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Classical and Keynesian views of wages and unemployment

There is a lot of unemployment in developed countries and on top of that there is an increasing in inequality of earnings.

According to Drobny, A. (1988). Real Wages and Employment: Keynes, Monetarism, and the Labour Market , some individuals who were analylising the classical theories, they came to find out that policies of  macro economics cant change the unemployment in countries which practice capitalism and this can include United states. The changes of employment levels are as a result of the choices of individuals. Most capitalist governments don’t appreciate monetary policy use for a good and stable employment state. According to the analysis of Lawson the unemployment in western Europe was higher than in united states of high rise of earnings within ten years of the western Europe workers while in the United states workers see a little reduction in their earnings. The classical models include stating that capitalist countries are dependent on the employment and out put rate.

The rule got from the theory of  classical includes that economies experience variations which are have variations smaller in terms of equilibrium of employment.

Keynes theory includes unemployment being as a result of high wage rate for hiring employers .But this is not

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because of worker’s behaviour but depends on the type of goods in the market. Keynes theory is a view of the capitalist countries although there was a saying that it didn’t have some regulating properties due to the fact that there was a conclusion that capitalist countries had more stronger properties than those indicated by the Keynesians. The Keynesians are into the prices and wages although there is uncertainty which involves unemployment even if the prices and wages are flexible thus leading to  the fluctuation of macro economics.

Demand changes have influence on employment fluctuations. The employment level will depend on the output. wages influence on employment depends on the output and the effect of substitute. The analysis of Keynes accepts the wage influence on employment.

REFERANCE

Drobny, A. (1988). Real Wages and Employment: Keynes, Monetarism, and the Labour Market (pp. 4,6,13,69,12,227). London: Routledge.

 

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