I

ArticlesInvoluntary
Unemployment versus“Involuntary
Employment”
J.M. Keynes and Beyond

Yasuhiro Sakai

Shiga University / Professor Emeritus

Introduction

One day when I myself felt tired of writingsome essays, I happened to find a rather oldbook in the corner of the bookcase of my study.
The book, entitled Keynes' General Theory: Reports of Three Decades, was published in 1964.
More than four decades have passed since then.
As the saying goes, time and tide wait for noman! 1)In the light of the history of economic
thought, back in the 1930s, John Maynard
Keynes (1936) wrote a monumental work of
economics, entitled The General Theory of Employment, Interest and Money. How and towhat degree this book influenced the academic
circle at the time of publication, by and large,
seemed to be dependent on the age of economists. According to Samuelson (1946),
contained in Lekachman (1964), there existed
two dividing lines of ages; the age of thirty-fiveand the one of fifty:"The General Theory caught most economists
under the age of thirty-five with the unexpected virulence of a disease first attacking
and decimating an isolated tribe of south sea
islanders. Economists beyond fifty turned
out to be quite immune to the ailment.
With time, most economists in-between began to run the fever, often without knowing
or admitting their condition." (Samuelson, p.
315)
In 1936, Keynes himself was 53 years old because he was born in 1883.
Remarkably, both Joseph Schumpeter andYasuma Takata were born in the same year as
Keynes. If we followed the Samuelson doctrine
1) For details, see Lekachman (1964).

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Another related topic would be the relationship between Keynes and Knight. Frank H.
Knight was born just two years later thanKeynes, and made an outstanding contribution
to the same field as Keynes, that is the economics of risk and uncertainty. When the General
Theory was published in 1936, Knight was 51
years old, thus a bit over fifty. It is worthy tonote that Knight (1937) carefully read the Gen-

eral Theory just after its publication, leaving thefollowing criticism of Keynes: "I [Knight] must
confess that the labor I have spent on The General Theory of Employment, Interest, and Money
leaves me with a feeling of keen disappointment." (Knight(1937); Emmett (ed.) (1999),
p.366)
Knight's word "keen disappointment" was avery strong expression to demonstrate his spiteful criticism after reading the book. The degree
to which Knight was disappointed was also
well-described by P. A. Samuelson, who went
to Chicago at sixteen in 1931 and received his
B.A. before going to Harvard for his Ph.D. In
the New Yorker, Columnist John Cassidy(2009) wrote a very instructive interview article with Samuelson, which was later
reproduced by Tyler Durden (2012) in Zero
Hedge with a more attractive title. According
to the article, "Knight really thought Keynes
was the devil," Samuelson recalled. "Knight
didn't believe in God, but he knew a devil
when he saw one. He insisted that the old economic system — the neoclassical one —worked pretty well, except in the Great
Depression." It seems that Keynes and Knight
are like oil and water: Keynes likes macro, but
Knight likes micro. On the surface, they areboth fond of risk and uncertainty, At the bottom of their thoughts, however, they lookfundamentally incompatible.
The contents of this paper is as follows. In
section 2, we will carefully reexamine the concept of involuntary unemployment that was
first employed by Keynes in the 1930s and later
have given rise to a heated controversy. We will
especially pick up the two great economists,
Takata and Knight, and aim to discuss how
and to what extent they differ from Keynes in

Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai

aforementioned, both of them should havebeen quite immune to the "Keynesian ailment."
It was well-known that Schumpeter had
thought Keynes as one of his greatest rivals
from his youthful days. Although Takata distinguished himself as a great social scientist inJapan and the East, it was quite unfortunatethat he was kept rather unknown in the Westuntil Michio Morishima, once Takata's disciple,
helped to publish some English translations of
Takata's great books on sociology and economics. In his important yet non-translated book,
Takata (1950) once remarked:"[T]his book aimed to state my own theoryof power economics for which, as a critic of
the Keynes doctrine, I [Takata] have continuously put all my energy for those thirty
years. ...... Although Keynes and I were bornin the same year and have done research inthe same field, namely social sciences, theopinions of the two persons should not be
the same. How and to what extent my theory is different from his must be a very
interesting question to ask. Which will be
the correct theory of economics, Keynes or
Takata? Let the future history decide it!
This is my true motive of writing this book.
(Takata (1950), Preface, p. 1)049

modern perspective. In section 3, the conceptof "non-voluntary employment" rather than theone of voluntary unemployment will be introduced in line with the original work ofNobuaki Takahashi, a rising Japanese economist. Concluding remarks will be made in the
final section.

