The Post Keynesian theory of employment is based on the idea that demand for labor is determined by effective demand in product markets. This means that labor-hire decisions are linked to points of effective demand. Unlike traditional theories, there is no fixed relationship between real wages and employment levels. The key innovation in this theory is the concept of an 'employment function' that connects labor-hire choices to effective demand. This approach challenges the traditional view of how labor markets work and suggests that factors like real wages, full employment, and exchange rates play a crucial role in determining employment levels.