If unemployment is zero,what happens to real wages?
Answer:
zero unemployment is just and extreme version of "low" unemployment.
If unemployment > 0, then employers can tap into the available pool of the umemployed OR poach employees of other firms. If unemployment=0, then employers can only poach the employees of other firms. The latter is just an extreme form of the former and requires ever higher wages, all else equal.
Skyrocket. Zero unemployment=zero available workers.
Anyone who wants to hire new workers will have to offer some serious compensation.
As others have said, u = 0 just means that companies have to push up wages that much more if they want to get/keep workers.
Of course, the question is really moot as you will never have u = 0 in any economy.
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