II

Involuntary Unemployment
a la Keynes

2-1. A Very Terribly Written Book
of Macroeconomics
According to J. M. Keynes, the fundamental
facts of the capitalist economy lies in massive
unemployment and the inequality of income
and wealth. In fact, Keynes (1936) lamented
with a strong expression: "The outstanding
faults of the economic society in which we live
are its failure toprovide for full employment
and its arbitrary and inequitable distributionof wealth and incomes." (Keynes (1936), p.
372)
When Keynes was writing the General Theory, he was constantly annoyed by his longstruggle of escape habitual modes of thought
and expressions. The difficulties lay in finding
the best way to get rid of the old ideas which
ramified into every corner of our minds. Surely, as the saying goes, old customs die hard. The
cost of replacing the old ideas by the new ones
would sometimes make the burden too heavy
for Keynes. As a result, his final work, namely
the General Theory, became one of the mostdifficult books in the history of economic
thought. In this connection, it is quite interesting to record what Richard Kahn once told
Hirofumi Uzawa after reading it: "Mr. Uzawa,
this may sound strange to you. I honestly tell050

you, however, that only in the last year (namely,1978), I finally read the General Theory to thevery last page. Then I found it a very terribly
written book. I could not understand at all
what it really intended to inform the reader
about." (Uzawa (1984), p.15)
Keynes's main interest was centered aroundthe question of how the level of output andemployment was determined. In order to conquer an academically high mountain named
The General Theory, we have to make every possible effort to find a very effective route leading
us to the peak. As the saying goes, where there
is a will, there is a way.
2-2. The Original Framework:
The Aggregate Supply andthe Aggregate Demand
After critically discussing the postulates of
the neoclassical economics in Chapter 2,
Keynes boldly attempted to introduce his own
ideas and concepts in Chapter 3, in which hegave a brief summary of his unique theory of
employment and unemployment. The following sentence is of the utmost importance for us
to comprehend the essence of Keynes's theory.

"[T]he volume of employment in equilibrium depends on (i) the aggregate supply
function, φ, (ii) the propensity to consume, χ,and (iii) the volume of investment, D2, Thisis the essence of the General Theory of Employment." (Keynes (1936), p. 29)
Then the following question would come toour mind right away. What is the aggregate
function all about? Very strange enough, theproperties of the aggregate supply function had
not been thoroughly investigated until Nubuo

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Okishio (1956) wrote a technical yet excellent
paper in an obscure Japanese journal, but thenunfortunately, doomed to leave out of memory
again by an explosion of works on the morefashionable topic of IS and LM functions.2)
Following the original work of Keynes(1936), let Z be the aggregate supply price ofthe output from employing N men. We may
call the relationship between Z and N, namely
Z = φ(N ) , the aggregate supply function. Let
D be the proceeds that entrepreneurs expect toreceive from the employment of N men. We
can call the relationship between D and N, i.e.
D = f (N ), the aggregate demand function.
Then the volume of employment is provided by
the point of intersection between the aggregate
supply function and the aggregate demand
function. The value of D at the point of f (N ),where it is intersected by φ(N ), is named byKeynes the effective demand. Keynes claims
that this is the substance of the General Theoryof Employment.
According to Keynes, the effective demand,
namely D, is the sum of the two quantities, D1
and D2. Here, D1 represents the amount which
the community is expected to spend on consumption, and D 2 , the amount which it isexpected to devote new investment. Keynes
assumes that D1 is a function of N, which we
may write χ (N ), depending on the propensity
to consume. In contrast to D1 , D2 is supposed
to be an independent variable since it may increase or decrease rather independently of N.
Summing up, we may have the following relations:
Z = φ(N )
(1)
D = f (N )= χ(N ) + D2(2)By carefully looking at equations (1) and (2),we may reach the following conclusion. The
equilibrium volume of N at which Z and D are
equal depends on the three factors: namely, φ, χand D2. Needless to say, this is the very essenceof Keynes's theory of employment.
Graphically speaking, the aggregate supply
function Z (N ) and the aggregate demand
function D (N ) are depicted in Fig. 1. As has
been lucidly pointed out by Okishio, (1957),
the function Z (N ) must be an increasing andconvex function whereas the function D (N )must be an increasing and concave function.
Note that the distinction between convex andconcave curves is of the most importance. The
point of intersection Q* stands for the equilibrium of the Keynes system, and N* and Y*
respectively show the equilibrium volume of
employment and the one of the aggregate output so that Y* = Z* = D*.
Let as suppose that the point of full employment is denoted by N f . Then we will easily see
in Fig.1 that the two points N* and N f should
not be identical. Expectedly, N* is less than N f,meaning that we are in an underemployment
equilibrium. By the same token, on the verticalaxis, Y* is less that Y f, so that the aggregate
production is operating at less than full capacity. In the history of economic thought, only alimited number of economists have been braveenough to point out the non-equivalence of N*
and N f. Karl Marx (1867), a famous or infamous socialist who has written Das Kapital, is
one exception. It is J.M. Keynes that represents
another outstanding exception among non-socialists.
More than 50 years ago, Okishio (1957) tookgreat pains to mathematically derive the aggregate supply function from the micro economic2) Nobuo Okishio was one of my respected teachers at

