Unemployability and involuntary unemployment
People differ in their abilities. They may be quicker or slower and make one or ten pins in a day, or rather one or ten units of specialized tasks in Adam Smith’s pin factory. They may be more or less qualified in text processing and type one or five letters in an hour. Such differences produce wage inequality if labor is paid according to its individual contribution. But they do not lead to an unemployment problem as long as wages are flexible. If no worker is available who can carry out ten units of a task in a unit of time, firms employ two workers who carry out five units and pay them the half wage. However, modern production and organization of work is more complicated. Autonomous problem solving and non-routinized interactions with other members of the firm or with customers are required. Workers who are not able to do reliable work without permanent guidance, people who have difficulties to help themselves when confronted with a new situation, or individuals who find it hard to communicate or to use modern means of communication cannot be easily integrated into making business in modern firms. There is no principal limitation to employ these less able workers. The point is that their employment requires more supervision, training and coordination. Only to the extent that firms do not provide these prerequisites, the less able workers cannot be productively employed. Chapter 2 has worked out this point in an abstract model. It shows that indeed involuntary unemployment is possible in the macroeconomic equilibrium of a competitive economy, if the requirements of organizing work are taken into account.
KeywordsMarket Power Labor Demand Efficient Level Unemployed Worker Wage Rigidity
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