Does “involuntary” unemployment actually exist?
Would be interesting to start an empirical study about it… oh wait!
Neoclassical,
While my latest Mises Daily (“Affording the Unemployed”) was not really on involuntary unemployment per sé (well it is, but it is understandably a special case; involuntary unemployment during business cycles), I touch on the topic a bit. In one of the footnotes, I give quote the following from Jesús Huerta de Soto,
“Nevertheless the real market is in a constant state of disequilibrium and, even in the absence of institutional restrictions (minimum wage laws, union intervention and so on), it is certainly quite possible that numerous workers who would be delighted to work with certain specific entrepreneurs (and vice versa) remain unemployed and never actually meet these entrepreneurs, or if the two do meet, they fail to seize the mutually beneficial opportunity to enter into an employment contract, simply due to a lack of sufficient entrepreneurial alertness.”
In essence, you would assert that incomplete information prevents full employment?
In essence, you would assert that incomplete information prevents full employment?
Yes; see: “Affording the Unemployed” (not on this exact topic, but it covers it to some degree).
No, involuntary unemployment does not exist. Also, incomplete information does not lead to involuntary unemployment, as the level of information completeness is voluntarily chosen.
Ignoring such aggravating variables as job-landing savvy and the skills involved with that, and other subjectivist gobblygoop that actually matters in the real world, this algorithmic statement on the completeness of information is like saying Galileo consciously chose to not know about the existence of volcanic material on the surface of the Moon, instead sufficing to think the Moon possessed oceans. But we can reasonably judge that Galileo was in search of the truth and didn’t have the available information, in this case due to the limitations of scientific technology in his era, to aptly as opposed to correctly answer his query.
If A (employers) and B (employees) are both not equal to C (omniscience) if and only if D (non-omniscience) is equal to [AB], hey guess what? I was involuntarily unemployed for a month a little while ago. Not just because of the business cycle rescinding much employment opportunity in this area, but also because I am not Jesus.
I was involuntarily unemployed for a month a little while ago.
Explain the situation to us.
You mean like when you get fired or you mean like when no one will hire you?
I was involuntarily unemployed for a month a little while ago. Not just because of the business cycle rescinding much employment opportunity in this area, but also because I am not Jesus.
Your unemployment was voluntary. You simply did not like the job offers available and/or did not like the payoff in finding more.
I’m not saying your temporary unemployment was what your heart desired. But it was your choice at that moment, because information is a scarce good just as job offers are.
Saying you are involuntarely unemployed because of scarce information is saying you are involuntarely hungry because of scarce food. The scarcity is not the problem, it is a mere (unfortunate) fact of nature.
Consultant,
No, involuntary unemployment does not exist. Also, incomplete information does not lead to involuntary unemployment, as the level of information completeness is voluntarily chosen.
Austrians expressely reject long-run equilibrium models. This includes labor market equilibrium. Imperfect information that is not voluntary can exist (what a ridiculous notion of all “voluntary” assymetrical information). As Jesús Huerta de Soto makes clear, there is always the possibility that a newly unemployed individual may spend some time unemployed without realizing that there is an employment opportunity for him.
Austrians expressely reject long-run equilibrium models. This includes labor market equilibrium.
Sure. Austrians say the market always moves towards clearing. I get that. This doesn’t imply that someone is forced not to buy/sell something. We don’t speak of “involuntary foodless hungry people” either. Being hungry, having imperfect info, having less money than one wants, … these are all just facts of life. Saying the desire to be employed implies “unvoluntary” unemployment is as utopian as the Marxist saying a factory worker wanting to be rich is “unvoluntary” poor.
Imperfect information that is not voluntary can exist (what a ridiculous notion of all “voluntary” assymetrical information).
Can you please provide an example? To make myself clear I’m not denying there is imperfect info, I’m saying the extent to which people spend time and money to overcome that is a purely voluntary act. Hence unvoluntary unemployment does not exist.
I’d be happy to be proven wrong.
Liberté,
Block and Barnett on Involuntary Unemployment over at another site.
