Those outside the total labor force.

Employment- this is any type of activity of citizens that is not prohibited by law and brings them income.

Unemployment– a socio-economic phenomenon inherent in a market economy, when part of the workforce (economically active population) does not find employment in production according to the acquired specialty and becomes unemployed.

Bunemployed as defined by the ILO (International Labor Organization) – This is a person who wants to work, can work, but does not have a job.

In accordance with the Law of the Republic of Belarus “On Employment of the Population of the Republic of Belarus” (dated June 15, 2006 No. 125-Z):

“An unemployed person is an able-bodied citizen who does not have a job or income, who is registered with the committee for labor, employment and social protection of the Minsk City Executive Committee, the department (department) for labor, employment and social protection of the city, district executive committee (hereinafter referred to as the labor authority , employment and social protection) in order to find a suitable job, is looking for work and is ready to start it.”

Thus, the unemployed include those temporarily unemployed who have such characteristics as working age, ability and willingness to work, lack of suitable work, and making efforts to find it.

Economically active population– part of the population that provides labor supply for the production of goods (works, services).

The economically active population includes those employed in the economy and the unemployed registered with the labor, employment and social protection authorities.

To determine the official unemployment rate it is necessary The number of unemployed registered by official services is correlated with the number of labor force and expressed as a percentage using the following formula:

To obtain information about the real scale of unemployment, balance sheet methods, sample surveys of families about attitudes towards employment, etc. are used.

The accuracy of estimating the unemployment rate is hampered by the existence of part-time employment, the lack of information about those who have lost hope of finding a job, false information, and the “shadow” economy. Because of this, a more detailed, detailed picture of unemployment can be obtained using such relative indicators as the share of youth, women or people with higher education among the unemployed, regional unemployment levels, the number of unemployed people applying for one vacant job, etc.

When classifying unemployment, first of all, there are: forced and voluntary unemployment.

Voluntary unemployment- people who can find a job, but do not want to do so.

Involuntary unemployment- when people are able and willing to work, but due to circumstances beyond their control they do not find work.

Depending on the reasons There are several types of unemployment:

Frictional unemployment (frictional unemployment) associated with searching and waiting for work. The term "frictional unemployment" is used to refer to workers who are looking for work or expecting work in the near future.

This type includes those who, due to the uneven development of industries in the economy, having left one place of work, cannot immediately start working in another place; people who are in a state of transition from one workplace to another due to dissatisfaction with earnings, working conditions, socio-psychological climate in the team, location of the enterprise, etc.; persons who are just starting their working life and are looking for work.

With increasing prosperity, frictional unemployment may increase, and its reduction is possible as information services for the labor market improve and the means of communication develop.

Structural unemployment arises in connection with technological shifts in the structure of aggregate demand and aggregate supply, is associated with structural transformations in a particular industry, in the economy as a whole. It manifests itself most widely during periods of introduction of the results of the scientific and technological revolution into social production. Structural unemployment is longer lasting than frictional unemployment.

In total, frictional and structural unemployment forms natural unemployment . This level of unemployment is often called the “full employment level” or “equilibrium unemployment.” The natural rate of unemployment determines the level of potential GDP. In developed countries it is currently 5-6%.

Cyclical unemployment appears when the labor force is released, caused by a general decline in production, which is characterized by a reduction in aggregate demand, production and a corresponding reduction in employment, and an increase in unemployment. For this reason, cyclical unemployment is sometimes called demand-side unemployment. When there is no cyclical unemployment, the economy is said to be operating at full employment conditions.

In addition, there are and other types of unemployment.

Seasonal unemployment, which is due to seasonal fluctuations in production in certain industries (agriculture, fisheries, etc.).

Regional unemployment, which is typical for individual regions due to some demographic, ethnic and other features of their development.

Youth and women's unemployment is associated with discrimination in the labor market of certain social groups.

Hidden unemployment occurs under conditions of underutilization of resources caused by an economic downturn or restructuring of production. Enterprises do not fire workers, but transfer them to shorter working hours and send them on forced unpaid leave.

Socio-economic consequences of unemployment

Unemployment carries significant negative consequences for both the individual and society as a whole. Due to the non-participation of a certain part of the working population in social production society irreversibly loses part of its potential output.

The gap between real GDP and its potential value reflects his losses. The famous American economist Arthur Okun was the first to study and describe these losses. Based on empirical studies conducted in the 60s. XX century, he discovered a stable connection between the value of cyclical unemployment and the GDP gap, calculated as the difference between its potential and actual values.

He expressed the established dependence with the formula:

ν P - ν f / ν P = - β (U-U e ) (2)

Where ν n - potential GDP;

ν f - actual GDP;

U - actual unemployment rate, %;

U e - natural unemployment rate, %;

β - Okun's coefficient.

The meaning of this formula is expressed by the so-called Okun's law, according to which the excess of the actual unemployment rate over the natural one by one percentage point leads to a lag of the actual volume of GDP from the potential one by β %.

The coefficient β is determined empirically and varies from country to country. Often its values ​​fall in the range from 2 to 3%, (usually 2.5%), which indicates significant losses in GDP caused by cyclical unemployment.

