Can there be unemployment with out minimum wage?

Question

I asked my professor this last class and he said yes, giving the example of the great depression. I accepted it as such, then. However, I have thought otherwise since. If supply is defined as being willing and able to produce a specific quantity at specific price, ceterius paribius, wouldn't it be correct to assert that if you are not supplying your wage, you technically are not unemployed? Is a good definition for unemployment the unability for find employment that occurs when a supplier is unable to sell their service for a particular price because.. wouldn't that 'because' have to be some market distortion? Am I wrong to assert unemployment can only occur when a market distortion is persent? Can someone convience me that I am wrong?

Answer 1

Depends what you're talking about...In a neo-classical model of the economy, old school style, without market distorsion there is only "friction" unemployment, nothing else. So you can decide that this is a correct representation of reality, or at least that these kinds of models behave like in reality, and then the answer to your question is no.

Or you can get yourself informed about how a labour marker really works, add some hypothesis (even light ones like wage stickiness, which is completely different from minimum wage, lead to unvoluntary unemployment...), or even use another kind of model, and then the answer is yes.

Or even better, you can have a look at sociological studies of unemployed populations, and you'll see that many of these would rather work than being on benefits. Or have have a look at the segmentation of job markets, explaining inadequacy between supply and demand, etc, etc.

I'd say it's a choice between ideology and intellectual honesty, but I'm not objective on this one, of course...
Good luck

Answer 2

Economists believe that there are two types of unemployment. The first -- called structural unemployment -- occurs when markets do not clear, either because they adjust too slowly to changes in market conditions or because of market distortions, such as monopoly power or minimum wages. Both the example of your professor and your argument are types of structural unemployment.

The second type is the more common, and is called frictional unemployment. Every day, someone leaves their job to find a new one, or is fired from their job for various reasons. Unfortunately, it takes time to find a new job. As long as people are leaving their jobs or getting fired, and as long as there are delays in getting new jobs, there will be frictional unemployment.

Answer 3

I think your view is not useful for two reasons. One practical, the other conceptual.

Defining unemployment out of existence, by ignoring the conventional meaning of the word will only lead to poor communication with everyone else in the field.

Economics claims to be a science that studies how the world works. Claiming that the real world is distorted when it does not fit the model, rather than the model is flawed when it does not fit the world is to put economics where physics was before Galileo.

Answer 4

there is a very simple ans.if workers r not paid a min wage thn they wud quit or not join the firm. moreover if the min wage is not fixed it leads to job insecurity. so the ans is yes