If we have a condition where employment is lead by the wages does it mean that a wage reduction will cause unemployment?

  • $\begingroup$ The article is indeed helpful thank you!However I was referring to a hypothetical economy where every factor is stable and only the wages can be changed.I think it is somehow related to Keynes theory about the accomplishment of full employment. $\endgroup$ – Georgina Sep 9 '16 at 9:38

Are you referring to real life circumstances or in a hypothetical world? There is an interesting article about the correlation between wages and unemployment found here: https://www.stlouisfed.org/On-The-Economy/2014/December/Are-Wages-and-the-Unemployment-Rate-Correlated

Essentially this article states that higher levels of wages are weakly correlated with the unemployment rate based on data that was compiled and published in The Regional Economist. They also argue that when business conditions shift, it impacts both the unemployment rate and wages.

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    $\begingroup$ Hi Dima, welcome to Economics.SE. Your answer is what we call "link-only" answer. It is impossible for us to evaluate the quality of your answer without clicking on the link. But links tend to disappear. Could you edit your post to include a summary from the content of that link, which relates to the question? By the way, I'd recommend taking the tour and maybe have a look at the help center. $\endgroup$ – clem steredenn Sep 9 '16 at 5:20

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