According to Okun's calculations, in the late 60s. XX century The natural unemployment rate in the United States was 4%, the coefficient β was equal to 3%.

Unemployment entails serious social, moral, psychological and political problems, which are often not quantifiable.

Work provides a person with appropriate social status, prestige, a sense of professional suitability, social significance and self-esteem, organizes the working day and creates a certain routine of life. Having lost a job, a person is gradually deprived of all this and can “slide into the pit” of social, moral and psychological degradation.

The costs of unemployment also include the increased tax burden in the country due to the need to find funds to pay unemployment benefits.

Due to the loss of qualifications and a decrease in the level of professionalism, the long-term unemployed have a reduction in their wages; after they find a job, they lose their attractiveness in the labor market.

At the same time, unemployment brings a certain positive impact on the economy.

Frictional unemployment contributes to the redistribution of labor to places of its most effective use from the point of view of entrepreneurs and workers.

Structural unemployment contributes to the development of various forms of advanced training and retraining of personnel, which leads to qualitative improvement of the total labor force of society.

The presence of a reserve army of labor has a stimulating effect on the performance of their duties by workers.

Unemployment - one of the most difficult problems of modern society, affecting all countries. Unemployment as an economic phenomenon occurs when part of the population capable and willing to work cannot find work in their specialty or find employment at all.

According to experts, in modern economics, losses from mass unemployment are much greater than losses associated, for example, with the monopolization of markets. In general, the negative consequences of unemployment can be divided into economic and social.

Economic Costs of Unemployment :

• Reduction in the volume of national product: underutilization of labor leads to underproduction gross domestic product (GDP) .
• Slower growth of well-being: the lag of actually produced GDP from the potential GDP that could be created under conditions of full employment.
• Uneven distribution of the costs of unemployment among different groups of the population: higher unemployment rates among unskilled workers, among youth, national minorities and women.

The most serious consequence of unemployment is a decrease in the volume of GDP produced below its potential level.

A well-known researcher of macroeconomic problems, American economist Arthur Okun mathematically expressed the relationship between the unemployment rate and the unreleased volume of output, that is, the “cost” of unemployment for society. Okun's Law describes the relationship between the short-run change in real GDP and the change in the unemployment rate as follows:,
(Y –Y*) / Y* = - β (u – u*)

where Y is the actual volume of GDP, Y* is the potential volume of GDP, u is the actual level of unemployment, u* is the natural rate of unemployment, β is the coefficient of GDP response to changes in cyclical unemployment (Ouken's coefficient).

The meaning of Okun's law is that a change of one percentage point in cyclical unemployment leads to a change in actual GDP of β percentage points. The value of β is established empirically and in different countries falls in the range from 2 to 3. For example, if β = 2.5%, the natural rate of unemployment is 6%, then if unemployment in the economy increases to 8%, the loss of GDP will be 5%. :

• Social costs of unemployment
• Losing a job is a great personal tragedy. The higher the unemployment rate, the higher the rate of divorce, suicide, and cardiovascular disease.
• Dequalification of people who have lost their jobs, loss of self-esteem, people cannot express themselves and realize themselves professionally.
• Social and political unrest. Mass unemployment can lead to rapid, sometimes violent, social and political change. The consequence of unemployment can be a social explosion if its size exceeds the permissible level.

Serious negative socio-economic consequences of unemployment increase the responsibility of the state for ensuring employment of the working population . These tasks are associated with the goal of achieving full employment in the economy - ensuring a balance between the size of the working-age population and the number of jobs required for it. Implementing employment policy, the state implements programs:

• to stimulate employment growth and increase the number of jobs in the public sector of the economy;
• aimed at training, retraining, and advanced training of the unemployed;
• assistance in labor recruitment, involving incentives for employers to create new jobs;
• on social unemployment insurance, providing for the provision of social guarantees and compensation to unemployed and laid-off workers.

The implementation of these programs requires specific actions by the state :

• reduction of legally established working hours during periods of mass unemployment;
• creation of new jobs and organization of public works;
• limiting the supply of labor by limiting the entry of foreign workers into the country, banning child labor, etc.

Of no small importance in the implementation of employment incentive programs are labor exchanges, which are mostly government agencies that act as intermediaries between employers (enterprises and firms), on the one hand, and potential employees, on the other. These institutions keep records of the unemployed, promote their employment, and study supply and demand in the labor market , assist those who want to change their occupation, etc.

In addition to direct regulation of employment, there are measures of indirect influence on the situation - these are measures of fiscal and monetary policy.

Emphasizing the negative socio-economic consequences of unemployment, it should be noted that unemployment cannot be considered a uniquely negative phenomenon . From the point of view of economic dynamics, unemployment is an economic necessity. The unemployed represent a reserve of labor that can be in demand during expansion or structural changes in production.

Unemployment intensifies competition in the labor market, encouraging workers to professional mobility, maintaining and improving the quality of work and discipline. Finally, unemployment restrains the “attacks” of trade unions and their demands to increase wages and thereby stimulates entrepreneurial activity.