Kobe University. It was quite unfortunate that almost
all of his works were written in Japanese.

Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai

051

basis, and to rigorously discuss its interesting
properties. Unfortunately, his outstanding
works have been relatively unknown until
Michio Morishima, his close friend, energetically introduced Okishio's accomplishments toforeign countries in a small yet influential
book, Marx's Economics.
Since Okishio's mathematical derivation of
the aggregate supply function was so nice tofollow, we are content here to attempt more elementary derivation by help of a simple figure.3)
To this end, let us denote the aggregate production function by F(N). It is usuallyassumed to be increasing and concave; so that
F'(N) > 0 and F" (N) < 0. The vertical axis
measures the aggregate supply price of the output from employing N, whence Z = p F(N).

Corresponding to three possible supply prices,p1, p2 and p3, we have three possible concave
curves, p1 F(N), p2 F(N), and p3 F(N) . Since
the aggregate profit can be written as Π = p
F(N) — w N — C o where C o denotes the
fixed cost, its maximization with respect to w
results in the following equation:p F ' (N) = w ,(3)which would teach us that even at the aggregate level, the price of the marginal product oflabor is supposed to be equal to wages. Presumably, we could interpret Eq. (3) as the"aggregate version" of the marginal productivity
doctrine. This is just one possible interpretation, being subject to critical investigation. . In

Fig. 1 The aggregate supply and aggregate demand functions

3) For a detailed derivation, see Okishio (1956) and Nii-

no-Okishio (1957),..

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the light of economic thought, there has been
serious controversies regarding the existence of
the aggregate production function per se.
Whether and to what degree Keynes himself
would agree with such an interpretation would
remain a hard nut to crack.
Eq. (3) above enables us to obtain the threeequilibrium points Q1, Q2, and Q3 as shown in
Fig. 2. By combining these three points andpossibly many more equilibrium points, we areable to find an increasing and convex curve
Z(N), which is indicated by a bold dottedcurve in the figure. This Z(N) is what we havestrongly wanted to derive, the aggregate supply
function. People might call it Keynes's favorite"macro tool", or possibly his unwanted "macro
enigma", depending on the degree and direction of his taste for Keynes's theory.

By boldly introducing the new concepts of
the aggregate supply and aggregate demand
functions into his new book the General Theory, Keynes intended to escape from the oldmodes of thought and expression. New wine
had to be put into new bottles! One of such
old modes was well-represented by the neoclassical doctrine, which could be expressed in thefollowing Say's law: "Supply creates its own demand." If we restate such a law within the newframework a la Keynes, we can say that "the aggregate demand price of output as a whole isequal to its aggregate supply price for all volumes of output." (Keynes (1936), p. 26) In
short, f (N) and φ(N ) are equal for all values ofN, namely for all levels of output and employment, namely that these two functions are
identical, or f (N) ≡ φ(N ). Consequently, inFig. 2 A graphical derivation of the aggregate supply function

Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai053

the neoclassical world, there should be no obstacle to full employment. By completely
denying Say's law, Keynes thus succeeded ingetting out of the old world toward the newone.
2-3. Involuntary Unemployment:
A New Concept in the Labor Market
There is fundamentally a methodological issue between Keynes and Knight. Keynes
analysis started with the presence of unemployment and then discussed how to adopt newpolicy measures to eliminate unwanted obstacles to the return to full employment. In
contrast, Knight remained to live in the oldneoclassical world: he thought that the otherway around should be the correct one: i.e. full
employment was regarded as the most usual
state of affairs. Unlike Keynes, we should notassume unemployment first, but instead start
our discussion with full employment, and thenexplain how unfortunate situations with nojobs could occur. The two giants, Keynes andKnight, adopted just the opposite ways ofthinking.
Let us carefully discuss how Keynes introduced his new concept of "involuntar yunemployment" in the labor market. In plain
English, involuntary unemployment occurs
when a person is willing to work but cannot
find his job: he is unwillingly out of the job
market. Note that involuntary unemployment
must be different from "voluntary unemployment," where workers intentionally choose notto work. The former is also distinguished fromfrictional unemployment, where certain degrees of mismatches between job offers andseekers take place because of geographical, seasonal, informational reasons or whatever.

054

The neoclassical view of the labor market issimple and straightforward. The labor market
is depicted in Fig. 3, where the horizontal axis
measures the amount of employment, N, andthe vertical axis the real wage rate, R (= w/p).
According to Keynes, the neoclassical doctrine
is based on the two fundamental postulates:(i) The real wage rate is equal to the marginal product of labor; namely, R = w/p = F ' (N).
(ii) The utility of the real wage when a given
amount of labor is employed is equal to themarginal disutility or pain of that amount of
employment.
In the light of postulate (i), it would be aneasy job to find that an increasing R results in adecreasing N, so that the labor demand curve
DD must be decreasing. Similarly, by virtue of
postulate (ii), we could show that an increasing
N corresponds to an increasing R, whence thelabor supply curve SS must be increasing. Theintersection point Q of the two curves, DD
and SS, shows the equilibrium of the labormarket in which the labor demand and supply
are just equal. The equilibrium amount of employment and the equilibrium rate of real wage
are respectively indicated by N* and R*. Insuch a perfect world, there should emerge no
unemployment at all.
The question of critical importance is whether or not the equilibrium point Q* guarantees
the ideal state of full employment in the labormarket. Let us denote the equilibrium amountof full employment and its corresponding rateof real wage by N f and R f , respectively. Sucha situation would occur in Fig. 3 when the labor demand curve from shift upward from DD
to D' D' and the new equilibrium point shift
upward from Q* to Q'. If this is the case thenwe would find N f less that N*, and Y f less thanTHE HIKONE RONSO

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Fig. 3 Is involuntary unemployment a real phenomenon ?

Y*, meaning that a undesirable situation withjobless persons would occur. Not all the persons who are willing to work cannot find theirjobs. More exactly, the line segment N* N f on
the horizontal axis measures the amount of involuntary unemployment.
The important question to ask at this point is
why we have entered the miserable world of involuntary unemployment. According toKeynes, the answer should be unmistakably
clear : it is because of the lack of aggregate dema n d w h i c h i n t urn i s c a u s e d b y th e
insufficient amount of consumption or investment as a whole. Otherwise, the labor demand
curve could be pushed up from DD to D'D',
and correspondingly the equilibrium pointfrom Q* to Q f.

In the academic world, there are a group ofliberal economists who have the strong desire
to understand the meaning of involuntary unemployment and its policy implications. For
example, Shapiro and Stiglitz (1985) remarked:"To us, involuntary unemployment is a real andimportant phenomenon with grave consequences that needs to be explained andunderstood." (Shapiro and Stiglitz (1985), p.
1217)
In contrast, there exist another group of conservative economists who do not believe thatinvoluntary unemployment in its true sense really exists, thus having serious doubts about its
relevance to the core of economic theory. In
this regard, Robert Lucas (1978), a famous
market fundamentalist, once remarked: "[T]Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai

