2018•The New Palgrave Dictionary of EconomicsRequires access
Involuntary Unemployment
John B. Taylor
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Abstract
The most common and analytically useful definition of involuntary unemployment is based on the labour supply curve: if workers are off the labour supply curve – so that there is an excess supply of labour at the current real wage – then, by definition, there is involuntary unemployment. The amount of involuntary unemployment is equal to the amount of excess labour supply. If workers are on the labour supply curve, then, by definition, there is no involuntary unemployment. One could analogously define involuntary overemployment as a situation of insufficient supply of labour at the prevailing real wage (as may occur during wartime with wage and price controls), but the term is seldom used.