Discouraged workers and the Classical model of Economics

1.

a.) A discouraged worker is someone who is willing and available to work, has stopped seeking work in the four weeks (Parkin et. al., 2008:491). The number of discouraged workers is likely to increase when the is an increase in the unemployment rate because employment is perceived as even harder to achieve.

b.) The classical model was is a pre-industrial revolution economic model. It does not take recessions into account and assumes that wages adjust quickly to the equilibrium of the labour market. According to the classical model, a decrease in the quantity demanded of labour would bring down the equilibrium wage rate and this in turn would lower the real wage rate. This would also diminish economic growth.

c.) An assumption of the Classical model is that wage rate would quickly adjust to the equilibrium. Assuming that there is no minimum wage, it does not matter how many people are looking for work (labour supply). A A large labour supply would mean that minimum wage is just extremely low but everyone has a job ie; the labour market would always be effcient.

This is not realistic in the South African labour market because it has a minimum wage which makes the market inefficient.