Unemployment and Real Wages

Unemployment was high throughout the period -certainly by the standards of 1945–80. In an economy there will be people leaving one job, or being made redundant and looking for another job. On the supply of labour consider first the following. In the economy there are a number of people in employment and there are some unemployed. And then there are people outside the labour force. The total of the first and second groups make up the labour force. The unemployment rate is the proportion the unemployed are of that total. Several factors can affect the natural rate of unemployment. Several factors can affect the natural rate of unemployment. For example if the government introduced unemployment benefit it is likely that some people at the margin would have a greater incentive to stay in the labour force, to be more willing to have a job separation and to take longer to find a new job.