In a job-hour model, Palley (1995) focuses on the case where workers and hours are two separate production inputs and finds that the labor market may be in a state of involuntary unemployment. This paper extends Palley's analysis to the case where workers and hours can be treated as a single factor and finds that the labor market equilibrium will be characterized by full employment. It then extends that model to take into account an additional instrument-fringe benefits. In the extended job-hour model containing two instruments (wage and unemployment benefits) and two targets (employment and hours), it is shown that the labor market may still result in a state of involuntary unemployment if workers and hours are separate inputs.
