Moreover, wages held at the minimum level translates to lower productivity level. In addition, states that are based on the minimum wage rates suffer from the high occurrence of unemployment. This is true in the case of Virginia, Wyoming and Hawaii; wherein the wages were kept in the minimum level which resulted to high percentage of unemployment. In addition to this, the increase in the unemployment rate is translated to changes in the GDP. According to economist Arthur Khon, every 1% increase in unemployment rate, the GDP falls by 2.5-3%.
Therefore, if the wage rate is always kept at a minimum level, the tendency that unemployment rate will rise also increases, thus it creates a negative effect towards the countrys GDP (Mackenzie). Therefore, an increase in the minimum wage rate will have direct effects in the economy. First, it will translate in the increase of productivity level of the workers, it will also improve the buying power of the consumers and it will lessen the unemployment rate all of which will have a positive rise in the GDP of the country.