An Overview of Major Theories of Labour Market Mismatch

Manpower planning has, at its core, the problem of mismatch between labour supply and demand, that is unemployment. Consequently, a better understanding of the manpower planning problem can be gained by examining theories about the determination of unemployment. Therefore, this chapter overviews some of the leading strands of thought that have attempted to explain, among other things, the economic causes of unemployment. This is an ambitious undertaking since the field is vast and, therefore, the approach taken has been eclectic and does not pretend to be exhaustive. The main choice has been to include those theories, and theoreticians, that have focussed upon unemployment rather than economic theory per se. So, Marx, Keynes and Lewis are included while, for instance, Sen, who focussed mainly on poverty and entitlements, Myrdal, of Asian Drama fame, and Tinbergen, who focussed upon Computerized General Equilibrium (CGE) models, are not. Moreover, the discourse has been hampered because economists rarely agree among themselves on what is the most appropriate theory. For example, in a discussion on the Nobel prize winners for economics, Little2 stated: