It's because 'unemployed' doesn't mean 'not working', despite what you'd think. It's a specific subcategory of people who are in the labor market (trying to fi

It's because 'unemployed' doesn't mean 'not working', despite what you'd think. It's a specific subcategory of people who are in the labor market (trying to find employment) and not succeeding. Higher wages can and do persuade some of them to enter the market, for instance a mom might need a few hours of childcare a week in order to work full shifts, and if the weekly salary raises enough that this pencils out, she'll start applying.