MARKET FOR LABOURLABOUR MARKET IN EQUILIBRIUM

SL

DL

W

Q QFActual employment

0

Voluntary

Unemployment

0Q = Actual employment

Q-QF = Voluntary Unemployment

No involuntary Unemployment

MARKET FOR LABOURLABOUR MARKET IN DISEQUILIBRIUM

SL

DL

W

QD QFActual employment

0

Voluntary

Unemployment

QS

Involuntary unemployment

W

MARKET FOR LABOURLABOUR MARKET IN DISEQUILIBRIUM

SL

DL

W

QS QF

SHORTAGE

0

Voluntary

Unemployment

QD

W

INSTITUITIONAL & SOCIAL CONSTRAINTS• Labour markets like other markets will

tend to return to equilibrium’• However, this does not happen because of

barriers put in the Market place.• These barriers could be either placed by

GOVERNMENT regulations like:1) Minimum Wages or2) Regulations regarding workplace safety3) LABOUR UNIONS: They tend to pressure the

wages to remain at higher levels. These wages are known as ‘STICKY WAGES’ as they are not allowed to fall below when the market forces require it to.