The proposition of okun's law
Arthur, a famous American economist? 6? 1 okun discovered the empirical relationship between economic growth rate and unemployment rate in periodic fluctuations, that is, when the actual GDP growth drops by 2% relative to the potential GDP growth (generally defined as 3% in the United States), the unemployment rate rises by about1%; When the real GDP growth increases by 2% relative to the potential GDP growth, the unemployment rate decreases by about 1%. This rule of thumb is named Okun's Law after its discoverer. The concept of potential GDP was first put forward by Okun, which refers to the maximum output value produced by a country's economy while keeping prices relatively stable. Potential GDP is also called full employment GDP, that is, the gross domestic product (GDP) reached when a country's total production capacity is completely released. This law once predicted the unemployment rate quite accurately.
For example, during the stagflation period of the United States 1979 ~ 1982, GDP did not increase, while the potential GDP increased by 3% every year and 9% in three years. According to Okun's law, the real GDP growth is 2% lower than the potential GDP growth, and the unemployment rate will increase by 1 percentage point. When the real GDP growth is 9% lower than the potential GDP growth, the unemployment rate will rise by 4.5%. Since the unemployment rate of 1979 is 5.8%, the unemployment rate of 1982 should be 10.3%(5.8%+4.5%). According to official statistics, the actual unemployment rate in 1982 was 9.7%. It is quite close to the predicted unemployment rate 10.3%. However, when people use the actual data of our country to test, they find that this law is not applicable in our country. The reason is that people don't fully understand Okun's law and ignore its applicable conditions. This paper will discuss the applicability of Okun's Law in China by discussing its applicable conditions.
The Relationship between Unemployment Rate and Economic Growth Rate in Okun's Law
Okun's law involves two variables: one is the unemployment rate; The other is the economic growth rate.
(A) from the unemployment rate to see the application of Okun's law
Judging from the unemployment rate, Okun's Law studies the unemployment rate excluding frictional unemployment and structural unemployment. Judging from the actual situation in China, the main component of the current unemployment rate in China is the natural unemployment rate caused by friction and structural factors. In addition, there are many factors that affect the speed of economic growth, and the effect of promoting economic growth can be reflected by small cyclical unemployment factors, which cannot be fully demonstrated statistically.
First of all, mass unemployment in China began in the late 1990s. After that, the unemployment rate rose sharply and fluctuated with time. Although the initial reason for the rising unemployment rate in China is the macroeconomic cycle and the adjustment of industrial structure, there is a completely different factor from the market economy countries such as the United States, that is, the enterprise labor system reform aimed at "reducing staff and increasing efficiency". Before workers were laid off and unemployed on a large scale since the end of 1990s, there was a serious problem of redundant staff in state-owned enterprises. According to the investigation at that time, the redundancy rate is generally between 1/3 and 2/5. In market economy countries, it is impossible to exist for a long time under the condition that enterprises make employment and dismissal decisions completely independently.
If we say that in the absence of large-scale layoffs, once the unemployment rate rises due to the decrease in labor demand, it will usually be accompanied by other changes in reducing labor use. The increase in unemployment rate caused by severe layoffs will increase the working hours of workers who remain in their jobs. Moreover, if the reform of reducing staff and increasing efficiency really works, labor productivity will also increase. All these factors have the opposite effect with the high unemployment rate reducing labor input. In this way, a single and indirect increase in unemployment rate can not be obviously translated into a decrease in output growth rate.
It is true that the macro-economic cycle also played a role in the factors that caused the unemployment rate in China to rise during the reform period. Especially at the stage when China's economy has just entered the escape sequence from the shortage economy, the restriction of domestic demand leads to the shortage of enterprises, which in turn leads to the decrease of labor demand, which is also the inducement for the rise of unemployment rate. However, as a persistent phenomenon in a period of time, the high unemployment rate in China is mainly a long-term natural unemployment phenomenon caused by structural changes and imperfect labor market functions. At the same time, among the factors of rising unemployment rate in this period, the contribution of natural unemployment rate is also very prominent. Therefore, in our country, the function of Okun's law is limited, that is, there is no significant negative correlation between economic growth rate and unemployment rate.
China adopts the form of registered unemployment rate, and laid-off workers are transformed into unemployed workers, which increases the unemployment rate, but the employment situation of the labor force is not necessarily bad. Because the unemployment rate published by the National Bureau of Statistics is only the registered unemployment rate, and the content reflected by this index is different from that used by market economy countries, the conclusions of many empirical studies are not reliable (such as Jiang Wei and others, 2005). In China, the registered unemployment rate often cannot accurately reflect the employment situation.
For example, from 1998 to 2000, during the most serious period of laid-off and unemployment in state-owned enterprises, the registered unemployment rate remained at 3. 1%. However, when the employment situation began to improve, this index rose sharply, from 3.6% in 200/kloc-0 and 4% in 2002 to 4.3% in 2003 and 4.2% in 2004. The reason is that people with laid-off status, that is, those who receive laid-off basic living expenses, no matter whether they have jobs or not, will no longer register for unemployment. In this way, this indicator does not include those who have no jobs after being laid off, thus underestimating the unemployment rate; With the merger from laid-off workers to open unemployment, the number of laid-off workers has decreased, while registered unemployment has increased. This increase does not mean that the labor market situation has become worse.
At the same time, China's unemployment rate statistics also face the following problems: the unemployment statistics are not comprehensive and do not involve the rural population. Recessive or semi-public unemployment in rural areas accounts for a considerable proportion in the whole country, which can be seen from the large number of "migrant workers" flowing into cities, but it is not included in the statistics. The upper limit of unemployment age is 50 for men and 45 for women, which is lower than the actual retirement age 10 years old. This makes the statistical value of unemployment rate deviate greatly from the actual value. The number of unemployed people in China is calculated by the number of people on the last day of the year, which is a time indicator. Theoretically, the number of unemployed people in a period of time should be counted, that is, the period index should be adopted. The internationally accepted unemployment rate is a monthly statistic, while China uses an annual statistic. Generally, the unemployment rate is investigated internationally, and the registered unemployment rate is adopted in China.