Overview of Employment and Unemployment

The previous chapter established the context in which to view employment. This chapter explores employment and unemployment and its relationship to poverty.

The section, "What is employment?", expresses the concept by stating its key characteristics. Regular employment, full-time employment, part-time employment are various names that express the same concept.

The section, "What is Not Employment?", outlines the characteristics of work that makes it inappropriate to call that work as employment. For example: doing our own household chores.

The section, "Why do we need Employment?", elaborates the need for employment by considering wealth, needs, wants and the Utopian Payment Model.

The section, "What is Self-Employed?", describes the concept of self-employment and outlines its challenges. This leads to the section, "Employment is Easier", as compared to being self-employed.

The section, "Various Employment Statuses", lists the following statuses with a brief description: employed, self-employed, no need to work, unemployed, cannot work. We will frequently reference these statuses in the following chapters.

The penultimate section, "Unemployment Causes Poverty", discusses the link between unemployment and poverty.

The final section, "The Size of the Unemployment Problem", provides the intuitive criteria to estimate the size of the unemployment problem. This discussion involves the current concepts of participation rate and unemployment rate.

What Is Employment?

Our world has evolved where work is specialized and hence employment is specialized. We need to be employed doing something, usually specialized, that is of value to others so that they give us some of their money for the thing that they get that they value. It is this way that most people can obtain money which they can use to satisfy their needs and wants. This continues the chain of receiving something of value and in exchange giving some of our money. Any person who has some money will part with it in order to satisfy his or her needs and wants. This mutual exchange makes up most of our economy.

Employment is the activity of offering our time, knowledge and skills to others to help them do some work that they would like to get accomplished in exchange for some money.

An "employer" employs an "employee" and offers some wages in exchange for work. The employee offers their time, knowledge and skills to the employer and the employer asks the employee to do some work. The wages do not depend on the amount of work done. Wages could be offered at an hourly rate and paid for the total number of hours worked. Wages could be offered at an annual rate for a predetermined number of hours within the year. The employment status of such an employee is "employed".

People could be "self-employed", they could produce some things and sell them to their customers, they could offer services to their customers. This is not much different than what we consider as regular employment because it has the element of doing something for someone else and accepting money in return for that work.

Work has evolved over time. We derive benefits from doing work. We would do work and derive benefits from it, rather than the alternative of not doing work and not having any of those benefits.

There may be a time in our collective future when all work could be done by machines. There may be a time when even the work of creating and maintaining the machines that do the work is done by machines. When that time arrives, then humans would not have to do work, but work would still need to be done. For now, we still have to work because everything is not done by machines.

Employment is about humans; not about machines. Unemployment is a human problem; not a machine problem. Until such time that humans have to work to satisfy their needs and wants, they will need employment and there will be the unemployment problem, and that problem needs a solution.

What Is Not Employment?

Not every kind of work we do is called employment. For example, everything that we do for our own personal hygiene (like brushing our teeth, taking a shower, etc.) is not employment. We do it because it makes our personal life better. This work neither produces anything nor it provides any service to anyone else.

Work that we do for our kids and other family members is also not employment. This kind of work also includes dropping and picking up our kids from school, overseeing their homework when they are young, shopping for their shoes, clothes and school supplies, etc. This kind of work includes keeping our house clean and tidy, doing the family laundry, keeping the lawn in our yards mowed and healthy, grocery shopping and cooking healthy meals, etc. We do this work for our loved ones.

When we help others without taking anything in return, it is not employment. It is helping others.

Personal chores, household chores, helping neighbors and friends is all work, but it is not employment, because such work is the bare minimum that one ought to do, but doing it does not fetch us any money and that money is critical to satisfy our needs and wants.

Why Do We Need Employment?

In short, it is because we have needs and wants, and employment is the only way to satisfy them for most of us. Obviously, the wealthy do not need to be employed to satisfy all their needs and most of their wants.

Most citizens are not enormously wealthy. We all have needs and wants. In order to satisfy them, we need money. That is, we need wealth. If we do not work and earn money, then we will quickly spend whatever wealth we possess and that would be the end of satisfying our needs and wants as well. Thus, employment is necessary.

In our current system, for an individual without employment, satisfying one's own needs and wants eventually becomes impossible. If an individual has to be truly independent and self-sufficient, then he or she must be able to take care of his or her own needs and wants. For that, this individual needs employment.

With the introduction of the Utopian Payment Model, the essential needs can still be satisfied, but not the wants. We are humans, and we will have wants, especially when we see others satisfying their own wants that are similar to our own. To satisfy these wants, we will need money, that is wealth. With the introduction of wealth redistribution, every citizen would get his or her share of the privately held wealth of the nation. A portion of this wealth will be used to satisfy our needs, and what would be left would still be insufficient for our wants. That is because our wants have grown as technological progress has grown; our wants have also grown thanks to the splendidly successful advertising and marketing of products and services. Thus, even in the presence of Wealth Redistribution and the Utopian Payment Model, employment is necessary.

When we are employed and as long as we try to live within our means, we can satisfy those wants that are within our means, derive some pleasures, have some joys in our life and pursue our happiness.

There are other benefits of employment. Employment keeps us busy. With employment, we get work related social interactions. Interacting with more than just our friends and family gives us a broader perspective on life.

When one is enormously wealthy, then employment is not necessary, but still desirable. For the wealthy, being employed is a lifestyle choice; for the rest, employment is a necessity.

What is Self-Employed?

Why do we have to work for someone else? Why not do everything that we need for ourselves by ourselves?

Technological progress has shown us that we can have a more comfortable life than what we would have in the absence of that progress. This has increased our needs, and we want to lead a comfortable life. We are humans and our capabilities are limited. We cannot do everything that we need and want ourselves. If we were to attempt such a thing, then we will have to grow our own food, store it, preserve it, cook it; grow the cotton, extract fibers, weave it into the cloth, then make the clothes, etc. That is just a lot of things to do for a single person. If it were an easy way to live, we would not have evolved into a society.

