Featured image for article

Minimum wage increases hurt the poor

Two new studies confirm that a higher minimum wage would not be an unalloyed gain for low-wage workers.

For their study, David Neumark and Peter Shirley “assembled the entire set of published studies in this literature and identified the core estimates that support the conclusions from each study, in most cases relying on responses from the researchers who wrote these papers.” [emphasis added] The bulk of research points to negative effects of a minimum wage. Low-skilled workers, such as teens, young adults, and people with less education, are particularly hurt by a higher minimum wage.

One concern with minimum wage increases is that companies may invest in capital, like touch-screen kiosks at fast food restaurants, instead of hiring workers. McDonald’s has not done that in places that have raised the minimum wage, Orley Ashenfelter and Št?pán Jurajda find, instead it has passed along all of the higher cost for employees in higher prices for burgers and fries. Thinking in terms of Big Macs per hour, real wages “are one fifth lower than the corresponding increases in nominal wages.” If the minimum wage increase would have allowed someone to get a Big Mac five days a week, the effect of higher prices would cut that back to four days a week.

Donna Martinez raised the concern earlier this week that some people won’t be hired because they cannot provide the $16.50 in value that an employer would need to cover the $15 minimum wage plus unemployment insurance, workers’ compensation, and payroll taxes. Donna also pointed back to Jon Sanders’ 2019 roundup of past studies.

Joseph Coletti / Senior Fellow, Fiscal Studies

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...