On socioeconomic causes of ‘wait unemployment’

Abstract This paper discusses implications of ‘wait unemployment’ in a two-sector model with a dual labour market. Primary sector firms pay efficiency wages; the wage rate in the secondary sector is determined by labour supply and demand. Most queueing models assume that workers for the primary sector are only recruited from the pool of unemployed. Instead, this paper explains ‘wait unemployment’ by assuming that people care about their relative status in- society. The model is presented in general terms and a closed-form solution is obtained by specifying functional forms. The results emphasize the need for proper manpower policies to reduce structural unemployment.