In some sectors with a large endowment of unskilled labour and without sufficient cooperating land or capital, given technology and a wage level bounded from below, labour markets cannot clear. A full employment solution would drive remuneration below socially acceptable, possibly subsistence, levels of consumption. Consequently, a labour surplus exists in that much of the labour force contributes less to output than it requires: its marginal product falls below its remuneration, set by bargaining. A reallocation of such workers to other, competitive, sectors would eliminate the inefficiency and enhance total output. Open economy dimensions, extensions and critiques are dealt with.
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