classical unemployment

Noun

 * 1)  The component of overall unemployment caused by too high wage expectations.
 * 2) * 1987 8 December, Nobel laureate Robert M. Solow in his prize lecture:
 * There can be "Keynesian" and "classical" unemployment. Indeed there can be both at the same time: the real wage might be too high to allow full employment with existing capital stock, while at the same time aggregate demand is inadequate to take off the market what firms would wish to produce. Changes in the real wage could have demand-side and supply-side effects.
 * 1) * 2006 September, Geoff Riley, Head of Economics, Eton College:
 * Classical unemployment is the result of real wages being above their market clearing level leading to an excess supply of labour.
 * Classical unemployment is the result of real wages being above their market clearing level leading to an excess supply of labour.

Usage notes

 * According to "classical economic theory" originally developed by Adams, Ricardo, Malthus and others in late 18th century unemployment is explained simply by the real wages being higher than the market-equilibrium wage. Classical unemployment is suggested to arise e.g. as a result of a too generous minimum wage law or labor union influence.