By Oleg Kolysnychenko; elkolys@gmail.com ; 2010

Unemployment is a major social and economic problem that is present in some point in all countries worldwide. The unemployment may be defined as state in which, people who does not have a job, and are available for work, and are actively looking for work(International Labour Office's 1998). The prevalence of unemployment is usually measured by the unemployment rate, which is the percentage of those in the labor force who are currently unemployed. It is common among the modern economists to use the unemployment rate as an indication of the underuse of a nation's resources, and to inform on the economic and social hardship that the absence of employment creates. There is a need to stress the fact that the unemployment itself is powerful tool of preventing and (at some point) controlling the inflation. But still, the reasons that lead to the state of unemployment are not agreed by all parties. For instance, Keynesian economics emphasizes unemployment resulting from insufficient effective demand for goods and services in the economy, while Classical or Neoclassical economics focuses more on rigidities imposed on the labor market from the outside, such as unionization, minimum wage laws, taxes, and other regulations that may discourage the hiring of workers.

Furthermore, the economists not only disagree on the causes of the unemployment, but also how it should be measured. This is mainly due to the fact that there are many different types of unemployment. The most common ones are cyclical unemployment, frictional unemployment, structural unemployment and classical unemployment (Steven M. Sheffrin).

Cyclical unemployment occurs when there is not enough aggregate demand in the economy. Cyclical unemployment rises during economic downturns and falls when the economy improves. n this case, the number of unemployed workers exceeds the number of job vacancies, so that if even all open jobs were filled, some workers...