Real wages key to reducing unemployment in the United States.
The rise in unemployment in the United States over the past forty years can be explained by wages being too high. By comparing actual wages to what they should be in a balanced market, a wage gap is identified that closely mirrors changes in the unemployment rate. This suggests that lowering real wages is crucial for increasing overall employment levels. The study questions the effectiveness of policies that focus on boosting demand, as the root cause of unemployment lies in wages being too high rather than insufficient demand.