An increase in the minimum wage
A)reduces structural unemployment.
B)reduces frictional unemployment,
C)increases structural unemployment.
D)increases frictional unemployment.

Question

Quizplus · Accepted Answer

An increase in the minimum wage increases the cost of hiring low-skilled workers, which leads to employers substituting labor with technology or reducing their workforce. This shift in the demand for labor causes structural unemployment among low-skilled workers as they may not have the specific skills that are in demand in the labor market. Therefore, an increase in the minimum wage increases structural unemployment.

An Increase in the Minimum Wage