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2016•RePEc: Research Papers in EconomicsRequires access

LABOR MARKETS, UNEMPLOYMENT, AND MINIMUM WAGES: A NEW VIEW

Thomas I. Palley

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Abstract

This paper presents an alternative macroeconomic framework for understanding labor markets and unemployment. The approach breaks with the standard model which maintains that unemployment is the result of high and rigid wages, and instead focuses on the structural characteristics of labor exchange. Unemployment can arise even if wages are flexible and labor markets competitive. This is because the wage rate is used to determine the level of hours rather than clear the jobs market. Minimum wages can actually increase employment as measured by jobs.

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What this paper is about

This paper presents an alternative macroeconomic framework for understanding labor markets and unemployment. The approach breaks with the standard model which maintains that unemployment is the result of high and rigid wages, and instead focuses on the structural characteristics of labor exchange. Unemployment can arise even if wages are flexible and labor markets competitive. This is because the wage rate is used to determine the level of hours rather than clear the jobs market. Minimum wages can actually increase employment as measured by jobs.

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OpenAlex reports 11 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This paper presents an alternative macroeconomic framework for understanding labor markets and unemployment. The approach breaks with the standard model which maintains that unemployment is the result of high and rigid wages, and instead focuses on the structural characteristics of labor exchange. Unemployment can arise even if wages are flexible and labor markets competitive. This is because the wage rate is used to determine the level of hours rather than clear the jobs market. Minimum wages can actually increase employment as measured by jobs.

Key concepts: Unemployment, Economics, Labour economics, Efficiency wage, Wage, Minimum wage, Full employment, Macroeconomics

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