Unemployment- one of the most difficult problems of modern society, affecting all countries. Unemployment as an economic phenomenon occurs when part of the population capable and willing to work cannot find work in their specialty or find employment at all.

When defining the category “unemployment”, it is necessary to clearly distinguish between the concepts of “unemployment” and “unemployment” of the population. Official statistics in Russia recognize as unemployed only those persons who are willing and able to work, are looking for work and are registered with the employment service.

For a market economy, both excessive unemployment is harmful, since it indicates underproduction and underemployment (an economic system operates below its production possibility curve), and excessive employment, since it reduces the flexibility and adaptability of the economy to both internal and external changes.

Unemployment arises due to the imperfection of the market mechanism, as well as for other reasons. It is caused by the excess of the number of people wanting to find work (labor supply) over the number of available jobs that match the profile and qualifications of applicants for these jobs (labor demand).

To analyze the dynamics of unemployment, not only the value of the level (norm) of unemployment is used. The length of time that an average person remains unemployed is the duration of unemployment indicator.

The following types of unemployment are distinguished:

Friction;

Structural;

Cyclic.

Frictional unemployment reflects staff turnover associated with:

With the change of jobs;

Change of place of residence;

Getting an education;

Coming out of maternity leave;

Moving from a low-paying job to a higher-paying or interesting one.

This form of unemployment is usually limited to short periods, and: with an increase in the well-being of citizens, frictional unemployment may increase; its reduction is possible as the methods of collecting information on vacant jobs improve.

Since some workers quit of their own free will, frictional unemployment is considered inevitable. as some economists argue, desirable for the following reasons:

Frictional unemployment is predominantly voluntary;

Its result is an increase in the well-being of citizens and a more rational distribution of labor resources;

Typically, frictional unemployment affects 2-3% of the economically active population.

Structural unemployment arises due to a mismatch between the structure of demand and supply for labor:

Consumer preferences change over time;

This, in turn, causes a change in the structure of overall labor demand;

Therefore, the need for certain types of professions (for example, miners, officers, etc.) is decreasing;

Demand for other specialties, including new ones, can grow rapidly.

Structural unemployment is associated with technological changes in the economy, which result in a depreciation of the skill level of certain categories of the workforce:

People are usually slow to respond to the emergence of new professions;

As a result, the structure of labor supply does not correspond to the structure of demand;

Some workers do not have the skills required by the employer and become unemployed; In case of structural unemployment, the initiator of dismissal is often the employer.

The structural unemployed primarily include workers with low qualifications or university graduates with no experience. The structurally unemployed cannot immediately get a job without retraining or changing their place of residence. Therefore, the structural form of unemployment is predominantly pronounced and long-term in nature and is considered a more serious problem for the economy. The presence of structural unemployment is quite understandable in a modern market economy. Structural unemployment within the labor market requires:

Expansion of the personnel training system;

Improving the qualifications of employees;

Synchronized and coordinated work of employment services with enterprises.

Combination of frictional and structural unemployment forms the level of natural unemployment corresponding to the potential volume of GNP or the situation of macroeconomic equilibrium.

Natural unemployment represents the best labor reserve for the economy. These workers have high mobility and are able to quickly move (to another industry or region) depending on production needs.

A type of natural unemployment is "unemployment waiting"Workers become unemployed because, at a certain desired wage level, the supply of labor exceeds the demand for labor, and people simply "wait" to get a job at the desired wage rate.

Cyclical unemployment arises in connection with the decline in production during the industrial crisis:

Changes in the situation in the markets for goods and services lead to the fact that many industries reduce or even stop production, while laying off workers;

In an economic downturn, when aggregate demand for goods and services decreases, there is a reduction in production and, consequently, a reduction in personnel;

The cyclical form of unemployment is characteristic of the depression and recession phases of the economic cycle, that is, for periods of decline in business activity;

With the transition to recovery and recovery, the number of unemployed becomes smaller;

The scale and duration of the cyclical form of unemployment reaches a peak during an economic downturn and a minimum during recovery;

To smooth out the negative consequences of this type of unemployment, it is necessary to develop and adopt special employment programs financed by the state.

The concept of "full employment" does not mean the complete absence of unemployment. Frictional and structural forms of unemployment are absolutely inevitable. Therefore, the unemployment rate at full employment is equal to the sum of frictional and structural forms of unemployment. In other words, the full employment unemployment rate is reached when cyclical unemployment is zero.

There are more than 20 forms of unemployment in the economy, the most frequently identified are:

Institutional;

Voluntary;

Hidden;

Stagnant.

Institutional unemployment arises as a result of insufficiently efficient organization of the labor market. In Russia, for example, the population often does not have the opportunity to obtain information about available jobs. This leads to ineffective job searches and an artificial increase in the unemployment rate.

Voluntary unemployment caused by the reluctance of certain categories of people, such as housewives, to work under certain conditions.

Voluntary unemployment can also be caused by:

People’s choice of a unique lifestyle;

Psychological attitude towards avoiding work;

Limited needs;

The opportunity to live financially at the expense of other people;

Other reasons.

