What is the role of the reserve army of labor Marx? How would you gauge Marx's approach in relation to the theories of effective demand developed by Kalecki and Keynes?

Throughout economic theory, there are various responses to the creation and subsequent role of unemployment and the wage rate. In Karl Marx’s theory, unemployment, or the ‘reserve army of labour’, is necessary for capitalism to regenerate itself, and is also what determines the wage rate. For John Maynard Keynes and Michael Kalecki, unemployment is caused by the failure of effective demand. This essay will first demonstrate Marx’s approach to employment through the study of the reserve army of labour and the cyclical tendencies of the capitalist system, and then Keynes and Kalecki’s theories of effective demand which led to the proposition that the economy ‘will not settle at full employment equilibrium; by and large it will not even reach it except by chance’ (Halevi, 2007, week 7, p. 8).

For Marx, unemployment, or the reserve army of labour, is a ‘necessary requirement for capital accumulation’ (Halevi, 2007, week 4, p. 2), linked to fluctuations in the wage rate and thus the rate of profit. The existence of a large reserve army of labour keeps wages down, because there are many unemployed workers available and willing to work for little money. Like the classical economists, Marx contends that low wages mean capitalists reduce their costs of production, resulting in a higher rate of profit and thus, higher capital accumulation. As accumulation grows, and as the reserve army dwindles, demand for labour increases. As demand rises, so do wages. Higher wages then encroach on profits and surplus value (Labini, 1984, p.40), meaning a smaller part of revenue is capitalised, accumulation lags, and the rise in wages is curtailed.

The inverse movement between wage rates and the