Unemployment

Unemployment rates are one of the strongest indicators of the economic health of a nation. A person is considered unemployed when they are without a job yet actively seeking paid employment. When large numbers of a country’s workforce become unemployed, both they and employed workers who are afraid of losing their own jobs become afraid to spend money. Low demand triggers further job loss as profits decline. Thus, unemployment benefits are seen as a way to help stabilize the economy as well as provide individuals and families with safety nets during times of financial crisis.

The financial implications of unemployment are far-reaching. Those who are unemployed are less likely to find new jobs, particularly the long-term unemployed. While employed individuals who change jobs generally take positions with higher wages, the unemployed are often forced to settle for lower-paying positions or part-time jobs. There are no unemployment benefits for self-employed workers. Since most Americans have health insurance through employers, they lose that benefit if they become unemployed. In countries with national health plans, job loss does not affect health-care coverage. The negative impact of being unemployed may persist for more than a decade after an individual finds a new job through decreased future earnings.

Overview

The United States Department of Labor was established in 1913 as a cabinet-level position. Labor became a major focus of US public policy during the Great Depression, as nearly one in four Americans were unemployed between 1929 and 1939. President Franklin D. Roosevelt (1882–1945) made getting people back to work a major part of his New Deal programs, creating the Works Progress Administration (later the Work Projects Administration) in 1935 to provide jobs for more than three million Americans. Those in WPA programs worked at everything from building parks, roads, and bridges to employing their skills as writers, actors, and artists.

Under President Harry Truman (1884–1972), the US Congress passed the Employment Act of 1946, which created the Council of Economic Advisers and established the Joint Economic Committee in Congress. In 1961, under President John F. Kennedy (1917–63), Congress passed the Area Redevelopment Act to provide grants and loans to areas that were experiencing consistently high levels of unemployment and underemployment. The following year, the Manpower Development and Training Act was established to help workers acquire skills for new technologies.

In 1964, President Lyndon B. Johnson’s (1908–73) war on poverty included sponsorship of the Economic Opportunity Act, which established the Office of Economic Opportunity to provide vocational training and offer loans to small businesses that hired the unemployed. It also established the Job Corps to provide job training for youths. Building on this earlier groundwork, new unemployment legislation is regularly enacted in the United States in response to the economic situation at given points in time.

Except in times of major economic crisis, the United States has traditionally experienced lower rates of employment than many other countries. Prior to the global financial crisis that began in 2008, youth unemployment rates averaged 13 percent in developed countries, including Australia, Canada, Japan, South Korean, western Europe, and the United States, while the national youth unemployment rate of the United States was approximately 10 percent. Following the global financial crisis, youth unemployment in the United States reached more than 18 percent.

When unemployment does occur, federal and state programs provide safety nets. The US Department of Labor’s Unemployment Insurance (UI) program provides the foundation for unemployment benefits. The program is funded through the Federal Unemployment Tax Act (FUTA) as well as state unemployment taxes.

State support in the United States for the unemployed is dependent on a number of conditions, including the economic environment within a state. Unemployment claims are unavailable to individuals who have lost a job for being unavailable for work or unable to perform the requirements of a job, have quit without a legitimate reason, have lost a job because of inappropriate on-the-job behavior, or refuse to take a job that is appropriate to their qualifications without justification.

Unemployment compensation has never been intended to replace lost earnings in totality. It generally provides up to half of an unemployed worker’s lost salary for twenty-six to thirty weeks. States and territories establish their own unemployment caps. European countries tend to provide more comprehensive unemployment benefits than the United States.

People applying for jobs are required to submit prior job histories, and those who have been unemployed have gaps in their histories that remain with them throughout their working lives. Potential employers tend to shy away from hiring the unemployed out of fear that they will prove to be unreliable. Job status is heavily tied to socioeconomic status, and long periods of unemployment can force people to drastically alter their standards of living.

