Economists are expressing concern about job cutbacks in the wake of states and municipalities having raised their jurisdictions’ minimum wage for hourly workers.
Since 2009, when the federal minimum wage rose to its current level of $7.25 an hour, 30 states and dozens of cities have raised their minimums, often to $15 an hour.
“They do increase the wages of some minimum wage workers, but they decrease the total number of these jobs,” said David Sacco, a finance professor at the University of New Haven. “Those who keep their jobs win but those who lose their jobs are out of luck.”
Daniel Lacalle, a professor at IE Business School in Spain, said wage increases “destroy jobs in the lowest income bracket” and displace much of “the cheapest labor … to the underground economy.”
“Minimum wage changes are political decisions aimed at making people believe politicians decide how wages are set,” Mr. Lacalle said. “But the only thing that makes salaries grow is productivity growth.”
State-mandated inflation adjustments, recent legislation and voter-approved ballot measures enacted minimum wage increases in 21 states on Jan. 1.
The left-leaning Economic Policy Institute estimates the hikes will benefit 9.2 million workers and increase total pay by $5.7 billion.
“Raising the minimum wage is a very efficient way to boost businesses and the economy because it puts money in the pockets of people who most need to spend it,” said Holly Sklar, CEO of the advocacy group Business for a Fair Minimum Wage.
Florida and Michigan will increase their wage floors later this year, while other states have declined to change.
North Carolina, Utah and Idaho require only the federal minimum of $7.25 an hour.
“Data from the Bureau of Labor Statistics shows that these three states all rank as top 10 states for private sector job growth rates for the last 10 years,” said Gretchen Baldau of the conservative American Legislative Exchange Council, a network of conservative investors and state legislators. “More jobs mean more opportunities for residents, so it should also not be surprising that these states have also seen consistent population increases in past years.”
According to the Bureau of Labor Statistics, about 1% of workers earn the federal minimum wage or less.
Advocates argue that regular wage hikes foster economic growth, reduce employee turnover and mitigate rising living costs for these workers.
“This is about giving workers a fair shot while strengthening our economy,” said Saru Jayaraman, president of the advocacy group One Fair Wage.
Several economists interviewed by The Washington Times said wage increases also push service industry employers to hire fewer workers, automate services and outsource jobs overseas.
“The rush to hike minimum wages across the state reflects a popular yet flawed belief that the minimum wage acts as a rising tide lifting all paychecks,” said Michael Austin, a former economic adviser to two Kansas governors. “But minimum wage laws function more like a hurdle: the higher the bar, the harder it becomes to land a job.”
Mr. Austin is an economist at Project 21, a network of Black conservatives. He noted that unemployment rates for Blacks have soared to double that of Whites since Congress enacted the first minimum wage of 25 cents an hour in 1938 to protect workers during the Great Depression.
According to a January 2021 analysis published by the National Bureau of Economic Research, 79.3% of studies showed that higher minimum wages led to fewer jobs.
“The minimum wage law is one of the most evil laws on the books,” said Walter Block, a free market economist at Loyola University New Orleans. “Economic illiterates like [Vermont Sen.] Bernie Sanders can be excused for supporting this enactment. Professional economists who do so ought to be ashamed of themselves.”
Some economists pointed to California, the nation’s most populous state, as an example of how minimum wage increases affect the economy.
Last month, data from the Bureau of Labor Statistics showed that California fast food restaurants lost 6,166, or 1.1%, of their jobs after Democratic Gov. Gavin Newsom signed a $20 minimum wage law in September 2023.
While Mr. Newsom called the hike modest, the right-leaning Economic Policy Institute noted that California had added 17,528 fast-food jobs — a 3.1% gain — during the previous comparable period.
In November’s election, California voters rejected a ballot measure to raise the hourly minimum to $18 for some other workers.
“Voters saw what a $20 wage did to their economy and voted for the first time in state history to reject another wage hike,” said Rebekah Paxton, research director at the Employment Policies Institute.
• Sean Salai can be reached at ssalai@washingtontimes.com.