Unemployed and the Minimum Wage
What are likely effects of a higher minimum wage?
it may reduce the rate at which employment grows.
it may make people value their current job more and increase their tenures.
it may motivate inactive workers to move into the labor force.
Who stands to lose from these three potential effects: Employed, Unemployed, or Inactive?
The answer is clear. The employed will only suffer insofar they become unemployed and have a harder time finding a job because of reason 1. The same is true of the inactive, although they benefit from reason 3. However, the UNEMPLOYED suffer from all three reasons.
If less jobs are created in the near future, the unemployed will be unemployed for longer and may be less likely to succeed in their search.
If employed workers become more attached to their current jobs this will lead to less employment opportunities for the unemployed.
If inactive workers move into the labor force this can only be done by increasing competition on the currently unemployed or -even worse- by taking job opportunities away from them.
Therefore, in this paper I try to determine the effect of the minimum wage policy specifically on low income unemployed workers.