Real-wage unemployment
Real-wage unemployment describes unemployment in a labour-market model where real wages are held above the level that would equate labour supplied and demanded. Employers demand fewer workers than people willing to work at that wage. The model is a possible explanation, not proof that every wage floor reduces employment in every actual market.
Worked example
In a simplified competitive market, 1,000 people seek work at a fixed wage but employers offer 850 jobs. The excess supply of labour is 150 at that wage under the model’s assumptions.
Common mistake
Assuming a statutory minimum wage always produces the model’s result regardless of market power, productivity and demand conditions.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | BT | Supporting | September 2026–June 2027 |
| FIA | FBT | Supporting | September 2026–June 2027 |