The Minimum Wage Makes the Affordability Crisis Worse

Higher labor costs push prices up, while fewer jobs and hours mean less money in workers’ pockets

By Jason L. Riley. Excerpts:

"In a forthcoming academic paper, Mr. Strain and Jeffrey Clemens analyze changes to the minimum wage in the decade preceding the Covid pandemic. They conclude that large increases harmed employment prospects for people with limited skills and work history—the same group who have experienced the most erosion in purchasing power since the pandemic. The authors estimate that “relatively large increases in minimum wages reduced employment rates among individuals with low levels of experience and education by just over 2 and a half percentage points.”

Between 2011 and 2019, California, New York state and the District of Columbia lifted their wage floors by 50%, 53% and 61%, respectively. New York City’s minimum wage more than doubled between 2013 and 2020 and will rise to $17 an hour next year, 13% higher than in 2023. The biggest jump in 2026 will occur in Hawaii, where the minimum will rise by $2 to $16 an hour, a 14% increase."

"the lowest-paid workers tend to spend a larger share of their income on food, housing, medical care and other necessities, which makes them far more sensitive to price increases. Minimum-wage mandates can make their situation even more precarious. The minimum wage for fast-food workers rose to $20 an hour in California in 2024. The Journal reported that in anticipation of the increase, restaurants halted hiring and scaled back hours. Teenage unemployment in the Golden State was already about twice the national average."