Labor Market Dynamics: Unemployment Causes and Job Creation

Labor Market Characteristics

The labor market is influenced by various factors, including how companies and unions affect wages. Work is not a homogeneous product; several factors determine salary and compensation differences:

• Wages for workers in dangerous jobs tend to be higher.
• Differences in talents and skills.
• Differences in human capital: more skilled and prepared individuals are generally better paid.
• Efficiency Wages: A type of wage used by some companies to incentivize and motivate their workers to increase productivity.
• Discrimination: Men often receive higher wages.

Causes of Unemployment

Neoclassical Theory

If the labor market operated freely and wages were flexible to lower and raise, there would be no unemployment, even with a serious oversupply of workers.

Keynesian Theory

The main cause of unemployment is not in the labor market itself, but in the goods and services market. Increased demand for goods and services leads to greater production and increased employment. However, when there is insufficient demand, companies reduce their level of activity.

Mismatches Between Labor Demand and Supply

Companies seek workers with specific qualifications but cannot find them, or vice versa.

Poor Distribution of Employment

Some individuals hold multiple jobs or work excessive overtime, preventing others from entering the labor market.

Types of Unemployment

• Frictional Unemployment: Occurs when people change jobs and are temporarily unemployed.
• Seasonal Unemployment: Occurs due to seasonal variations in demand for labor.
• Cyclical Unemployment: Occurs during economic crises when production falls, leading to job losses.
• Structural Unemployment: Mismatches between the qualifications of job seekers and the requirements of available jobs. While one sector may be booming, others are in decline.

Employment Creation Strategies

Measures Affecting Labor Supply

These measures aim to reduce the active population or increase labor market flexibility:

• Reduction of the active population through early retirement.
• Extension of compulsory education.
• Job sharing: reducing working hours.
• Elimination of multiple job holding.

Measures Affecting Labor Demand

These actions aim to empower producers and facilitate job creation:

• Public investment.
• Creation of small and medium-sized enterprises (SMEs).
• Tax reductions.

Information and Training Measures

These measures aim to improve worker training and information:

• Promotion of services that act as intermediaries between labor supply and effective demand for employment.
• Actions designed to facilitate professional training for workers.

Unemployment Benefits and Subsidies

A protective measure for workers who lose their employment and receive temporary state aid.