• UNCERTAINTY
• See information.
• UNDERGROUND ECONOMY
• See BLACK ECONOMY.
• UNEMPLOYMENT
• The number of people of working age without a job is usually expressed as an unemployment rate, a percentage of the workforce. This rate generally rises and falls in step with the BUSINESS CYCLE--cyclical unemployment. But some joblessness is not caused by the cycle, being STRUCTURAL UNEMPLOYMENT. There are also VOLUNTARY UNEMPLOYMENT and involuntary unemployment. Some people who are not in work have no interest in getting a job and probably should not be regarded as part of the workforce. Others choose to be out of work briefly while they look for, or are waiting to start, a new job. This is known as FRICTIONAL UNEMPLOYMENT. In the 1950s, the PHILLIPS CURVE seemed to show that policymakers could reduce unemployment by having higher INFLATION. Economists now say there is a NAIRU (non-accelerating inflation rate of unemployment). In most markets, PRICES change to keep SUPPLY and DEMAND in EQUILIBRIUM; in the LABOUR market, wages are often sticky, being slow to fall when demand declines or supply increases. In these situations, unemployment often increases. One way to tackle this may be to boost demand. Another is to increase LABOUR MARKET FLEXIBILITY.
• UNEMPLOYMENT TRAP
• When unemployed people who receive benefits, either from the GOVERNMENT or from private CHARITY, are deterred from taking a new job because the reduction or removal of benefit if they do will make them worse off. Also known as the POVERTY TRAP, it can be addressed, to an extent, by continuing to pay benefit for a while to unemployed people returning to work. (See WELFARE TO WORK.)
• UNIONS
• In developed countries, at least, trade union membership and influence has declined over the past three decades. Fewer WAGES are now set by collective bargaining, and far fewer working days are lost to strikes. Unions, which are in effect a CARTEL of workers, probably make UNEMPLOYMENT higher than it would be without them, as collective bargaining often pushes wages above the level that would bring LABOUR SUPPLY and DEMAND into EQUILIBRIUM. These higher wages increase supply and reduce demand, with the result that there are more jobless people. Unions thus deepen a conflict between those in the labour market who are insiders, that is, union members, and those who are outsiders, typically non-unionised, poorly paid or jobless people. However, unions can combat the excessive market power of some FIRMS, particularly when the firms (or a GOVERNMENT) dominate a particular job market. They can support workers who are badly treated by management. They may sometimes provide an efficient, and thus valuable, channel for communication between workers and managers, particularly in countries such as Germany, where conflict between management and unions is viewed as unhealthy.
• USURY
• Charging INTEREST, or, at least, an exorbitant rate of interest. Plato and Aristotle reckoned that charging interest was “contrary to the nature of things”; Cato considered it on a par with homicide. For many centuries, the Catholic Church regarded as sinful the charging of any interest by lenders and it was not allowed in Catholic countries, although Jews were exempted, provided they did not charge excessive rates. According to Pope Benedict XIV, in 1745, interest should be regarded as a sin because "the creditor desires more than he has given".
• In most modern economies, interest is recognised as a crucial part of the economic system, a reward to the lender for the RISK taken in making a loan. Even so, most developed countries have some form of usury law imposing limits on how high interest charges can be. These aim to protect borrowers from being exploited by unscrupulous loan sharks.
• UTILITY
• Economist-speak for a good thing; a measure of satisfaction. (See also WELFARE.) Underlying most economic theory is the assumption that people do things because doing so gives them utility. People want as much utility as they can get. However, the more they have, the less difference an additional unit of utility will make – there is diminishing MARGINAL utility. Utility is not the same as utilitarianism, a political philosophy based on achieving the greatest happiness of the greatest number.
• A tricky question is how to measure utility. MONEY does not (entirely) capture it. You can get richer without becoming more satisfied. So some economists have tried to calculate broader measures of happiness. They have found that people with jobs are much happier than unemployed people. Low INFLATION also makes people happier. Extra INCOME increases happiness a bit, but not much. In many countries incomes have risen sharply in recent years, but national surveys of subjective well being have stayed flat. Within countries, comparing people across the income distribution, richer does mean happier, but the effect is not large. Married people are often happier than single people; couples without children happier than couples with; women happier than men; white people happier than black people; well-educated people happier than uneducated people; the self-employed happier than employees; and retired people happier than economically active people. Happiness generally decreases until you are in your 30s, and then starts rising again. Other economists are dismissive of such studies. They argue that people are rational maximisers of their own utility, so, by definition, whatever they do maximises their utility.