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Richard Layard is one of Britain's foremost applied economists, whose work has had a profound impact on the policy debate in Britain and abroad. This book contains his most influential articles on the subject of unemployment. It is published along with a companion volume Inequality , which deals with these topics and with economic transition. Unemployment explains what causes unemployment and proposes remedies to reduce it. There is a strong focus on how unemployed people are treated and how this affects unemployment - including Layard's well-known recommendation of a job-guarantee for long term unemployed people. Other key topics covered are the effect of unions and wage bargaining, the effect of low skill, and the possible role of rigid employment laws. The book opens with Richard Layard's personal credo Why I became an Economist .

When policy-makers have multiple objectives, they still need an over-arching criterion which determines the importance of the different objectives. The most reasonable criterion is the wellbeing of the population. Fortunately, it turns out that this is also the outcome which most determines whether a government gets re-elected. We therefore argue that, wherever there is a fixed budget constraint, money should allocated to those policies which give the greatest increase in wellbeing per pound of expenditure. If desired, now policies can focus especially on areas of life which cause the most misery. The new science of wellbeing provides evidence on which these are: especially mental and physical illness and poor relationships at work, at home or in the community. But, to approve a policy, there must be evidence of its effectiveness in dealing with the problem – preferably through controlled experiments. Where a policy increases the length of life, this counts as an addition to wellbeing, measured by Wellbeing-Years (or WELLBYs) per person born. Even policy-makers unmoved by wellbeing as an objective should promote it because of its large positive effects on productivity, academic learning and life-expectancy. If wellbeing is to play its proper role in decision-making, this will require a major re-organisation of Finance Ministries and other decision-making bodies.

AbstractThis lecture argues that mental health is a major factor of production. It is the biggest single influence on life satisfaction, with mental health eight years earlier a more powerful explanatory factor than current income. Mental health also affects earnings and educational success. But, most strikingly, it affects employment and physical health.In advanced countries mental health problems are the main illness of working age – amounting to 40% of all illness under 65. They account for over one third of disability and absenteeism in advanced countries. They can also cause or exacerbate physical illness. It is estimated that in the absence of mental illness, the costs of physical healthcare for chronic diseases would be one third lower.The good news is that cost-effective treatments for the most common mental illnesses now exist (both drugs and psychological therapy). But only a quarter of those who suffer are in treatment. Yet psychological therapy, such as cognitive behavioural therapy, if more widely available would pay for itself in savings on benefits and lost taxes.The lecture ends by illustrating how rational policy can be made using life-course models of wellbeing. Such policies should include a much greater role for the treatment and prevention of mental illness.
Jel codes
I30, J30