Classical Unemployment Theory

1132 Words5 Pages
Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level, causing the number of job-seekers to exceed the number of vacancies.
Many economists have argued that unemployment increases with increased governmental regulation. For example, minimum wage laws raise the cost of some low-skill laborers above market equilibrium, resulting in increased unemployment as people who wish to work at the going rate cannot (as the new and higher enforced wage is now greater than the value of their labor). Laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky.
However, this argument overly simplifies the relationship between wage rates and unemployment,
…show more content…
Their data shows a strong correlation between adjusted real wage and unemployment in the United States from 1900 to 1990. However, they maintain that their data does not take into account exogenous events.

Measurement
There are also different ways national statistical agencies measure unemployment. These differences may limit the validity of international comparisons of unemployment data. To some degree these differences remain despite national statistical agencies increasingly adopting the definition of unemployment by the International Labor Organization. To facilitate international comparisons, some organizations, such as the OECD, Eurostat, and International Labor Comparisons Program, adjust data on unemployment for comparability across countries.
Though many people care about the number of unemployed individuals, economists typically focus on the unemployment rate. This corrects for the normal increase in the number of people employed due to increases in population and increases in the labour force relative to the population. The unemployment rate is expressed as a percentage, and is calculated as
…show more content…
Unemployment is an intense issue of India. It is turning out to be more genuine step by step. India has the number of inhabitants in around 1.20 billion. Large portions of the Indians are jobless. The issue of unemployment is expanding step by step. Each physically fit man and lady must get livelihood, yet they are not landing position. If not, the issue of unemployment will make troubles for the advancement of the nation. Many age-old businesses that are not able to cope-up with the changing demand and economic scenario are either closed down or heavy retrenchment takes place in them. When there is slump in business, many people find themselves without

More about Classical Unemployment Theory

Open Document