Image source: Terry Everton
Ever known someone, such as a parent or friend, who has lost their job, or who has remained unemployed for an extended period of time? Traditional theories of unemployment argue that your friend is unemployed because he or she is too lazy or lacks the skills to make him or herself marketable to employers. In the above picture, we see a different theory illustrated: namely, that employers use the threat of unemployment to increase the productivity of their workforce. As employers lay off workers, labor productivity increases. Similarly, as unemployment falls, workers feel more secure in their jobs causing them to slack off. The fluctuations in unemployment are thus at least partially a cause of employers' desire to control their workforce.