The causes of unemployment are heavily debated. Causes and types of unemployment economics pdf for frictional unemployment often address job entry threshold and wage rates.
Some additional types of unemployment that are occasionally mentioned are seasonal unemployment, hardcore unemployment, and hidden unemployment. On the other hand, cyclical unemployment, structural unemployment, and classical unemployment are largely involuntary in nature. So, in practice, the distinction between voluntary and involuntary unemployment is hard to draw. The clearest cases of involuntary unemployment are those where there are fewer job vacancies than unemployed workers even when wages are allowed to adjust, so that even if all vacancies were to be filled, some unemployed workers would still remain. This happens with cyclical unemployment, as macroeconomic forces cause microeconomic unemployment which can boomerang back and exacerbate these macroeconomic forces. On the other hand, some economists argue that as wages fall below a livable wage many choose to drop out of the labor market and no longer seek employment.
This is especially true in countries where low-income families are supported through public welfare systems. In such cases, wages would have to be high enough to motivate people to choose employment over what they receive through public welfare. Wages below a livable wage are likely to result in lower labor market participation in above stated scenario. In addition it must be noted that consumption of goods and services is the primary driver of increased need for labor. Higher wages leads to workers having more income available to consume goods and services.