055

here is an involuntary element in all unemployment in the sense that no one chooses bad luckover good; there is also a voluntary element in
all unemployment, in the sense that, however
miserable one's current work options, one canalways choose to accept them. ...... the unemployed worker at any time can always find some
job at once. " (Lucas (1978), p. 354) Lucas has
the strong belief that unemployment must be
voluntary rather than involuntary. It is truethat a certain jobless worker could desperately
accept any job if he neglects human right anddignity. We must remember, however, that aperson should not be a "working machine" ; if
he wants to work at a shop or factory, then hemust find a good reason for staying there as ahuman being.
We could also think that the labor market
operates like a social institution in which both
employers and employees as flesh-and-blood
persons meet together and make some form oflabor contracts between them. Remarkably,
Yasuma Takata, a very famous Japanese social
scientist, applied his unique power theory to
the labor market, thus shedding new light on
involuntary unemployment. This and related
topics will carefully be discussed in the following sub-section.
2-4 Takata on Keynes:
Another Look at Involuntary
Unemployment
Yasuma Takata (1883-1972) , a contemporaryof J.M. Keynes (1883-1946) and J. A. Schumpeter (1883-1950), was a person with plenty of
striking characters; namely, cool head, warm
heart and strong will. He was not only a world
famous sociologist and a first-class economist,
but also a highly talented poet. He distin-

guished himself as a great educator who
succeeded in establishing the world -famous
Socioeconomic Institute at Osaka University,
which collected a group of young and ambitious scholars including the young Morishima
and the young Nikaido. 4)
According to Takata, a person engaged in
trading does not only seek for more utility, butalso he or she possesses a strong desire for more
power. Such desire for seeking power is mostclearly present in the labor market. Because
the labor market is of human and social character, the concepts of justice and moral must also
be involved. The real wage rate for different
works are not so freely determined by supplydemand interactions as are traditionally
supposed by neoclassical economists, but theabsolute money wage per se should demonstrate the worker's true desire for maintaining
or raising pride or prestige.
It is in this sense that Takata believed that
Keynes's new approach to the working of thelabor market became somehow close to Takata's one. We will show their analytic similarity
by help of a new figure, namely, Fig. 4. Notethat the real wage rate is the ratio of money
wage rate to the price level; i.e., R = w/p . This
figure distinguishes itself from the last figure in
the sense that the vertical axis does not measure R any more, but rather w. As both Takata
and Keynes strongly believed, the difference
between R and w is of critical importance withrelation to the origin and persistence of involuntary unemployment. To take an example, aperson may demonstrate strong resistanceagainst a 5 % cut in his or her money wage,
even though his or her degree of resistancemight be rather weak when the price level increases by 5 %. Mathematically speaking, these4) See Takata (1950, 1995) and Morishima (1994, 1998).

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two effects should be the same in terms of real
wage rate. In reality, however, the person inquestion is most likely to prefer the price riseto the money wage fall. This is certainly because the level of money wage per se may
indicate the degree of his status in the society;indeed, a cut in w , not a rise in p, would represent a downfall in his pride or prestige. In thisconnection, Keynes (1936) once remarked: "Infact, a movement by employers to revise money-wage bargains downward will be much morestrongly resisted than a gradual and automatic
lowering of real wages as a result of rising
price." (Keynes (1936), p. 264)
Keynes already recognized strong resistanceby workers against a money wage cut in a modern democratic society. It is in this sense that
Keynes became very close to Takata, who as astrong promoter of sociological power theory
was brave enough to go even beyond Keynes.
Let us look back at Fig. 4. Then we see thatthe vertical axis measures the money wages, w,
not the real wages, R = w/p. In our opinion,such an assumption looks very congruent with
the Keynesian spirits. The upward-sloped
curve SS associates employment, N , with money wage, w. This is not the aggregate supply
curve we want to discuss here, however. We areinstead eager to pay special attention to thekinked curve S'T*T'S which consists of the twoparts; the horizontal part S'T*T' and the increasing and concave part T'S. The firsthorizontal (bold-faced) part represents the absolute level of money wage to be desired by theworkers; indeed, as was wisely asserted byKeynes himself, any movement by the employ-

Fig. 4 Strong Resistance to Cut in Money Wages:
Takata's Interpretation of Involuntary Unemployment

Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai

057

ers to revise the level downward would strongly
be resisted by the workers.
Let the aggregate demand curve be denotedby DD. Then surely, its intersection T* withthe kinked curve S'T*T'S would stand for theequilibrium under question. Note that N* indicates the amount of underemployment.
Note that N* must be less than N f , the amountof full employment, which is attainable only if
the aggregate demand moves upward from DD
to D'D'.
In the above we have shown that when theaggregate demand is deficient there is underemployment of labor: there are workers
unemployed who would be willing to work at
the existing level of money wage. As the aggreg ate demand rises, howe ver, a g g reg ate
employment increases correspondingly. The
above is by and large the essence of KeynesTa k a t a t h e o r y o f e m p l o y m e n t a n dunemployment. Power really matters!
It is remarkable to see that in their later years,
both J.R. Hicks (1989) and Robert M. Solow(1990) came close to Takata. As Morishima(1994) remarked, Takata's power theory is still
alive today. We can learn new lessons from oldteachings!