For individuals and families, unemployment has implications that go far beyond economics. Sociologists and psychologists contend that efforts to provide financial safety nets for the unemployed are not always effective in improving well-being. Unemployment is often accompanied by decreased life satisfaction, a feeling of lost control, and increased likelihood of experiencing mental distress or psychiatric disorders. Members of the public may view the unemployed as lazy or unmotivated, leading unemployed individuals to question their worth. In a 2013 Canadian study, Cameron A. Mustard and colleagues found that Canadian unemployment was associated with higher incidences of accidents, violence, malignant neoplasms, circulatory diseases, respiratory diseases, and alcohol-related diseases. Family members of the unemployed may also experience negative impacts from unemployment. In families where one spouse is involuntarily unemployed, increased stress levels result in significantly higher separation and divorce levels, particularly if the period of unemployment is lengthy.

Unemployment Today

Economists use the Beveridge curve to compare job vacancies and unemployment rates. During a recession, the curve generally reflects low job vacancies and high unemployment rates. The opposite occurs during times of economic expansion. Between 2009 and 2013, however, the Beveridge curve was erratic. Economists disagreed on whether persistently high unemployment rates were the result of structural or cyclical events. Structural unemployment tends to occur when jobs are available but positions are not filled because of a lack of skilled workers, the introduction of new technologies that renders certain jobs obsolete, or persistently low wages. Cyclical unemployment, on the other hand, occurs when spending and consumption are low, leading to low demands for labor.

Individuals without college degrees are consistently more likely to be unemployed than those with higher levels of education. In January 2020, for instance, the unemployment rate for Americans aged twenty-five and older with only a high school diploma was 3.8 percent, compared to 2 percent for those with bachelor’s degrees or more. A major reason for the difference is job market's emphasis on technology, as individuals with lower educational levels are less likely than others to have acquired technological skills. Indeed, the disparity between unemployment rates among college graduates and those with only high school diplomas increased greatly in the twenty-first century.

In early 2020, millions of people began losing their jobs amid the global coronavirus (COVID-19) pandemic. In order to protect public health and limit the spread of the virus, governments closed nonessential businesses and advocated social distancing standards. In the US, the unemployment rate reached 14.7 percent in April 2020, the highest unemployment rate since the Great Depression. In response, the federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which granted unemployment benefits to a wider range of people and gave unemployment workers an additional $600 a week for up to six months. While the US unemployment rate continuously decreased over subsequent months, reaching 6 percent about one year later in March 2021, this rate was still high in comparison to levels before the start of the pandemic. The American Rescue Plan Act signed into law that same month extended such benefits and provided another weekly payment of $300 to unemployed workers.

According to a 2021 report by the International Labour Organization (ILO), global unemployment increased by thirty-three million people in 2020, with approximately 220 million people unemployed worldwide, due in large part to the worldwide lockdowns and social distancing measures enacted in an effort to slow the spread of COVID-19. The majority of employment losses occurred in the Americas. The report estimated that an additional 81 million people who had lost employment had become inactive, with many not seeing opportunities for job searching and others lacking the ability to search because of pandemic restrictions.

As the global economy slowly and intermittently recovered throughout 2021 as the worst of the pandemic waned, unemployment fell in the US and many other countries which saw economic improvement during that time. However, by 2023, economic analysts had raised concerns that high unemployment rates and systemic inequalities, particularly in developing nations, had worsened during the pandemic and not improved. While countries in certain regions, such as Europe and Latin America, had seen unemployment fall, on average, below pre-pandemic levels, other regions saw unemployment exceed pre-pandemic levels, including North Africa and Sub-Saharan Africa. Drawing on these trends, some experts identified the existence of an employment gap using a measurement referred to as the jobs gap rate, which includes any person who wants to work but does not have a job. In 2023, according to the International Labour Organization (ILO), high-income countries had a jobs gap rate of 8.1 percent in 2023 whereas the rate in low-income countries stood at 21.5 percent at that time. Additionally, the jobs-gap rate in low-income countries had risen over two percent between 2001 and 2023. In 2023, the global unemployment rate was 5.1 percent.

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