4 ms·
The models say that a rising minimum wage would decrease demand for labour. Of course, how much it affects actual unemployment depends on how much labour was p
by Mikeb85 9y ago
The models say that a rising minimum wage would decrease demand for labour. Of course, how much it affects actual unemployment depends on how much labour was previously demanded and supplied. The thinking of course is that aggregate income among low earners makes up for the increased unemployment, and the extra spending power they have improves the economy as a whole, leading to less unemployment than a linear relationship between minimum wage and unemployment would suggest.
Edit - at the very end I should add, "assuming the demand for labour actually increases aggregate income for those workers affected". If a min wage hike is too severe or unemployment already too high, you might not be better off in the end.