Progressives love to insist that if you care about poor people, you must support raising the minimum wage. But we just got even more evidence that raising the minimum wage doesn’t actually help the poor.
A new paper from economists Richard V. Burkhauser, Drew McNichols & Joseph J. Sabia examines four decades of data and evaluates the impact of many minimum wage increases. It finds that a 10% increase in the minimum wage corresponds with a statistically insignificant change in the poverty rate. They further conclude, “an examination of the post-Great Recession era—which saw frequent, large increases in state minimum wages—failed to uncover poverty-reducing effects of the minimum wage across a wide set of specifications.”
How could this possibly be? If workers get a pay increase, shouldn’t poverty go down?
You’d think that, if you only look at the surface-level effects of increasing the legal minimum wage. But you have to also think of the second-order effects. While some workers will certainly see their hourly rate go up, others will lose their jobs or have their hours reduced. So, there’s no actual reason to believe workers overall will be better off just because the minimum wage went up.
What’s more, prices will often rise in response to minimum wage increases, meaning that the costs simply get “passed along” to the same working-class consumers that these mandates are supposed to help. For example, one infamous study of McDonald’s found that nearly 100% of the costs incurred from higher minimum wage mandates were passed along through higher food prices.
How, exactly, does that leave the working class better off?
But don’t expect these pesky facts and inconvenient economic realities to stop progressive politicians from doubling down on these failed ideas. Sen. Bernie Sanders, for example, recently increased his demands to radical new levels and introduced a $17 minimum wage, up from his prior $15 demands.
Unfortunately, they don’t care about the consequences. They just know that pushing naive ideas that sound great will benefit them politically, and they count on escaping blame for any of the aftermath.