ABSTRACT
Employment and the related wage payments give workers earnings which amount to about 70 percent of national income and, at the same time, 70 percent of the nation's purchasing power. By this measure, the earnings of labor are the most important of factor payments and labor the most important of factors. The neoclassical paradigm treats all markets the same with supply and demand
yielding a stable equilil.:rium, stable in the sense that the force of disequilibria causes equilibria to be regained. Were labor markets in accord with the theory, the smallest outbreak of unemployment or labor shortage would force the market toward equilibrium and eradication of the labor shortage or surplus. With its high stress on this theory, unemployment in the neoclassical paradigm, is of little, if any, concern. Some distinguished leaders of the school even deny the existence of involuntary unemployment contending that people normally categorized as unemployed have actually chosen leisure over work. This is congenial to the equilibrium thrust of the paradigm-but not to me and others. Unemployment and other labor market disequilibria receives due coverage here. The existence of unemployment has given rise to a substantial number of mod-
els explaining its existence. Old an new ones are examined. Almost all economists believe that were the real wage less sticky, unemployment would be attenuated. But an empirically based model is presented which indicates that decreases in the real wage would probably worsen unemployment due to the real earnings loss it would create. Disequilibrium in the labor market covers more than unemployment. There is disequilibrium, for example, when workers want to work more or fewer hours than they actually work. All disequilibria considered,
about 40 percent of workers are in disequilibrium. The labor market is characterized by multiple prices for what seemingly is the
same kind of work performed by the same quality workers. This is frequently a manifestation of the existence of high-and low-wage firms and high-and lowwage industries. Models of wage differentials are presented in an attempt to explain this phenomenon. At the end two "bottom lines" are considered. One is the growth record of real earnings during the post-World War II period. The other refers to the distribution of earnings and the worsening position of lowwage workers.
