Th2.1: Real Wage Inflexibility

Question 1

What is this unemployment considered to be a result of?

Answer 1

real wages being above their market clearing level leading to an excess supply of labour

Question 2

How does the minimum wage prevent unemployed workers from getting a job?

Answer 2

workers are willing to work under the minimum wage and firms prepared to take on more workers if they could pay under it, however this is illegal

Question 3

What do some economists believe about the minimum wage?

Answer 3

it risks creating unemployment in industries when international competition from low-labour cost producers is severe

Question 4

What can this unemployment also be caused by?

Answer 4

workers refusing to take low paid jobs because they can receive more in welfare benefits