In the labor market model where wages are set to ensure worker effort, the unemployment that exists at the equilibrium point could be eliminated if the unemployed individuals simply offered to work for a slightly lower wage.
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Consider a labor market model where the equilibrium real wage is set by firms at a level designed to ensure employee effort. At this wage, the number of people actively seeking work is greater than the number of jobs firms are offering. Based on this scenario, why is the resulting unemployment classified as 'involuntary'?
Nature of Unemployment at Labor Market Equilibrium
In the labor market model where wages are set to ensure worker effort, the unemployment that exists at the equilibrium point could be eliminated if the unemployed individuals simply offered to work for a slightly lower wage.
Nature of Unemployment at Labor Market Equilibrium
Labor Market Dynamics in Econland