Hidden unemployment includes those employed part-time or part-time, as well as persons formally employed (that is, when the employee is only on the payroll, but does not actually work). This category also includes workers on forced leave without pay.

The features of the hidden form of unemployment include the following:

This type of unemployment can turn into an open form at any moment;

The scale of hidden unemployment is very difficult to determine.

Stagnant unemployment includes people who have been unable to find work for a long time. And although the size of this form of unemployment is insignificant (according to the ILO, it is less than 1%), in terms of the degree of negative consequences, stagnant unemployment has no equal. People who have not been able to find a job for a long time lose knowledge, skills, qualifications, and are morally depressed. The reason for the stagnant form of unemployment lies in the lack of demand for some professions. This problem is also typical for small towns or settlements focused on a specific production, where the opportunity to choose a job (occupation) is extremely small.

Quantitative analysis of unemployment is usually carried out using two complementary indicators. The first indicator is the unemployment rate, which reflects the share of unemployed in the total working-age population:

To obtain the labor force indicator, it is necessary to subtract the number of children and adolescents under 16 years of age from the total population of the country; pupils and full-time students of educational institutions; pensioners (for old age and other reasons); people in prison; persons running a household; incompetent citizens (persons in psychiatric hospitals); military personnel.

The labor force indicator will consist of two main elements - employed and unemployed. In this regard, the unemployment rate can be presented as follows:

The second indicator is the average duration of unemployment - the time during which a person remained unemployed. For the economic system, the option will be more preferable when the duration of unemployment is short, even at a fairly high level, than the option when long-term unemployment is combined with a low unemployment rate. The first of the described cases will reflect a situation where the economic system adapts and adjusts to any changes. Perhaps this is due to the rapid spread and implementation of technical innovations, changes in the structure of social reproduction (the development and expansion of some industries, the contraction of others, which causes a flow of labor resources) and other reasons.

The economic consequences of unemployment at the individual level are the loss of income or part of the income (i.e., a decrease in current income), as well as the loss of qualifications (which is especially bad for people in advanced professions) and therefore a decrease in the chances of finding a high-paying, prestigious job in the future (i.e. .e. a possible decrease in the level of future income).

The economic consequences of unemployment at the level of society as a whole consist in the underproduction of gross domestic product, the lag of actual GDP from potential GDP. The presence of cyclical unemployment (when the actual level of unemployment exceeds its natural rate) means that resources are not fully used. Therefore, actual GDP is less than potential GDP (GDP at full employment of resources). The lag (gap) of actual GDP from potential GDP (GDP gap) is calculated as the percentage ratio of the difference between actual and potential GDP to the value of potential GDP:

where Y is actual GDP, and Y* is potential GDP.

The relationship between the lag in output (at that time GDP) and the level of cyclical unemployment was empirically derived, based on a study of US statistical data over a number of decades, by the economic adviser to President J. Kennedy, the American economist Arthur Okun. In the early 60s, he proposed a formula that showed the relationship between the gap between actual output and potential output and the level of cyclical unemployment. This relationship is called "Oken's law".

On the left side of the equation is the formula for the GDP gap. On the right side, u is the actual unemployment rate, u* is the natural unemployment rate, therefore (u - u*) is the cyclical unemployment rate, b is the Okun coefficient (b > 0). This coefficient shows by what percentage the actual output is reduced compared to the potential output (i.e. by how many percent the gap increases) if the actual unemployment rate increases by 1 percentage point, i.e. this is the sensitivity coefficient of the GDP lag to changes in the level of cyclical unemployment. For the US economy in those years, according to Okun's calculations, it was 2.5%. For other countries and other times it may be numerically different. The minus sign in front of the expression on the right side of the equation means that the relationship between actual GDP and the level of cyclical unemployment is inverse (the higher the unemployment rate, the lower the value of actual GDP compared to potential).

The lag of the actual GDP of any year can be calculated not only in relation to potential output, but also in relation to the actual GDP of the previous year. A formula for such a calculation was also proposed by A.Ouken:

where Yt is the actual GDP of a given year, Yt - 1 is the actual GDP of the previous year, i.e. on the left side of the equation is written the formula for the lag of GDP by year, u t is the actual unemployment rate of a given year, u t – 1 is the actual unemployment rate of the previous year, 3% is the growth rate of potential GDP due to: a) population growth, b) growth in capital-labor ratio and c) scientific and technological progress; 2 is a coefficient that shows how much actual GDP decreases when the unemployment rate increases by 1 percentage point (this means that if the unemployment rate increases by 1 percentage point, actual GDP decreases by 2%). This coefficient was calculated by Okun based on an analysis of empirical (statistical) data for the American economy, so it may be different for other countries.

Related information.

Consequences of unemployment

Consequences of unemployment

Decrease in income

Mental health problems

Loss of qualifications

Economic consequences (loss of GDP)

Worsening crime situation

The presence of cyclical unemployment represents a serious macroeconomic problem, serves as a manifestation of macroeconomic instability, and evidence of underemployment of resources.

