Structural
unemployment is unemployment related to structural, or systemic, changes in the economic
system. Therefore, unemployment directly related to raising the minimum wage is called
structural unemployment. The issue in the system is that the amount of profit each company
receives will remain roughly the same; therefore, margins will decrease in terms of paying
employees, so employees will have to be let go.
While an increase in the
minimum wage would mean that the individuals who are paid the increased wage will have more
disposable income, the argument does not hold up that it would cause an increase in spending to
offset the loss of profit, because fewer people would be receiving that income (if a company
chose not to cut spending in other areas, such as to its CEO's salary). Unemployment is a
complex system, but in the end, drastic changes in minimum wage will cause a state of structural
unemployment.
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