Why Keynes Was Wrong about Unemployment
Large-scale unemployment is another name for a surplus in the labor market. Equilibrium is a state which markets will naturally move toward as buyers and sellers look for mutually advantageous exchanges. Firms can always get some value from additional labor, even under pessimistic forecasts of sale prices and quantities. Workers earning zero wages can improve their situation by accepting a job even if they do not accept the first offer. Therefore, a labor market in surplus will absorb unemployed labor at a lower wage. When a market is in surplus, the direction the price must go toward equilibrium is down.