Involuntary Unemployment

Picture yourself lounging lazily and happily on your couch...doing whatever you do (video games? Netflix? Knitting?). You just quit your job and you’re not looking for another one. You’re voluntarily unemployed. Good riddance to the working man’s life.

But eventually...you've gotta pay for the bills that you know are coming in. You start looking for a job. Congratulations...you’re not involuntarily unemployed.

Involuntary unemployment is when you’re out of a job, but you want one. On a mass scale, involuntary unemployment means there are major issues with the economy. People want jobs, and are capable of providing some kind of value, but they can’t get a job. In economic terms, it means there’s a surplus of labor at the current wage.

What’s that look like on a labor supply and demand graph? Well...it’s not really on there. That graph assumes everyone who’s not working isn’t working because it’s a choice they made, i.e. they weighed the costs and benefits and decided it wasn’t worth it.

There are lots of reasons why involuntary unemployment happens in economies, but one thing’s for sure: it shows that the invisible hand that’s supposed to keep surpluses and shortages in check...is out of whack.