As firms laid off workers in the sectors that were nearing saturation, so unemployment climbed. Productive capacity existed, but the demand necessary to make the operation of the factories profitable did not. More on that later. There's one more issue to consider with respect to the Classical position. Not only was wages being too high not the problem, lowering them could cause considerable economic damage.
Contractual agreements are a cornerstone of business in specialization-market economies.
This causes problems throughout the financial sector, first for workers, then for financial institutions, and then to rest of the economy as the weak financial sector is unable to provide funds for further purchases. So, according to Keynes, in the event that the wage rate is above the intersection and involuntary unemployment has occurred, there is no reason to expect the market system to automatically correct the situation. Nor should moves be made to encourage the wage to fall, either. Thus far, Keynes has established the possibility of involuntary unemployment, but certainly not the likelihood of it. The above sections introduce the possibility that involuntary unemployment could take place if the labor demand has shifted left.