There are economic and non-economic consequences of unemployment, which manifest themselves both at the individual level and at the societal level.

Non-economic consequences of unemployment are the psychological, social and political consequences of job loss.

At the individual level, the non-economic consequences of unemployment are that if a person cannot find a job for a long time, this often leads to psychological stress, despair, nervous (even suicide) and cardiovascular diseases, and family breakdown. The loss of a stable source of income can push a person to crime (theft and even murder) and antisocial behavior.

At the level of society, this, first of all, means an increase in social tension, up to and including political upheavals. It is no coincidence that American President Franklin Delano Roosevelt, explaining the reason for the development and implementation of the “New Deal” policy to get out of the Great Depression, the main problem of which was huge unemployment (every fourth person was unemployed in the United States during this period), wrote that by doing so he wanted "prevent a revolution of despair." Indeed, military coups and revolutions are associated precisely with a high level of social and economic instability. In addition, the social consequences of unemployment are an increase in the level of morbidity and mortality in the country, as well as an increase in the crime rate.

The costs of unemployment should also include those losses incurred by society in connection with the costs of education, vocational training and providing a certain level of qualifications to people who, as a result, are unable to apply them, and, therefore, recoup them.

1. lost output - deviation of actual GDP from potential as a result of underutilization of the total labor force (the higher the unemployment rate, the greater the gap in GDP);

2. reduction in federal budget revenues as a result of decreased tax revenues and decreased revenue from the sale of goods;

3. direct losses in personal disposable income and a decrease in the standard of living of persons who have become unemployed and members of their families;

4. increased costs for society to protect workers from losses caused by unemployment: payment of benefits, implementation of programs to stimulate employment growth, professional retraining and employment of the unemployed, etc.

Economic consequences of unemployment at the individual level consist in the loss of income or part of the income (i.e., a decrease in current income), as well as in the loss of qualifications (which is especially bad for people in new professions) and therefore a decrease in the chances of finding a well-paid, prestigious job in the future (i.e., a possible decrease in the level future income).

Economic consequences of unemployment at the level of society as a whole consist in underproduction of gross domestic product, the lag of actual GDP from potential GDP. The presence of cyclical unemployment (when the actual level of unemployment exceeds its natural rate) means that resources are not fully used. Therefore, actual GDP is less than potential GDP (GDP at full employment of resources). The lag (gap) of actual GDP from potential GDP (GDP gap) is calculated as the percentage ratio of the difference between actual and potential GDP to the value of potential GDP:

where Y is actual GDP, and Y* is potential GDP.

The relationship between the lag in output (at that time GDP) and the level of cyclical unemployment was empirically derived, based on a study of US statistical data over a number of decades, by the economic adviser to President J. Kennedy, the American economist Arthur Okun. In the early 60s, he proposed a formula that showed the relationship between the gap between actual output and potential output and the level of cyclical unemployment. This relationship is called "Oken's law".

On the left side of the equation is the formula for the GDP gap. On the right side, u is the actual unemployment rate, u* is the natural unemployment rate, therefore (u - u*) is the cyclical unemployment rate, b - Okun's coefficient(b > 0). This coefficient shows by what percentage the actual output is reduced compared to the potential output (i.e. by how many percent the gap increases) if the actual unemployment rate increases by 1 percentage point, i.e. This sensitivity factor lag of GDP to changes in the level of cyclical unemployment. For the US economy in those years, according to Okun's calculations, it was 2.5%. For other countries and other times it may be numerically different. The minus sign in front of the expression on the right side of the equation means that the relationship between actual GDP and the level of cyclical unemployment is inverse (the higher the unemployment rate, the lower the value of actual GDP compared to potential).

The lag of the actual GDP of any year can be calculated not only in relation to potential output, but also in relation to the actual GDP of the previous year. A formula for such a calculation was also proposed by A.Ouken:

where Y t is the actual GDP of a given year, Y t - 1 is the actual GDP of the previous year, i.e. on the left side of the equation is written the formula for the lag of GDP by year, u t is the actual unemployment rate of a given year, u t – 1 is the actual unemployment rate of the previous year, 3% is the growth rate of potential GDP due to: a) population growth, b) growth in capital-labor ratio and c) scientific and technological progress; 2 is a coefficient that shows how much actual GDP decreases when the unemployment rate increases by 1 percentage point (this means that if the unemployment rate increases by 1 percentage point, actual GDP decreases by 2%). This coefficient was calculated by Okun based on an analysis of empirical (statistical) data for the American economy, so it may be different for other countries.

A high level of unemployment results in huge economic needs for society, but another aspect of the problem that cannot be expressed quantitatively is no less important - the socio-psychological one.

The economic costs of unemployment may include:

• lost output is the deviation of actual GDP from potential as a result of underutilization of the total labor force (the higher the unemployment rate, the greater the gap in GDP);
• reduction in federal budget revenues as a result of decreased tax revenues and decreased revenue from the sale of goods;
• direct losses in personal disposable income and a decrease in the standard of living of persons who become unemployed and members of their families;
• increased costs for society to protect workers from losses caused by unemployment: payment of benefits, implementation of programs to stimulate employment growth, professional retraining and employment of the unemployed, etc.

