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There is always debate that increasing minimum salary will pour in more money into the budget as those who get minimum salary will spend them immediately.

The counter argument is that increasing minimum salary will increase unemployment and it will bring all the downsides (sitting on benefits, less spending, crime,...)

I was wondering is there established 'elasticity' between unemployment to GDP e.g 1% raise in unemployment would reduce GDP growth by X%? I am sure it will differ from country to country and also change from 10% to 9% and from 2% to one will not be the same, still there should be some ratio or formula with wide margin?

How much does rise of one percent in unemployment affect GBP?

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  • $\begingroup$ I am sure it depends on where the unemployment is as well, I.e. going from 1 to 2% may change a different amount than from 8 to 9%, and also how you measure unemployment $\endgroup$ – user2813274 Dec 29 '16 at 18:57

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