One of the goals of economic democracy is to eliminate unemployment.

Unemployment is objectively harmful. It means that a person, often involuntarily, cannot provide their labor even if they are willing to work. Both individuals and the economy are harmed: unemployment reduces demand for goods and services and represents an unused labor supply. The economy stagnates when it does not operate at full capacity. Even part-time jobs cause harm by underutilizing labor. It is important to understand the causes of unemployment.

Neoclassical unemployment: caused by government regulations such as minimum wage laws or the 40-hour work week. Government intervention in the economy decreases labor mobility while increasing rigidity in labor costs. This creates externalities and deadweight loss in the form of unemployment.

Keynesian (demand-deficient) unemployment: caused by insufficient aggregate demand. If people do not buy enough, companies reduce production if costs are constrained. So they fire workers to minimize costs. This further decreases aggregate demand because workers have less income to spend. In this way, capitalism fall into crisis.

Marxian unemployment (reserve army of labour): the idea that capital owners intentionally keep part of the workforce unemployed to put downward pressure on wages. Forcing workers work harder for lower wages

Natural unemployment: caused by market frictions and imperfections in the real world.

Economic democracy offers potential solutions.

Worker cooperatives would not require regulations such as minimum wage laws, the 40-hour work week, or other labor restrictions that harm workers because workers are bosses there is no exploitation, so neoclassical unemployment would not arise.

Keynesian unemployment would also be reduced, since workers and consumers are the same people; if demand falls, workers reduce supply to restore wages.

Marxian unemployment would not occur because owners and workers are the same group, so their interests do not conflict.

Natural unemployment would still exist, but there is evidence that worker cooperatives are more likely to retain or even increase employment during downturns. They tend to adapt through restructuring, retraining, adjusting working hours, and adopting new technologies. In contrast, capitalist firms often increase unemployment during downturns due to capital flight and pressure from investors to maintain returns.

Finally, John Maynard Keynes suggested that in a cooperative economy, factors of production are rewarded by dividing the realized output of joint effort according to agreed proportions. In such a setting, the second postulate of classical theory applies: workers supply labor as long as the marginal productivity of labor exceeds its marginal disutility. This mechanism support full employment and full capacity utilization.

In conclusion, economic democracy is an efficient way to address unemployment and support workers. Support workers and defend their rights on self-management.

Some empirical evidence:

During the global economic crisis of the 1970s and early 1980s, Italian cooperatives saw an 86.2% increase in employment, while the rest of the Italian economy grew by only 3.8%. link1

In several industries during recessionary periods, cooperatives cut jobs at a significantly lower rate than conventional firms or even increased employment while others decreased it. link2

Research in the U.S., Israel, France, and Spain confirms that the creation of new worker cooperatives is clearly counter-cyclical, meaning they are more likely to be formed when unemployment increases. link3

Large-scale studies show that worker-managed firms significantly reduce the hazard of dissolution compared to conventional firms, with a 29% lower risk of failure. Their employment levels are far less responsive (less elastic) to demand shocks than those of conventional firms. link4 | link5

Recent econometric models for the period 2011–2022 in Italy show that employment created by cooperatives has positive and statistically significant effects on overall economic growth and total employment. link6