Social (non-economic) costs unemployment:

• marginalization of society, loss of qualifications and self-confidence, decrease in the level of self-esteem among the unemployed;
• deterioration of physical and psychological health, an increase in the number of mental and cardiovascular diseases, an increase in alcoholism and suicide;
• a decline in morality in society, the breakdown of the family and an increase in crime;
• worsening social tension, social and political unrest.

To calculate the value of losses from cyclical unemployment, it is used A. Okun's law, which describes the relationship between the short-term movement of real GDP and changes in the unemployment rate and establishes the relationship between the labor market and the market for goods (services).

The American economist A. Okun discovered, based on empirical observations, the following relationship: an annual GDP growth of 2.5% keeps the unemployment rate at one point, with each additional increase in annual GDP growth of 2.5%, the unemployment rate decreases by 1%.

According to this law, when actual GDP decreases relative to potential by 2.5%, the unemployment rate increases by 1% (in accordance with earlier studies, the relationship was expressed as a 3:1 ratio).

A. Okun's law plays an important role in analyzing the dynamics and interdependence of main macroeconomic indicators. It can be used:

• to estimate losses in real GDP due to cyclical unemployment in the form of the difference between potential and actual GDP;
• to determine the necessary growth in output in order to reduce the unemployment rate by one percentage point;
• to predict changes in unemployment during the economic cycle based on the dynamics of actual and potential GDP;
• when calculating the time it will take to reduce unemployment to the natural level in the context of implementing various economic growth programs (when choosing the growth rate of actual GDP).

Inflation: essence, causes, measurement, classification. Socio-economic consequences of inflation

The essence of inflation.

Violation of the laws of monetary circulation leads to inflation. As an economic phenomenon, inflation has existed for a long time. The term inflation (from the Latin inflatio - inflation) first began to be used in North America during the Civil War of 1861-1865. and denoted the process of swelling of paper money circulation. In the 19th century, this term was also used in England and France. The concept of “inflation” became widespread in economic literature in the 20th century after the First World War, and in Soviet economic literature since the mid-1920s.

In the modern understanding, inflation is a complex multifactorial socio-economic phenomenon generated by reproduction imbalances in various spheres of the market economy. Inflation is one of the most pressing problems of economic development in many countries of the world.

Traditionally, inflation is defined as the overflow of circulation channels with the money supply in excess of the needs of trade turnover, causing depreciation of the monetary unit and, accordingly, an increase in commodity prices. However, this definition of inflation cannot be considered complete. Inflation, although it manifests itself in rising commodity prices, cannot be reduced only to a purely monetary phenomenon.

Therefore, the following definition seems more accurate (correct): inflation is an imbalance of aggregate demand and aggregate supply (a form of general equilibrium imbalance), manifested in general (price increases cover all markets and this is typical for the economy as a whole) continuous (prices rise constantly) growth prices

Thus, as a result of a continuous and general rise in prices, the purchasing power of money decreases and its depreciation occurs.

In general, during inflation, money depreciates in relation to:

a) to gold (under the gold standard);

b) to goods;

c) to foreign monetary units.

As a result, in the first case, the market price of gold in paper money increases, in the second case, the prices of goods increase; in the third case, the exchange rate of the national currency falls in relation to foreign monetary units.

However, not all prices rise during inflation. Prices for some goods may rise, while others remain stable; prices for some goods may rise faster than others. These proportions are based on different relationships between supply and demand and different elasticities.

In addition, not every price increase is an indicator of inflation. Prices may increase due to changes in the dynamics of labor productivity, cyclical and seasonal fluctuations, structural changes in the reproduction system, market monopolization, government regulation of the economy, the introduction of new tax rates, devaluation and revaluation of the country's currency, changes in market conditions, the impact of foreign economic factors, natural disasters and so on.

Classification of inflation.

When using different bases for classification, several types of inflation can be distinguished.

