The Keynesian and Neoliberal View of Unemployment

Both the Keynesian era and the neoliberal era existed as a result of the economic crisis and war. Keynesianism was after World War II when the neoclassical economy was at stake. This crisis brought about the fundamental distrust of Keynesianism and the self-regulating nature of capitalism. Keynes' ideology believes that state intervention will increase to create economic stability. This policy should leave four policy regulations, full-time jobs, social safety nets, worker rights expansion, investment policy to the private sector.

Keynesian unemployment theory argues that an increase in the unemployment rate will reduce income, thereby reducing consumption and reducing total production (Keynesian, 2010). Individuals make decisions based on current income (Keynesian, 2010). Therefore, unemployment benefits can compensate for the decline in incomes of unemployed people. In Keynesian theory, if the wage goes down, the unemployment rate may decline (Keynesian, 2010). However, monetary wages are determined by institutional data (Keynesian, 2010). Because consumption is based on ordinary income, unemployment compensation is necessary to prevent further reduction in actual output (Keynes, 2010). Keynesian theory believes that increased unemployment compensation will affect the economy (Keynesian, 2010) (Hendrickson, 2010).

Labor is one of the most likely resources to be used. Unemployment means that existing workforce can not be used. Regarding unemployment, there are two main perspectives. Keynesian view and classical view Classical theory focuses mainly on the market role in the economy. If the market moves freely, there is nothing that stops them from quickly liquidating, and the economy will prosper. Market imperfections that interfere with this process should be handled by the government. Therefore, the main role of the government is the free operation of the market and the securing of a balanced budget. A classical economist believes that if the economy is left for itself, it tends to be fully employed. If the labor market is functioning properly, this can happen if there is unemployment, the following will happen:

4 Regular / Keynesian Unemployment / Lack of Demand Unemployment Circular unemployment is the most common type of unemployment in the capitalist economy that has developed industrially. According to classical economists, there will be a full employment balance over the long term. In fact, however, we found that the capitalist economy is characterized by alternating periods of prosperity and depression, increased economic activity and employment, and deterioration of the business environment and a reduction in employment opportunities. After Keynes, cyclical unemployment was also commonly referred to as Keynesian unemployment. Keynes considers such unemployment as involuntary unemployment. During the recession, Lerner called this unemployment the deflationary unemployment.