Human needs are generally insatiable, but the means of securing these needs are limited simply because the world has only limited amounts of resources that include human needs extremely limited in number. and skills (this is where unemployment appears). Recession occurs if the economy's output declines, i.e. growth becomes negative. When people spend less, stores will be left with unsold inventory, leading to less purchasing from producers, which in turn will reduce production. Unemployment will likely result from production cuts. When companies produce less, they need fewer employees. Several countries, regardless of their economic status, have experienced varying degrees of unemployment since the economic downturn of 2007. The US economy had an unemployment rate of 9.2% in June 2011, Egypt 19%. unemployment rate and Saudi economy of 10%. This is very costly economically because it represents a loss of GDP. The classic theory analyzed by Pigou (1993) and Solow (1981) maintains that the labor market is made up of demand and supply of labor. The demand curve is a negative function of the real wage in that if wages increase, the quantity demanded of labor will decrease and the opposite is true. It is not because one is employed that the others are not unemployed. Cheaper labor for entrepreneurs is the most effective way to reduce unemployment. Technological advancements will lead to an increase in the number of unemployed people, but these unemployed people will also look for other jobs, but this search is likely to reduce wages. Reducing wages is not a complete way to increase employment. Organizations look for skilled workers who, in turn, look for better paying jobs, which still leaves...... middle of paper ......in the degree of welfare and unemployment rate of 'Today. For example, the Netherlands has returned to low unemployment while offering high social orientation. In conclusion, in an environment in which global bargaining is at the heart of wage determination, not only formal labor market institutions but also the right groups of workers are important in reducing unemployment rates. .ReferenceAdil, HM (2011) 'Important Theories of Unemployment and Public Political', Journal of Applied Business and Economics, [online], vol 12, no5, pp100-110, (accessed March 16, 2014).John, S. and Dean G. (2010), “Essentials of Economics”, 5th edition, Harlow: Pearson Education. Olivier, JB (2004), “Explaining European Unemployment”, The National Bureau of Economic Research, [online], available at: http// www.nber.org/reporter/summer04/Blanchard.html, (accessed March 16 2014).