The effect of unemployment rate on the value of GNP

Okun's Law

In cyclical unemployment production capacity is not fully utilized and the amount of GDP less than that which would be at full employment. The difference between potential output at full employment GDP and actually achieved in cyclical unemployment GDP is GDP gap.

Between cyclical unemployment and the GDP gap is a direct link there is a stable, found empirically A. Okun. Okun's Law expresses the relationship between the level of unemployment or lost in GDP. If the actual unemployment rate exceeds the natural rate of 1%, the gap in GDP of approximately 2.5%. This ratio (1:2.5) allows us to calculate the absolute loss associated with any level of unemployment. For example, if the unemployment rate is 9.5% and its natural rate of 6% will be forgone GDP of 8.75% / (9.5 - 6) x 2.5 = 8.75 /. If this was not provided with the unemployment rate below the natural, the GDP would be 8.75% more than the actual.

The main method of the state employment policy are the programs for the reduction of unemployment.

They include the following:

- Stimulating employment growth;

- Increase the number of jobs in the public sector;

- Training and retraining;

- Promoting the employment of labor.

The state also provides social insurance unemployment, that is, pays benefits have lost their jobs are not in their water. The basic requirements for obtaining a benefit, the duration and their absolute size in different countries vary considerably.

Multiple functions to regulate employment perform labor exchanges, which are:

- Registered unemployed, if these persons meet the established legal status of "unemployed"

- Make records and registered vacancies in enterprises of different ownership forms,

- Employment opportunities for job seekers,

- Study labor demand and supply,

- Provide information on employment for everyone,

- Carry out the payment of unemployment benefits.

Besides the direct impact on the labor market, the state uses and indirect methods, including fiscal, monetary and depreciation policy, as it was already in the previous topics.