Which among the following type of unemployment is also known as the real wage unemployment?

Question

Question

This question was previously asked in

SSC MTS (2022) Official Paper (Held On: 16 Jun, 2023 Shift 3)

Answer 1

The correct answer is classical

Key Points

Real wage unemployment:-

It is a type of classical unemployment. (Hence option 1 is correct)
It occurs when the real wage is set above the equilibrium real wage.
The equilibrium real wage is the wage that is consistent with full employment, meaning that everyone who wants to work at the prevailing wage rate can find a job.
Real wage unemployment can be caused by a number of factors, including:
- Minimum wage laws: Minimum wage laws set a legal minimum wage that employers must pay their workers. If the minimum wage is set above the equilibrium real wage, it can lead to real wage unemployment.
- Collective bargaining agreements: Collective bargaining agreements are contracts between unions and employers that set wages and other working conditions. If a union negotiates a wage rate that is above the equilibrium real wage, it can lead to real wage unemployment.
- Efficiency wages: Some firms may choose to pay their workers wages above the equilibrium real wage in order to boost worker productivity and morale. However, if all firms do this, it can lead to real wage unemployment.