Answer to Question #209394 in Macroeconomics for econ

Question

1. Explain the role and importance of the presence of involuntary unemployment in ensuring that the labour discipline model works as a tool for employers to incentivise workers to exert effort into their jobs

Answer 1

Involuntary unemployment is a situation where workers are willing to work at the market wage or just below but are prevented by factors beyond their control. These factors could include deficiency of aggregate demand, labour market inflexibilities, implicit wage bargaining and efficiency wage theory.