AN ECONOMY OF UNEMPLOYMENT?
The title of this chapter poses the paradox of continuing high levels of unemployment in an economy even though, at times, the demand for labour has been buoyant. Why, in the absence of a general deficiency of demand, does the labour market not appear to ‘work’ to create job opportunities for all who want them? Or why, as Robert Hall put it in the title of a paper twenty years ago, is the unemployment rate so high at full employment (Hall 1970)? At the time Hall was writing, the unemployment rate in the United States was 5 per cent, not very different from the average American unemployment rate of 5.5 per cent recorded in 1990. Going even further back, one may recall that in the late 1930s, Keynes regarded 6 per cent as the minimum unemployment rate safely attainable through demand expansion alone, with progress to lower levels of unemployment having to depend on reducing structural imbalances and the like (Keynes 1937).