The Foundation of Modern Macroeconomics /

primary sector (because wages are higher there), but are prevented from getting work there because of the union's wage-setting power.

Suppose now, however, that unemployment benefits equal B, and that B exceeds the wage for which full employment would prevail in the economy, i.e. B > w . In such a case, employment in the two sectors would equal IT and g, respectively, and unemployment would be equal to UB .