High Real Wages No Longer Linked to High Unemployment Rates
Unemployment can be reduced without cutting real wages, contrary to traditional economic theories. A new behavioral model suggests that lowering real wages doesn't always lead to more jobs, and raising wages doesn't always cause unemployment. In this model, unemployment is more about demand for workers than wage levels. So, to fix unemployment after a drop in demand, we need to focus on boosting demand, not just cutting wages.