III “Involuntary Employment”:
A New Concept Beyond
Keynes3-1. Depression Economics:
Old and New
Most people in the world, especially in the
United States, remember the 1930s as the mostterrified and most tragic years in the 20th centur y. In 1935, just one year before thepublication of The General Theory, J.M. Keynes

058(1936) recognized the serious failure of the capitalist system as a whole. This is now what we
could call "Old Depression Economics".
Around 20 percent of the American labor
force was unemployed, and real Gross National
Product still remained under the level of 1929.
As Galbraith (1987) correctly recalled, to noneof those horrible events could the neoclassicaleconomics correctly respond. In spite of thefact that so many people in the street could not
find jobs, they were by and large regarded as
being voluntary unemployed. The depression
economics of Keynes seemed to offer us the
only one solution which could solve the serious
problem of mass unemployment in the capitalist society.
And so many years have past since then. And
so many events have happened between the
1930s and the 1990s — the Second World War,the Cold War, the Fall of the Berlin Wall, theCollapse of the Soviet Union, the Iraq War,and the like.. It seemed that the capitalist
economy was the final and indisputable winnerof the Cold War.
As the saying goes, however, history repeats
itself. The "Economic Tower of Babel" is destined to collapse. Already in the late 1990s, arespectable group of Asian economies including Japan, India and China experienced an
economic slump which bore a striking resemblance to the Great Depression. In his new
edition, Paul Krugman (2008) , a winner of theNobel prize in economics and one of the mostinfluential economists today, published a very
interesting book entitled The Return of Depression Economics and the Crisis of 2008. This iswhat we may call "New Depression Economics".
As Krugman and other prominent economists
have noticed, "Depression Economics" has nev-

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er been dead, and now is safely andtriumphantly returned to the academic profession. In his new book, Robert Skidelsky(2009), Keynes's well-known biographer, hasdeclared that after so many years, Keynes is still
alive and fundamentally all right. It seems that
we live in the Second Age of Keynes, which issimilar to, yet must be different from, the FirstAge of Keynes.
3-2. Unhappy Workers Dispatchedby Outside Agencies
I have a habit of getting up rather early, exactly at 6:30, every morning and enjoying
reading several daily newspapers from the top
page through the last one. One cold wintermorning, I had a serious shock by reading thefollowing complaint against social injustice by
Mr. Taro Tanaka, who is one of the now popular non-regular workers in contemporary
Japan:"I am a non-regular employees who unwillingly have to work under only five year
agency contracts. I would like to let you
know that my yearly income is merely two
million yen, around half of the pay of a regular worker. Because of such a low income, I
remain unmarried, having no choice otherthan living with my old parents. I wonder
whether and how I am able to get out of sucha hopeless situation. I want to die without
losing my human dignity." 5)
We could call Mr. Tanaka one of the modern
working poor, or even one of the modern "wageslaves." Keynes has paid special attention to
those people who are willing to work at the existing pay but cannot find their jobs. Clearly,

Mr. Tanaka is not such an involuntarily unemployed person. Judging by appearance, he has a
job but is unwillingly working under unfair
working conditions such as extremely low pay,
no guarantee for promotion, and no permanent contract. In substance, he might becalled an "involuntarily employed person" or asort of "wage slave" in a modern society.
As discussed above, Keynes (1936) has shownthat when the aggregate demand is deficient
there emerges under-employment of labor in
the sense that there are men unemployed who
would be wiling to work at less than the existing real wage. As a result, as the aggregate
demand increases by means of a rise in investment or consumption, employment as a wholeis expected to increase. This is certainly the
problem of involuntary employment which
was energetically discussed by Keynes in the
1930s.
Eighty years have passed since then. We are
now in the 2010s. Presumably, the depression
economics a la Keynes has returned to a certain
degree. We would like to say, however, thatthat was the past; things seem to be a bit different today. Looking at the Japanese data
today, there are so many men including Mr.
Tanaka aforementioned, whose jobs are neither
regular nor wanted. There should be a clearcut distinction between the regular and nonregular workers, which has been rather ignored
even by Keynes himself. Non-regular workers
are those who are dispatched by an outside
agency in order to work less than full time for alimited duration (at most for five years). In
contrast, regular workers are those who work
full time under permanent contracts with theircompanies. Although regular workers enjoy
benefits such as bonuses, housing, training and5) Mr. Tanaka's complaint or similar accusations can beheard everywhere and every day in Japanese Newspapers
today. Japan is no longer a class-free society!

