Employing the economic theory and the methods of norma-tive analysis, positive analysis and model deduction, the author ofthis essay discusses the emergence and harmfulness of the latentunemployed and intends to probe into the practical way of freeingstate - owned enterprises of the latent unemployed.Starting with the emergence of the redundant, this essaydeeply dissects the theoretical and systematic origin of the redun-dant, pointing out the historical origin of the emergence of the re-dundant is the traditional socialist theory and the planned systemof labour allocation plus the economic conditions at that time.With deepgoing development of cognition and practice, thetheory of Deng Xiaoping, which is the contemporary Chinese Ma-rxism, brings about revolutionary changes in understanding social-ism. People have reached the consensus that we should establishthe socialist market economy system of Chinese character. Themarket economy system dictates state - owned enterprises shouldchange their management mechanism in order to become mainbodies of the market pursuing maximum profits. The redundant ofstate -- owned enterprises is one of the reasons which cause themto suffer losses. The redundant makes state -- owned enterpriseshave low efficiency inertia and brings about the burden of heavywelfare expenditure on them. All these are contrary to the objectof the pursuit of maximum profits and make sate -- owned enter-prises unequal to non state -- owned enterprises in competition. Sothe redundant must be separated so as to lighten the burden onstate -- owned enterprises.Completely separating the redundant has unestimable ef-fects, but at present there are no adequate conditions in China.The redundant’s abruptly pee1ing off would cause high employ-ment rate, and threaten the balance of budget funds used to settleunemployment. Moreover, the government cannot afford the un-employment security system due to its limited financial capacity.Because the redundant is the historical burden of state -- ownedenterprises, the government must pay the reform cost to separateit, then there comes"going -- off -- sentry -- duty" and" Re -- em-ployment PrOject"."Going ’-- off -- sentry -- duty"is the particular phenomenonwhen demand is inadequate during the transfOrmation of economyin China. Re -- employment PrOject, as a systematic social prOjectcarried out by the government, is essential and of great signifi-cance. However its effects on the fundmental living security and re-- employment ’of the "going -- off -- sentry -- duty" workers arelimited because of its internal disadvantages. Furthermore, the du-al unemployment security system in cities and towns is harmful tothe formation of labour market and economic refOrm aiming atmarket system. So the "going -- off -- sentry -- duty"and the unem-lpoyment must combine into one at the right moment.The chief obstacles which hinder the combination are theproblems handed down by the old system, the funds of workersdefaulted by enterprises, the combination of old -- age pension andmedical treatment with the new system. In order to clear awaythese obstacles such measures as complementing the 1abour contri-bution of the workers and solving the problem of the funds de-faulted should be taken.After "going -- off -- sentry -- duty" and the unemploymentcombine into one, the unemployment security system in cities andtowns must be set up and perfected, providing fundmental livingsecurity and re -- employment service fOr the general unemployed.The new unemployment security system should be based onfully considering the political, economic and population conditionsin China. China lacks in economic and administrative capability toorganize and administrate the unemployment insurance system.The system in operation has lots of problems. So it is suggestedthat the unemployment insurance system should be abolished.Employers and t