The process of transition from a centrally-planed to a market economy has had a tremendous impact on various aspects of socio-economic life including the labour market. In these circumstances alongside the traditional forms of adjustment emerge additional mechanisms such as employment in the informal sector, inactivity and emigration. Each of these plays an important role in cushioning the economic and social consequences of unemployment. With this in mind, the sustainable rate of unemployment is defined as the rate, given the job creation in the formal sector, that in the long-run provides a balance between welfare expenditure and revenues from the payroll taxes, taking into account the capacity of the alternative labour market adjustment mechanisms to absorb a part of the unemployed workforce. This book provides a model of the sustainable rate of unemployment which yields several testable results from a comparative static point of view and enables a dynamic simulation of labour market outcomes. The analysis should help shed some light on the transitional labour markets and should be especially useful to professionals and policy makers in the field of labour economics.