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The Classical Approach

The Classical Approach - The Classical Approach If the...

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The Classical Approach: If the principle of supply creating its own demand is made applicable to the labor market, one would wonder what its effect would be. The number of workers may be in excess of the available job opportunities and the employer’s demand for their services. Therefore at the existing or going market rate of wages all available working force cannot be absorbed. Some workers will be rendered superfluous and will remain unemployed. The classical answer to the problem is that like all other goods and their prices workers’ wage rate should be cut or lowered so that the employers will be induced to employ more number of workers. The condition of full employment can then be restored if workers are agreed upon the wage cut solution. Thus flexible rate of wages is a classical approach to solve the problem of unemployment . It is possible that some workers may resist a cut in the wage rate and may remain unemployed.
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