Unemployment in the Recent Recession: A Comparison

Unemployment in the Recent Recession: A Comparison of Cyclical and Marxian Theories

The recent (or ongoing) recession has affected the entire globe, though some countries have been harder hit than others. In the United States, unemployment hit higher levels than it has seen in quite some time -- more than doubling at the depth of the recession in 2010 from its pre-recession low (in the current decade) in 2006 and 2007 (USBLS, 2012). Understanding unemployment during a time when money is tight and business is slow might seem easy ("it's the economy, stupid!"), but there are actually many competing or alternate theories of unemployment. At times these theories come into direct conflict with each other, with different explanations offered for the same set of circumstances or trends, yet this does not necessarily mean that different theories or types of unemployment are mutually exclusive -- some are just applicable to specific circumstances. The following pages describe two types of unemployment, cyclical unemployment and Marxian unemployment, and explain how the higher unemployment experienced in the current recession is clearly the result of the former, with reference to personal impact and to relevant literature.

Understanding Unemployment(s)

Before unemployment in the current recession can be explained, an understanding of the two types of unemployment discussed must be developed. Cyclical and Marxian unemployment are not at all alike, but they are also not mutually exclusive and either could be applicable at different time. Neither concept is especially complex, either, but both have profound implications on the way the world functions.

Marxian unemployment, as the name clearly suggests, was first advanced by Karl Marx as a part of his explanation of the inherent conflict between the owners of the means of production -- the bourgeoisie -- and the laborers -- the proletariat (Blaug, 2007). The essential concept of this type of unemployment is that by keeping jobs scarce owners can keep wages low for those that are employed, as there will be constant competition and the constant threat of not being able to find employment (Blaug, 2007). This can be seen as a reflection of the basic principles of supply and demand, except here the laborers are the "producers" while the "consumers" -- the owners that will purchase the labor -- are in complete and conscious control of demand, and thus by keeping demand always a certain amount lower than the supply -- the number of available laborers or labor hours -- they can keep the price low, just as prices stay low in any market where supply exceeds demand (Blaug, 2007; Schiller, 2006).

Cyclical unemployment is a more consistently-held theory than the somewhat controversial theory of Marxian unemployment, tying directly into the empirically-evidenced business cycle. According to this construct of unemployment, a natural downturn in the economy is expected as the trough of a business cycle, when GDP shrinks (or growth slows) and suppliers cut back, before building back up to increased demand and increased supply at the peak of a business cycle (Schiller, 2006). When producers/suppliers cut back, they necessarily cut back on labor-hours, as well, and this lead to periods of higher unemployment (Schiller, 2006). Clearly, this could be very different in appearance from Marxian unemployment.

Unemployment in Recent years

A view of the past decade of labor rates and unemployment statistics shows that about a little over 66% of individuals above the age of sixteen are in the civilian workforce during years of strong economic growth, with an unemployment rate -- the percentage of adults actually seeking employment but unable to find it -- staying around approximately five percent (USBLS, 2012). In 2009 and each subsequent year, however, the percentage of people employed in the civilian workforce has dropped, from 66% exactly in 2008 to 64.1% in 2011 and currently holding at 63.4%, and the unemployment rate rose from 4.6% in 2007 to 5.8% in 2008, then jumped dramatically to peak at 9.6% in 2010, though the currently (and not seasonally adjusted) unemployment is back down t 7.7% (USBLS, 2012). This shows a clear spike in unemployment over the past several years, not a continuation of long-term unemployment trends, and this means this unemployment is clearly cyclical, not Marxian.

Marxian unemployment describes unemployment that is a constant and purposeful part of the labor environment -- it must be constant, otherwise the price of labor would fluctuate too much and ultimately rise, reducing owners' profits and thus running counter to the Marxian model (Blaug, 2007). Long-term unemployment rates of close to 5% might be indicative of Marxian unemployment, or at least that argument could be made, but such a construct is wholly inapplicable to this scenario. Cyclical unemployment, on the other hand, predicts exactly this type of spike in unemployment rates, both in the way it steepens and tapers off (Schiller, 2006).