Defining unemployment is not simple, and becomes extremely problematic when it comes to developing countries. Three types of unemployment, which overlap to some degree, have been recognized: (1) those actively seeking employment; (2) those without work but available for and actively seeking it; (3) those available for work but who have become so discouraged that they have given up looking.
The occasions when unemployment grew fastest give some clues to its causes. The collapse of the international monetary system in 1973 and the oil shock of 1974 trebled Europe's jobless to more than 6%. The second oil shock in 1980 took the rate to 8%. By reducing the profits of enterprise across the board, the oil crises curtailed real wage rises and forced company restructurings and redundancy. At the same time, the new international financial environment has allowed money to move around ever more quickly between the countries in the search for short-term returns. Capital flight leads to sinking national currencies and higher interest rates, again adding to unemployment.
In 1994 it was estimated by the ILO that 30% of the world's labour force, namely 820 million people, were currently unemployed or under-employed. For the first time since the 1930s the industrial countries, as well as developing countries, were facing long-term, persistent unemployment. The number of officially registered unemployed numbered 120 million, although the real numbers, including those who never registered or who had stopped looking for work, were considered as almost certainly higher. In addition, some 700 million were underemployed, namely engaged in a level of economic activity that did not permit them to reach a minimum standard of living.
[Industrialized countries]
All industrialized countries have experienced rises in unemployment and the economically inactive over the past 20 years. The extent of regulation of the labour market and provision of welfare has not changed that, rather it has represented a social choice over how the shock of increased inactivity has been distributed. The more deregulated the labour market, the more unstable the pattern of employment, the more income inequality and social insecurity, and the more marginalized the unskilled male has become, with all the associated social consequences; the more regulated the market, the more the opposite holds. Both systems have suffered from a parallel fall-off in economic growth.
Unemployment shows no sign of declining in many industrial countries. Rising from its lowest level of under 2% in the late 1960s, European unemployment has remained about 10% since 1983; in 1993, 17.4 million were unemployed in the 12 countries of the European Community, or 10.3% of the workforce. In October 1999, there were 15.4 million people (9.1%) unemployed in the 15-nation European Union. The lowest level of unemployment was in Luxembourg (2.7%) and the Netherlands (3%), the highest in Spain (15.3%). All these figures are thought to understate the problem; many have settled for part-time work against their will or simply abandoned the hunt for a job as futile.
In 1999, some 63% of people of working age had a job in the European Union. The proportion would have to rise to 76% if all those who want a job could actually have it.
[Least developed countries]
Per capita income growth was negative in most least developed countries during the 1980s and a heavy burden of external debt was accumulated. While economic growth stagnated, population and labour force growth has continued to be high. This has led to an increase in unemployment and underemployment. Unemployment along with increasing income inequality have contributed to the overall rise in poverty.
Unemployment constitutes a heavy social cost and contributes to a resurgence of protectionism. Political tension associated with high unemployment may also account for the reluctance of industrialized countries to expand their aid programmes.
Everyone recognizes the reality and growing seriousness of this problem in the industrialized countries. While it is alarming in the developing countries, with their high rate of population growth and their large numbers of young people, in the countries of high economic development the sources of work seem to be shrinking, and thus the opportunities for employment are decreasing rather than increasing. This phenomenon too, with its series of negative consequences for individuals and for society, ranging from humiliation to the loss of that self respect which every man and woman should have, prompts us to question seriously the type of development which has been followed over the past twenty years. Here the words of the Encyclical Laborem Exercens are extremely appropriate: "It must be stressed that the constitutive element in this progress and also the most adequate way to verify it in a spirit of justice and peace, which the Church proclaims and for which she does not cease to pray...is the continual reappraisal of man's work, both in the aspect of its objective finality and in the aspect of the dignity of the subject of all work, that is to say, man." On the other hand, "we cannot fail to be struck by a disconcerting fact of immense proportions: the fact that...there are huge numbers of people who are unemployed...a fact that without any doubt demonstrates that both within the individual political communities and in their relationships on the continental and world level there is something wrong with the organization of work and employment, precisely at the most critical and socially most important points." (Papal Encyclical, Sollicitudo Rei Socialis, 30 December 1987).
Most of the so-called unemployed in developing countries in fact work extremely long hours (10-15 per day, 6 to 7 days per week) in the informal sector. The issue is rather that they are paid extremely low wages.