Involuntary Unemployment in a Compentitive Labour Market

Abstract

High an persistent unemployment, especially in the sector of low-skilled work, is usually attributed to the presence of minimum wages or unemployment benefits creating a reservation wage at wich labour demand of firms is insufficient. While not refusing this view this paper argues that also without these obstacles a situation is likely to occur which is similar to unemployment and in a rigorous sense even worse: people not finding a job in the sector of "honest work" at a wages sufficient to meet minimum consumption are forced to recourse to less desirable activities. The topic is analyzed in an OLG-context with two working periods for each generation.