Beveridge curve
The Beveridge curve (based on William Henry Beveridge ) is a simple economic model that shows the relationship between unemployment and vacancies on the one hand and compares structural and cyclical unemployment on the other. It is also referred to in Anglo-Saxon literature as the UV curve (U for English unemployment , V for English vacancies ). Since the 1980s it has been named the Beveridge curve after the British economist William Beveridge, as he was already looking at the connection between vacancies and unemployment in 1944, even if the UV curve itself does not appear in his case.
Unemployment and vacancies
The red line marks the possible combinations between the number of vacancies in an economy and the number of unemployed. The inversely proportional relationship between the two figures quickly becomes clear: when unemployment is high, there are few vacancies; when unemployment is low, there are many vacancies.
Frictional and cyclical unemployment
Basic idea
However, the curve establishes another connection: that between structural unemployment and cyclical unemployment. In older textbooks, a 45-degree line was included in the model for this purpose. All points that lie on this line are characterized by the fact that unemployment and vacancies occur to exactly the same extent. In other words: If an economy is on this line, then unemployment is only a placement problem, since there is a job available for every unemployed person. So there is only structural unemployment.
To the right below the bisector there are more unemployed than vacancies. So unemployment is no longer just a placement problem. Even if all vacancies were filled (= avoidance of frictional unemployment), there would still be unemployed - the model attributes this to cyclical factors - one therefore also speaks of cyclical unemployment. If an economy is to the left above the 45-degree line, the number of vacancies is obviously greater than the number of unemployed due to the economic situation.
More recent approaches allow the number of unemployed and vacancies to differ in a cyclical neutral situation. There are usually more unemployed than vacancies because, on average, it takes more time for an unemployed person to find a job than it takes for a vacancy to be filled. The equilibrium curve is flatter than the 45 ° line. The slope of the equilibrium curve then results from the ratio of vacancies ( ) and unemployed ( ), which exists in a cyclically neutral situation.
Examples
If the economy is in point (1), there is no cyclical unemployment. The structural unemployment is then 0A.
On the other hand, if the economy is in point (2), there is also cyclical unemployment. Structural unemployment is as high as there are vacancies (in spite of the high unemployment) - i.e. in the range of 0C - the remaining unemployment (i.e. 0B - 0C) is then cyclical.
Economic policy implications
The Beveridge curve allows important conclusions to be drawn with regard to the economic policy that is necessary to reduce unemployment: It is therefore the task of politics to both eliminate the causes of structural unemployment and to reduce cyclical unemployment.
Measures against structural unemployment
Structural unemployment mainly includes frictional unemployment and mismatch unemployment. Graphically, a policy against structural unemployment is reflected in a shift in the Beveridge curve towards the origin.
Frictional unemployment occurs when there are suitable jobs for an unemployed person, but the unemployed person first has to look for a while until he has found the job that is right for him. To reduce this form of underemployment, the search process needs to be improved. According to the model, every such measure thus helps to reduce unemployment.
Mismatch unemployment occurs when the profiles of the unemployed and vacancies do not match in terms of qualification or region. It can be reduced, for example, through qualification measures or the promotion of regional mobility.
Many economists define structural unemployment as unemployment that is not cyclical (including natural unemployment ). Some economists use the term for mismatch unemployment. The term is therefore not used uniformly.
Measures against cyclical unemployment
According to the curve, there is a second form of underemployment, cyclical unemployment. However, it cannot be reduced by optimizing the matching process. A reduction in cyclical unemployment is only possible by mitigating cyclical fluctuations. The question of which policy is necessary for this is answered in opposite directions by economists from different schools of thought.
Individual evidence
- ↑ Christopher Pissarides (2000): Equilibrium Unemployment
- ↑ Beissinger, Thomas (2003): Structural Unemployment in Europe - An inventory. In: Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, vol. 36, no. 4, pp. 411–427.
- ↑ Cheshire, PC & Weeden, R. & National Institute of Economic and Social Research. (1973). Regional unemployment differences in Great Britain