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No, Keynesian economics proposes that high real wages are what cause unemployment - if an employee's real output drops but his real wage stays flat, he might be
by yummyfajitas 11y ago
No, Keynesian economics proposes that high real wages are what cause unemployment - if an employee's real output drops but his real wage stays flat, he might become unprofitable to employ. Since nominal wages are the real sticky quantity, Keynesians propose inflation as a sneaky way to reduce the employee's real wages.
- yk 11y agoUsually Keynsian economics is understood as economic thought that is based on aggregate demand, this is for example the view Wikipedia takes. [1] From there it is straightforward to argue that higher wages lead to higher employment, a view that makes Keynsian economics popular on the left. The view, that too high wages cause unemployment, is a staple of supply side economics, the view that the economic process is driven by the supply side. Krugman argues a lot about sticky wages recently, but not because this is a central tenet of Keneysian economics. Krugmann argues about sticky wages because it is a good argument against the troika's handling of the Greek crisis, since the internal adjustment in the Euro area would either mean inflation in Germany or deflation in Greece. [1] https://en.wikipedia.org/wiki/Keynesian_economics https://en.wikipedia.org/wiki/Keynesian_economics
- yummyfajitas 11y agoDid you read the article on wikipedia? Start from the heading "Concept". https://en.wikipedia.org/wiki/Keynesian_economics#Concept https://en.wikipedia.org/wiki/Keynesian_economics#Concept Supply side economics is not based on wage levels at all, but rather based on tax-based disincentives to employment and investment. https://en.wikipedia.org/wiki/Supply-side_economics https://en.wikipedia.org/wiki/Supply-side_economics