If the market determined pay (employees shopped around and companies wanted to pay low), the resulting pay would be, presumably, lower than what people are comfortable with. Why is this? Are there any policies which have resulted in this gap? It seems unnatural to me.
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Conventional wisdoms says surplus of labor supply will not result in everyone withdrawing from the labor market, because people still need to eat. Instead, wages approximate minimum wage, or the wages negotiated by unions, unless you compete in a segment with labor shortage
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Biggest issue is automation, followed by limits in ability of markets to absorb more goods and services (because most people don't have enough money to buy what they could produce), and competition from lower wage countries.
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There is arguably no surplus of labor. The number of empty jobs is the same or greater than number of unemployed people. There's a mismatch in skillset and education, not an overall surplus in labor.
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There is an oversupply of labor, except for jobs that require a high IQ. The number of CS graduates is not arbitrarily elastic.
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