Editing Unemployment (section)

===Real wage unemployment===
Classical, natural, 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. On the other hand, most economists argue that as wages fall below a livable wage, many choose to drop out of the labour market and no longer seek employment. That is especially true in countries in which low-income families are supported through public welfare systems. In such cases, wages would have to be high enough to motivate people to choose employment over what they receive through public welfare. Wages below a livable wage are likely to result in lower labor market participation in the above-stated scenario. In addition, consumption of goods and services is the primary driver of increased [[demand for labor]]. Higher wages lead to workers having more income available to consume goods and services. Therefore, higher wages increase general consumption and as a result demand for labor increases and unemployment decreases.

Many economists{{who|date=September 2020}} 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 labour).<ref>{{cite book |first=F. A. |last=Hayek |title=The Constitution of Country |location=Chicago |publisher=University of Chicago Press |year=1960 }}</ref><ref name="autogenerated2">{{cite book |first=Alain |last=Anderton |title=Economics |year=2006 |location=Ormskirk |publisher=Causeway |edition=Fourth |isbn=978-1-902796-92-5 |url-access=registration |url=https://archive.org/details/economics04edande}}</ref> Laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky.<ref name="autogenerated2"/>

However, that argument overly simplifies the relationship between wage rates and unemployment by ignoring numerous factors that contribute to unemployment.<ref name="P. Garegnani 1970">{{cite journal |first=P. |last=Garegnani |title=Heterogeneous Capital, the Production Function and the Theory of Distribution |journal=[[Review of Economic Studies]] |volume=37 |issue=3 |year=1970 |pages=407–436 |jstor=2296729 |doi=10.2307/2296729}}</ref><ref name="Robert L. Vienneau 2005">{{cite journal |first=Robert L. |last=Vienneau |title=On Labour Demand and Equilibria of the Firm |journal=[[The Manchester School (journal)|The Manchester School]] |volume=73 |issue=5 |year=2005 |pages=612–619 |doi=10.1111/j.1467-9957.2005.00467.x|s2cid=153778021 }}</ref><ref name="Ian Steedman 2009">{{cite journal |first1=Arrigo |last1=Opocher |first2=Ian |last2=Steedman |title=Input Price-Input Quantity Relations and the Numéraire |journal=[[Cambridge Journal of Economics]] |volume=3 |year=2009 |issue=5 |pages=937–948 |doi=10.1093/cje/bep005}}</ref><ref name="Wyne Godley 1989">{{cite journal |first1=Michael |last1=Anyadike-Danes |first2=Wyne |last2=Godley |title=Real Wages and Employment: A Skeptical View of Some Recent Empirical Work |journal=[[The Manchester School (journal)|The Manchester School]] |volume=62 |issue=2 |year=1989 |pages=172–187 |doi=10.1111/j.1467-9957.1989.tb00809.x}}</ref><ref name="Graham White 2001">{{cite journal |first=Graham |last=White |title=The Poverty of Conventional Economic Wisdom and the Search for Alternative Economic and Social Policies |journal=The Drawing Board: An Australian Review of Public Affairs |volume=2 |issue=2 |year=2001 |pages=67–87 |url=http://www.australianreview.net/journal/v2/n2/white.html }}</ref> Some, such as [[Murray Rothbard]], suggest that even social taboos can prevent wages from falling to the market-clearing level.<ref>{{cite book |first=Murray |last=Rothbard |title=America's Great Depression |location=Princeton |publisher=Van Nostrand |year=1963 |page=45 |title-link=America's Great Depression }}</ref>

In ''Out of Work: Unemployment and Government in the Twentieth-Century America'', economists [[Richard Vedder]] and Lowell Gallaway argue that the empirical record of wages rates, productivity, and unemployment in America validates classical unemployment theory. 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 variable|exogenous events]].<ref>{{cite book |first1=Richard |last1=Vedder |first2=Lowell |last2=Gallaway |title=Out of Work: Unemployment and Government in the Twentieth-Century America |location=New York |publisher=NYU Press |year=1997 |isbn=978-0-8147-8792-2 }}</ref>