• According to the nature (form of manifestation) of the inflation process:
• Open inflation is an unrestrained, free and continuous rise in prices. It is typical for market economy countries, where the interaction of supply and demand contributes to an open, unlimited rise in prices. Although open inflation distorts market processes, it still retains the role of prices as signals showing producers and buyers areas of profitable investment of capital.
• Hidden or suppressed inflation - the state establishes strict control over prices in conditions of commodity shortages. At the same time, a decrease in the quality of products is allowed without reducing their prices, and prices for supposedly new products are artificially inflated. At the same time, prices on the black market are rising. In this case, the depreciation of money is expressed in shortages and queues.
• An inflation shock is a sudden, sharp increase in prices. It can give impetus to an open, accelerated rise in the price level.
• By area of ​​distribution:
• Local inflation - price increases occur within the borders of one country.
• Global inflation – covers a group of countries or the entire global economy.
• According to the rate of increase (growth) of prices:
• Creeping or moderate inflation – prices rise gradually but steadily at a moderate rate (about 10% per year). The value of money is preserved, there is no risk of signing contracts at nominal prices. In industrialized countries, it is viewed as part of the normal functioning of the economy and does not cause much concern.
• Galloping inflation is characterized by a rapid rise in prices (from 10 to 100-200% per year). Such a pace can cause severe economic and social consequences (a drop in production, the closure of many enterprises, a decline in the standard of living of the population, etc.), contracts are “tied” to rising prices, and money quickly materializes.
• Hyperinflation is a catastrophic rise in prices (up to 500-1000% or more per year). The world record was hyperinflation in Hungary (August 1945 - July 1946), when prices rose on average almost 20 times every month. Hyperinflation causes the collapse of the monetary system. Money ceases to adequately perform its functions, and the largest enterprises become unprofitable and unprofitable. Hyperinflation paralyzes the economic mechanism, since the effect of flight from money in order to transform it into goods sharply increases. Economic ties are being destroyed and a transition to barter exchange is taking place.
• According to the degree of balance of price growth:
• Balanced inflation, in which the prices of various product groups relative to each other remain unchanged. In this case, the interest rate increases according to the annual rise in prices, which is equivalent to an economic situation with stable prices.
• Unbalanced inflation, in which the prices of various goods constantly change in relation to each other, and in different proportions. Industry cannot develop in such conditions; industrial development seems unrealistic. Only short speculative and intermediary operations are possible.
• According to the degree of expectation of price increases:
• Expected inflation, which can be forecast for a period, or "planned" by the government.
• Unexpected inflation, which is characterized by a sudden jump in prices, which negatively affects money circulation and the taxation system. In such a situation, if there were already inflationary expectations in the economy, then a sudden jump in prices may trigger further inflationary expectations, which will spur price increases. However, if a sudden jump in prices occurs in an economy where inflation expectations have not yet gained momentum, the behavior of the population and its reaction to rising prices may be different: consumers will save more and provide less money to the market in the form of effective demand. As a result, the economy returns to a state of equilibrium. This phenomenon is called the “Pigou effect” (the effect of real cash balances). However, the Pigouvian effect operates only in conditions of flexible prices and interest rates and the absence of inflation expectations.

Measuring inflation.

To measure inflation rates in the economy, indices are widely used, and in particular, price indices. The most common are:

3. GNP deflator.

In practice, price indices are widely used that reflect changes in the general (average) price level, prices for individual goods or groups of goods (for example, price indices of industrial and agricultural products).

In world practice, the cost of living index is widely used - an index of retail prices of a special set of goods and services included in the budget of the average consumer and components of the cost of living, his living wage. To calculate it, the following procedure is used.

• The consumer basket is determined: a set of the most commonly used, typical goods and services. The consumer basket more accurately reflects the dynamics of inflation, the more goods it contains. For example, in the United States, the market basket covers 300 consumer goods and services purchased by a typical city dweller. The same name “basket” was used in our country in 1992-1995. contained an incomparably smaller amount of goods: 70 basic food products, only 20 non-food products and a set of some paid services.
• A base period is established - the starting year, from the price level of which their changes in the subsequent period are calculated.
• The total price of the market basket (the total price of the entire set of goods and services) for the base period is determined.
• The total price of the same basket for a given (current) period is calculated.
• The price index is calculated - an indicator reflecting the relative change in the general (average) price level (expressed as a percentage) using the formula:

Price index =	Market basket price in a given year	100 %
Market basket price in base year

The price index can have three numerical values:

• The price index is 100%. This means prices are unchanged.
• The price index is above 100%. Consequently, prices have increased in the current year compared to the base year, i.e. There was an inflationary depreciation of money.
• Third option: price index below 100%. This means that deflation has occurred (from the Latin deflatio - blowing out, blowing away), i.e. there was a fall in the price level.

The cost of living index is used to determine the minimum wage; the level of wages, in turn, depends on it.

When calculating the wholesale price index (price index of industrial goods), the change in prices of a certain amount of intermediate goods used in production is considered. Changes in wholesale prices reflect the dynamics of prices for raw materials, semi-finished products, materials, and final products on the wholesale market. The two named indices are closely interrelated, since the growth of industrial goods and services ultimately leads to an increase in retail prices.

3) GNP deflator (price index for final goods and services)

To measure the general price level, the price index of the gross national product is often used - the so-called GNP deflator. His basket includes all final goods and services produced in society. Consequently, the GNP deflator more fully reflects changes in prices in society and covers not only individual groups of goods and services. Real GNP shows how much the gross national product has increased solely due to rising prices.

When calculating the GNP deflator, nominal GNP means expenses in the current year at current prices, real GNP means expenses in the current year at prices of the base year.

Causes of inflation

Rising prices and the appearance of excess money are only external manifestations of inflation. Its underlying cause is a violation of the proportions of the national economy due to the action of various factors, i.e. disturbance of general balance:

• General economic (economic policy of the country's government, phase of the economic cycle, level of GNP production, presence of a payment crisis, etc.);
• Social (the adoption of social programs and the degree of their implementation, methods and sources of their financing);
• Financial and credit (carrying out measures aimed at stabilizing money circulation, monetary regulation, etc.).