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Yasuhiro Sakai059

lifetime employment, non-regular members
might get as little as half of the pay for thesame work, with no bonuses and no fringe benefits.6)
3-3. Takahashi’s New Approach to“Involuntary Employment” :Looking Beyond Keynes
We now live in the 21st century that appears
to be the Uncertain Age in which everything
in the future is uncertain and unpredictable.
Although, so many things have happened between the 1930s and the 2010, it seems that the
depression economics a la Keynes has returned.
As they say that the "007" in the movie is alive
twice, Keynes is destined to alive more than
twice.
It is under such circumstances that Nobuhiko Takahashi, one of rising liberal
economists in contemporary Japan, boldly introduced the new concept "involuntar y
employment into economic theory. In his
small yet ambitious book, Takahashi (2012) has
wanted to show that the severe crisis of the Japanese economy today resides neither in
deflation nor in accumulated financial deficit,
but rather in involuntary employment. Here,the word "involuntary employment", which has
newly been invented by him, is supposed tomean the severe state of employment in which,as typically exemplified by the working poorand the men who work overtime till late, theemployees are forced to work against theirwills: indeed, their working pains presumably
far exceed their earned wages. In what follows,
let us attempt to explain his ideas of involuntary employment by help of a figure.
In Fig. 5, it is noted that the vertical axis measures real wages, R = w/p, rather than money

wages, w. The equilibrium in labor market isindicated by the intersection point Q*, of thetwo curves; namely, the upward-sloped labor
supply curve SS and the downward-sloped labor demand curve DD. Needless to say, theequilibrium amount of wages is indicated by
R*. This R* is supposed to show the wages forfortunate regular workers, not the one for unfortunate non-regular workers.
In Fig. 5, it is noted that the vertical axis measures real wages, R = w/p, rather than money
wages, w. The equilibrium in labor market isindicated by the intersection point Q* , of thetwo curves; namely, the upward-sloped labor
supply curve SS and the downward-sloped labor demand curve DD. Needless to say, theequilibrium amount of wages is indicated by
R*. This R* is supposed to show the wages forfortunate regular workers, not the one for unfortunate non-regular workers.
As mentioned above, we now live in a sort of"class society." Like airplane passengers, there
are two distinct classes within the workers— the "first-class workers" and the "secondclass workers", with no intermediate "businessclass workers" being present. The second-classworkers or non-regular workers are not hiredby the firm they are actually working at, but
merely dispatched to the job from an outsidehuman-allocation agency. From the very nature of things, the power of humble nonregular employees are much weaker than theone of upper-seated employers. Consequently,
as is seen in Fig. 5, there emerges a double wages structure, the upper level R* and the lower
level R u . While the regular members earn
their wages as much as R* , the non-regularmembers are forced to accept the minimal
wages Ru . There the difference between the6) For rigorous empirical approaches to the 2014 em-

ployment structure and the 2016 wages structure in theJapanese society, see Japan Ministry of Welfare and Labor (2015, 2016).

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Fig. 5 Takahashi on "involuntary employment": Is there no resistanceto pay cut ?

points U and V, or equivalently the one between Nu and Nv is supposed to measure theamount of "involuntary employment", or more
plainly "unwanted employment."
If the labor market under question is depicted in Fig. 5, we have to face a sort of "labor
discrimination." At this point, the question
which might naturally arise in our head is why
and how long such a discrimination can continue. This would really be a rather easyquestion but very hard to answer !
It would almost always be the case that nonregular members such as temporary or parttime instructors without tenures are simply
underpaid; they earn much less pay than they
really deserve.

