10.1
Shirking and Efficiency Wages
In any economy, there are always unemployed people who are available for
work and are, in fact, seeking work. Up to now we have looked at two expla-
nations for this aggregate unemployment or excess supply of labour. One has
been that the money wage has been set above the equilibrium rate, and as
actual employment is determined by the short side of the labour market (the
demand side), this results in unemployment.
The other explanation advanced argues that workers form mistaken expec-
tations about prices, and when expected prices are higher than actual prices,
wages are set too high, which again ...
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