In a Boston Globe op-ed this week, Arindrajit Dube argued for a minimum wage model that would push wage floors substantially higher in many states. Dube, a professor of economics at University of Massachusetts Amherst, is among a small group of economists who contend that large minimum wage hikes can be implemented with little to no negative impact on employment. He pointed to his role advising the United Kingdom’s recent wage increases as evidence that aggressive mandates can raise pay without harming jobs.
But, the real-world impacts of large wage hikes like those he prescribes are rarely that simple.
When labor costs rise rapidly, businesses often respond by cutting hours, slowing hiring, raising prices, or increasing automation. Those impacts also tend to fall hardest on younger and less-experienced workers trying to enter the labor force.
Following recommendations from Dube, the UK significantly increased its National Living Wage. In the past five years, the government has pushed wages up to roughly two-thirds of the UK’s median earnings, translating to a nearly 43% increase since 2021.
During this same period, unemployment among 16- to 24-year-olds rose to 16.4%, its highest level in over a decade. While there are many factors that can influence unemployment trends, policymakers and industry leaders have increasingly pointed to rising labor costs as one of the main growing challenges for employers and a large contributor to rising unemployment among youth.
Across parts of the United States, high wage mandates have also coincided with rising pressure on employers and weaker labor market conditions for younger workers. California has quickly become one of the clearest examples. Following the implementation of a $20 fast-food minimum wage, the state experienced significant job losses in the industry, along with rising menu prices and one of the highest teen unemployment rates in the country.
If the U.S. adopted Dube’s two-thirds median wage framework, the result would be some of the largest mandated wage increases in history. In many states, minimum wages would need to rise by more than 50%, while other states would see increases exceeding 100% relative to current law. Nationally, the formula would create a minimum wage of roughly $16 an hour, more than double the current federal minimum wage.
These steep wage increases would not come without consequences. Main Street businesses would face enormous pressure to accelerate automation, increase prices, or reduce staff, making it significantly harder for younger and entry-level workers to find opportunities in the labor market. As more proposals to tie minimum wages to roughly two-thirds of median earnings gain traction, policymakers should carefully consider the tradeoffs that can accompany wage mandates of this magnitude.