It seems that Takata's power theory may
work again here! The place of regular workers
in a modern society has been historically high,and their powers are guaranteed by strong labor unions. In contrast, non-regular workers
are not well-organized and less respected byother members of the society; consequently,
they could little resistance against pay cut.
Notwithstanding those power theoretic interpretations, we need to do much further
inquiry.

Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai

IV

Concluding Remarks

Quite recently, Thomas Piketty (2013), a rising French economist, published a very excitingbook entitled Le capital au XXIe siècle. Its Eng-061

lish translation Capital in the Twenty-First
Century published a year later immediately became a best seller all over the world. This title
per se seems to remind us of the return of KarlMarx (1968), who published a very sensational
book entitled Das Kapital more than 140 years
ago.
Piketty's new book is a timely and well written book. By and large, it has been so wellreceived by the general public as well as the
economics profession. Why has it been so
popular all over the world? In our opinion,
the key to answering this question resides in
the old and new remark by Keynes (1936): theoutstanding faults of the economic society inwhich we live are its failure to provide for full
employment and its arbitrary and inequitable
distribution of wealth and incomes.
According to Keynes, there are two criticalproblems we have to solve in the capitalist
economy, i.e., unemployment and income inequality. We think that the first problem has
been thoroughly investigated by Keynes himself. The key concept he has employed is theone of "involuntary unemployment" : there areso many persons in the street, who are willingto work at the existing wages but cannot findjobs because a shortage of the effective demand
as a whole. It would be safe to say, however,that Keynes's attempt to solve the second problem has not been so successful. Only in the
recent times, Piketty, acting as the modern
Keynes, has bravely tackled the leftover problem of inequality of income and wealth with asmashing success.
Linbeck and Snower (1988) has developed
the new insider-outsider theory of employment
and unemployment. Whereas the "insiders" arethe incumbent employees whose jobs are pro-062

tected by labor turnover costs, the "outsiders"
who are not employed and have no solid protection at all. Although the Lindbeck-Snower
theory looks attractive, it cannot give an effective tool to analyze the miserable states of the
non-regular workers. Both regular and nonregular workers may be regarded as insiders;
they rather belong to distinct classes of insiders— "upper-class insiders" and "lower-class insiders." Besides, the barriers between those twoclasses are great and almost insurmountable.
In short, we need another Keynes, and also
another Piketty.
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Yorker, December 14, 2009.

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Knight, Volume One, "What is Truth" in Economics?,
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⦿Hicks, J.R. (1989) A Market Theory of Money, Oxford,

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Employment Structure: Statistical Research, Ministry of
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Macmillan.

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⦿Knight, F. R. (1937) "Unemployment: And Mr. Keynes'

Revolution in Economic Theory," Canadian Journal of
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⦿Krugman, P. ( 2008) The Return of Depression Econom-

ics and the Crisis of 2008, London Penguin Books, Ltd.

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Thought, Iwanami , in Japanese.

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Macmillan.

Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai

063

Involuntary Unemployment versus“Involuntary Employment”
J.M. Keynes and Beyond

Yasuhiro Sakai

This paper is concerned with the importantquestion of how and to what extent great economists such as Ke ynes, Knig ht, Hicks,
Samuelson, Takata, and Morishima have beenintermingled with each other. Our discussion
focuses on the two key concepts in the labormarket— involuntary unemployment and"involuntary employment." On the one hand,
there are so many persons in the street who arewilling to work at the existing wages but cannot find jobs because of a shortage of theeffective demand as a whole. This is clearly theissue of involuntary unemployment, which has
been energetically tackled by J. M. Keynes andhis followers since the 1930s.
On the other hand, since the 1990s, there also have emerged so many people who must
work unwillingly for their survivals at the minimal level of wages. This is a new issue of"involuntary employment" or "non-regular
workers", which has recently been investigatedby Nobuaki Takahashi, a rising Japanese economist. Although the Takahashi approach is an
attractive one, it nevertheless seems to remain
at the embryo stage, thus requiring further developments in many ways. The second Keynes
would urgently be needed.

064

Keyword: Keynes, involuntary unemployment, Takata, sociological factors, non-regular
workers, Takahashi, "involuntary employment"
JEL Classification B22, E12, E24

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Involuntary Unemployment versus "Involuntary Employment"

Yasuhiro Sakai

065