Many causes of inflation are observed in almost all countries. However, the combination of various factors in this process depends on specific economic conditions. All causes of inflation are interrelated and each in its own way can lead to an increase or decrease in supply and demand, upsetting their balance. The significance of inflation sources is important for developing specific measures to combat inflation.

To consider the mechanism of inflation, we can turn to its two types:

• Demand inflation, in which the balance of supply and demand is disrupted by the demand side;
• Supply-side inflation (cost-push inflation), in which an imbalance between supply and demand occurs due to rising production costs.

However, in practice it is not easy to distinguish one type of inflation from another: they often interact closely, so wage growth, for example, can look like both demand inflation and cost inflation.

Demand inflation

The essence of demand inflation can be explained by the phrase: “Too much money chasing too few goods.” The main causes of demand inflation are:

• Growing demand from the population, the factors of which are rising wages and employment growth;
• Increased investment and increased demand for capital goods during economic recovery;
• Increase in government spending (increase in military and social orders).

Supply inflation

Supply inflation means an increase in prices provoked by an increase in production costs in conditions of incomplete use of production resources. It is sometimes called cost-push inflation. Recently, the type of inflation, in which prices rise while aggregate demand decreases, is often encountered in world practice. The main causes of supply inflation are:

• Wage growth;
• Rising prices for raw materials and energy resources;
• Monopoly and oligopolistic pricing practices;
• State financial policy.

Increasing unit costs reduces profits and the volume of output that producers are willing to offer at current price levels. As a result, the supply of goods and services decreases and prices increase.

A general increase in prices leads to a decrease in real incomes of the population. The demands of trade unions to increase the nominal wages of workers and the state policy of compensating for monetary losses from inflation give rise to a vicious circle: rising prices cause demands for increased incomes of the population, increased income leads to an increase in entrepreneurs' costs for wages (supply inflation) and/or to the restoration of effective demand (inflation demand).

Consequences of inflation.

In practice, there are three main options for the consequences of inflation for economic entities:

• Positive (which means an increase in income);
• Zero (neutral);
• Negative (unprofitable).

Positive option

• Inflation brings income to the state (seigniorage is a fee for the right to print money); when the government does not dare to increase direct taxes to finance its expenses, it organizes the printing of new money through the central bank. In this way the budget deficit is covered. However, seigniorage reduces the value of old money held by the population. Obviously, in this case, the real income of the population decreases by the amount of the inflation tax.
• An increase in the speed of money turnover has a positive effect on commercial banks, because participants tend to spend the increased amount of cash faster.
• Numerous industrial and trade monopolies will benefit greatly from rising prices by creating artificial shortages, reducing the sale of popular goods and accumulating them in warehouses. As a result, additional demand is generated, as a result of which they increase the prices of goods.

Zero option

Neutral consequences of inflationary processes are quite rare. In this case, losses from rising prices are fully covered by increased income. This case occurs when “automatic indexation” of cash income is carried out at individual enterprises or on a national scale.

Negative option

• The loss from keeping cash at home, determined by the amount of additional money that could be obtained by depositing money in a bank (at a certain interest rate). However, quite often the nominal interest rate on a bank deposit is lower than the inflation rate, so even placing cash on deposit does not completely guarantee against inflationary losses. Their value is equal to the difference between the inflation rate and the interest rate charged by the bank.
• Increased costs during inflation associated with rising prices in stores, cafes, transport tariffs, etc. (menu costs).
• Costs generated by imperfect legal practice, arising from the indication of nominal prices without their indexation.
• Losses due to imperfections in tax legislation, arising due to the fact that some provisions of tax legislation are drawn up without taking into account the impact of inflation.
• The costs of incorrect inflation expectations. These costs arise from people who did not foresee the rise in prices or incorrectly determined the course of inflation.

In general, although inflation, like many other phenomena characteristic of economic life, cannot be assessed unambiguously. It should not be viewed as an absolute evil, since it can be a tool for stimulating economic growth, helping to revive the market, increase prices and profit margins. That is why creeping inflation is perceived as an attribute of modern economic development, which has more positive consequences than negative ones.

At the same time, it must be taken into account that inflation getting out of control is fraught with extremely negative socio-economic consequences. Galloping and especially hyperinflation lead to disruption of the reproduction process and severe social upheavals. In addition, inflation can have a negative impact on international economic (especially currency) relations.

Features of modern inflation.

A number of features of modern inflation can be noted:

• If earlier inflation affected the economy of one or several countries, now the rise in prices is not local, but general, global in nature.
• Inflation in different countries develops at different rates, unevenly, spasmodically. The speed of the inflation process is determined by internal factors, the effect of which can increase or decrease depending on a particular phase of the cycle, as well as the degree of government intervention in regulating the economy.
• Modern inflation is not episodic, but continuous, chronic. In the past, periods of inflation in individual countries alternated with periods of relative stabilization of monetary circulation. At present, prices rise at all phases of the industrial cycle, without decreasing significantly even during periods of economic crises.