The first sentence of the introduction is an important caveat, which ties in with my comment on the non-existence of long-run equilibrium. Wages may not always be perfectly in line with the equilibrium price. They will tend to fluctuate, as supply and demand fluctuate. Also, Huerta de Soto’s imperfect information argument seems to be relatively new. When I brought Huerta de Soto’s quote up at Mises Scholars nobody suggested anything to the contrary (doesn’t suggest aggreement necessarily, but suggests that Huerta de Soto’s point does make sense).
Consultant,
Sure. Austrians say the market always moves towards clearing.
Yes and no. Austrians say that since supply and demand are always shifting, equilibrium is impossible. Prices may be above or below equilibrium, depending on what factors into the creation of prices. This ties into my point mentioned in my response to Liberté: wages will not always be harmonious with equilibrium.
This doesn’t imply that someone is forced not to buy/sell something.
Nobody suggested otherwise.
Being hungry, having imperfect info, having less money than one wants, … these are all just facts of life.
Errr, ok? What’s your point?
Saying the desire to be employed implies “unvoluntary” unemployment is as utopian as the Marxist saying a factory worker wanting to be rich is “unvoluntary” poor.
Um, this is not what I am saying at all. I am saying that given imperfect information, there may be an individual who is not aware of an existing employment position. Or, there may not be an entrepreneur aware of a worker who is perfectly willing to work. This represents involuntary unemployment.
Can you please provide an example?
Let’s say you’re fired in the city of San Diego. There is no employment available in San Diego, but there is employment available in Dallas, Texas. You may not be aware of the fact.
To make myself clear I’m not denying there is imperfect info, I’m saying the extent to which people spend time and money to overcome that is a purely voluntary act.
I agree, but this doesn’t really have anything to do with anything. Someone who ceases to look for a job perhaps can be categorized as voluntarily unemployed. Someone who is continuously looking for a job, but can’t find one, is involuntarily unemployed. There may be a period of time in which an individual simply cannot find one, for a variety of reasons.
Jonathan, we agree on the dynamics but we disagree on whether you can call it “involuntary”.
Consider the following example:
I go and buy a car and pay $20K. A few miles down the road another dealership has the same car for sale with the same service for $19K. I didn’t know about the offer and the dealer didn’t know about my demand. Does my purchase constitute an involuntary ripoff? Or if I insist on paying no more than $19,5K and stop searching after dealer 1, am I involuntarely carless?
You say yes, I say no.
My conclusion: Information is scarce like so many other goods. Overcoming information scarcity is a cost (and a prerequisite) for each purchase/sale. There’s nothing involuntary/irrational/market failure about people chosing not to overcome information scarcity in certain situations.
You say stop, and I say go go go… OH NO.. you say goodbye, and I say hello.
Huh?
Hello Goodbye ~ The Beatles
I agree that it is weird to call it involuntary unemployment. Perhaps you could say that it is not voluntary unemployment like the case of, “I want $10/hr, but no one is willing to pay me more than $8/hr, so I’ll remain jobless for now.” That it does not fit that (narrow) conception of voluntary unemployment does not necessarily mean it is involuntary unemployment. Involuntary unemployment can have its own conditions other than anything-not-voluntary-unemployment. I would say involuntary unemployment requires a third party intervening in the would-be contract between would-be employer and would-be employee. Unless bring God or the fates into this, and blame them for not using their power to hook me up with the person willing to pay me $10/hr, no thing is preventing me from being employed.
Perhaps imperfect information is not a case of voluntary unemployment, but I definitely think it is not involuntary unemployment either. This is not to absolve the unimpeded labor market or belittle those who cannot find their perfect employer; it’s just holding language accountable. In a free market, I think we can and should seek to lower information costs in the labor market, so that there is situation is as rare as possible.
Consultant,
I go and buy a car and pay $20K. A few miles down the road another dealership has the same car for sale with the same service for $19K. I didn’t know about the offer and the dealer didn’t know about my demand. Does my purchase constitute an involuntary ripoff? Or if I insist on paying no more than $19,5K and stop searching after dealer 1, am I involuntarely carless?
This is a poor example. A closer example would be if you are interested in buying a car, but you know of no dealer that exists (maybe you live out in the boonies). You desire a car, but you don’t know where you can access one. This may be an unrealistic example, but it is realistic in the case of employment.