Persistent unemployment disciplines wages, so slack in the labour market serves employers whether or not anyone intends it.
Marx's 1867 concept. The mechanism survives in modern labour economics as the reservation-wage effect, without requiring the rest of the theoretical apparatus.
In practice
- A warehouse that can fill any vacancy within a week has no reason to improve the shift pattern, and does not.
- A labour market with high unemployment sees wage growth stall without any employer coordinating, which is the observable part of the claim.
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- Economics & Incentives
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- The theories behind every argument about money