I am just going to state the obvious here and state that low wages cause unemployment. More people would be willing to work, and low-wage workers would be willing to work more productively if they were paid more. Much of the "unemployment" problem in certain countries (especially the USA) is not that workers cannot find a job, but simply that they are unwilling to do the jobs available at the wages being offered. The extreme of this is homelessness. Many of the homeless could obtain an unpleasant minimum wage job, but it might not be enough to even pay for a decent place to sleep, so the homeless just give up on life. Another psychological aspect of this is that unemployment may not be entirely a choice. Low wages and exploitation in the workplace can become so discouraging that some workers can become depressed or rageful to the point that they are actually unable to be functional in the workplace, even if they tried. This may be difficult to understand for many of us who have decent paying jobs that are not too unpleasant. There is also an economic model that postulates that higher wages will lead to more consumer demand, and thus will indirectly create more jobs, and put further upward pressure on wages. While higher wages could potentially lead to higher prices, labor is only one component of price, the other being capital. Indeed, in some situations a change in the cost of labor will not significantly affect prices. In regions where land is expensive, the main factor is the maximum rents that land owners can charge. There is a limit to what consumers are willing to pay, and the land owner will seek to raise his rents to as high as the tenant business owners, but ultimately the consumer, will pay. If the workers at those businesses demand more money, the land owner will have to reduce his rents, because consumers will not be willing to pay more. The burden of increasing labor costs is felt by the land owner, not the consumer. This would only apply in regions where the cost of land is very expensive. Now, of course, higher wages are only shifting the wealth around. But more equal distribution of income usually leads to higher demand. One wealthy person with all the money is not going to spend as much as if that money were divided up amongst 10 people. We hear all the time about a "shortage" of skilled laborers. But when workers in a certain occupation have to go through years of training, then are not paid very much, can we really be surprised that so many people are unwilling to do these types of jobs? Here is an example: If physicians are only being paid slightly above the median salary in the wider workforce, not many people are going to be willing to go through 10 years of school and training to become physicians. Does this mean there is a "shortage" of physicians? No. A real shortage, assuming it is operating in a free market, would put upward pressure on wages, to the point that there would be enough incentive to attract more new physicians. In the physician workforce, such a shortage can actually exist for an extended period of time because there is a lag time in training. Of course, there are always more desperate potential workers in other countries, willing to obtain education and training and work for far lower wages. Now, in "classical economics", students are essentially taught just the opposite, that lower wages increase employment! This is very misleading. The idea seems to be that more desperate workers are willing to work harder as they struggle to pay for the basics of housing and a car, or that lower wages help decrease price. But as I already mentioned, price is also caused by the cost of capital. Even part of the cost of labor itself is actually indirectly the cost of capital. All these workers need a place to live. Higher land cost will mean the worker has to be paid more to pay his rent. Higher fuel costs will mean he has to be paid more to commute from the affordable area where he lives to his place of employment, if he cannot afford to live closer. Desperate workers are also willing to work more for less. This higher productivity can lead to reduced demand for labor, and thus unemployment. Sort of the "crisis of capital" described by Marx. So I hope our countries can focus on increasing wages, not just on decreasing unemployment.