Raising the Minimum Wage: The Effects on Employment, Businesses and Consumers

Increasing the minimum wage may seem like a tool to raise low-income workers out of poverty, but it inevitably hurts the very people policymakers intend to help.

When the government imposes a higher minimum wage, employers face higher labor costs and are forced to respond by decreasing other production expenses. As these employers cope with the increased costs of a mandated wage raise, they often respond by cutting the jobs available to less-experienced and less-educated employees. The result is that these individuals, who already have few employment options, find it more difficult to get a job.

Increasing the minimum wage benefits those who already have a job at the expense of the unemployed. However, even those workers who see an increase to their wages may not feel the full benefit of higher pay, as businesses raise prices to compensate for the increase in labor costs. In particular, food prices tend to increase when the minimum wage is increased, exacerbating the problem for those who cannot find work and offsetting gains for those who can.

States considering raising their minimum wage risk alienating business and harming their citizens. To inform the debate occurring around the country, the Commerce, Insurance, and Economic Development Task Force has released a new report, “Raising the Minimum Wage: The Effects on Employment, Businesses and Consumers.” This report considers how raising the minimum wage hurts business, reduces employment opportunities and artificially raises prices.

Raising the Minimum Wage: The Effects on Employment, Businesses and Consumers by ALEC