What most people mean by self-employed is that a self-employed person does not have a human as a boss or manager or supervisor. In this case, the self-employed person still provides others with something that is valuable to them and in return earns money. Perhaps the self-employed are producers, perhaps they are service providers. In each of these cases, the self-employed have customers and their livelihood depends on continuing to have customers.

Being self-employed in this way is also not easy. For it to work, one needs a steady stream of customers and capacity to produce enough goods or services with sufficient profitability for the self-employed to be able to satisfy one's needs and wants. Then there is the aspect of advertising and marketing.

Taking on the risk of variability of business has its rewards and risks. If the risks materialize, self-employment ends for sure. If the rewards continue, the self-employed continue their self-employment and as long as they are earning enough to satisfy their needs and wants, they can be considered to be employed.

Employment Is Easier

Most people would consider the variability in earning money in self-employment as an undesirable aspect and would opt for being employed by some organization.

Specialization helps us focus on our interests and strengths, gain the knowledge and skills to do a few things well, do those things well, produce those things that we are better at than others, produce them in plenty, offer them to others in exchange for money, use the money thus obtained to get those things that we do not specialize in. Specialization enables us to work in our areas of interests; it makes work enjoyable rather than a chore.

Different people specialize in different things and do different kinds of work. This is the division of labor. Work done using specialization and division of labor is collaborative, cooperative and coordinated. One can view all the work done within our society as the biggest example of such collaboration, cooperation and coordination.

As technological progress has continued, we have vastly improved the tools, we have specialization and division of labor and all that needs to be organized and managed. This has led to well capitalized private enterprises taking up the task of organizing and managing the work required to produce a few things. Many such organizations together produce all the things that we need and want.

Individuals usually cannot compete with these organizations. However, they can work for one of these organizations, use their specialized knowledge and skills and help the organization produce its specialty product or products and in return for this service, they get paid wages or salary.

All the individual has to do is specialize in something and join an enterprise and contribute to the profitability of that enterprise. This frees up the individual from having to manage multiple aspects of running a profitable business.

This makes being employed by an organization or an enterprise an easier choice as compared to being self-employed.

Various Employment Statuses

Imagine that every person has an associated "employment status".

When a person is employed by some organization, that organization would pay this person some wages and hence his or her employment status would automatically be marked as "employed".

Those who are self-employed could mark their status as "self-employed".

A person who does not need employment to fully satisfy all the needs and wants and has no current employment would simply state his or her status as "no need to work". Typically, wealthy people would have this status.

A person who needs employment to fully satisfy all the needs and wants, who can work but cannot find employment, would state his or her status as "unemployed".

A person who needs employment to fully satisfy all the needs and wants but who cannot work, would simply mark his or her status as "cannot work". There is no need to specify the reason. It could be a disability, it could be family obligations, it could be any other reason. With the introduction of Wealth Redistribution and the Utopian Payment Model, such a person will not suffer the adverse effects of not being able to work. While such a person may be poor, the adverse effects of poverty will be mitigated. Such a person will still have wants, which unfortunately cannot be satisfied, unless some other person chooses to help. This chapter is about employment and unemployment. The situation of "cannot work" is not exactly unemployment, and we will not discuss this particular situation when we are discussing unemployment. Of course, it needs to be discussed, just not in the context of unemployment.

Unemployment Causes Poverty

Poverty is a deficiency of wealth to such an extent that those who experience poverty can barely satisfy their needs and regarding satisfying their wants, they either cannot satisfy their wants at all or in order to satisfy even their basic wants they have to trade off their needs.

The section about "Why do we need employment?" contains the reasons, and we use the same reasoning to conclude "unemployment causes poverty"; we just use a different presentation of that same logic.

Most citizens are not enormously wealthy. We all have needs and wants. In order to satisfy them, we need money. That is, we need wealth. If we do not work and earn money, that is, if we have no employment, then we will quickly spend whatever wealth we possess. That is, we will be left with no wealth at all. That is poverty. Thus, lack of employment leads to poverty.

For those who can work and are willing to work, that is for those who are unemployed, unemployment causes poverty.

With the introduction of Wealth Redistribution and the Utopian Payment Model, such a person will not suffer the adverse effects of poverty. But, this person would still be poor.

The Size of the Unemployment Problem

We all know that unemployment is a problem. But how big is this problem?

Usually our governments publish what is called a "participation rate" and it tells the percentage of working-age people who have employment. This number is somewhere between 60 and 70 percent. Does this mean that about 30 to 40 percent are unemployed?

Further, our governments publish what is called an "unemployment rate" and it tells the percentage of working-age people who were once employed but are now unemployed and still looking for employment. This number does not report those people who can work and who need employment but are for some reason not looking for employment; perhaps they are discouraged. Further, in many countries, this number is estimated.

If we actually ask every one of us, we would get the full picture about how widespread unemployment really is. Right now, we do not know the real number. Perhaps the number is closer to 20 to 30 percent.

To add to that number, there are those past retirement age who could work and may want to work. There are also the older teenagers who could work and may want to work. Then there are those who have part-time employment and desire full-time employment.

Those who are unemployed experience poverty. Some of the unemployed are parents of very young children, and those young children are by law not allowed to work. The parents are supposed to take care of their children and if the parent is unemployed and hence poor, the children would also suffer poverty. These children add to the number of people who experience poverty. Some of the unemployed are spouses of those who are employed and earning plenty of money. Such unemployed spouses reduce the number of people who experience poverty.

On the whole, the number of people who experience poverty should be about the same as the number of people unemployed.