What Are the Effects of Raising the Minimum Wage?

Senator Tom Harkin, Democrat of Iowa, has introduced a bill to raise the federal minimum wage to $9.80 from its present level of $7.25. Legislators in a number of states — including Connecticut, New Jersey and New York — are also considering increases.
An election-year promise of higher wages and less poverty makes a compelling campaign platform. Unfortunately, it’s an empty pledge: Research indicates that, on the whole, a minimum wage increase simply doesn’t help the poor — in fact, it hurts them.

A 2010 study by two economists of the 28 states that raised their minimum wages between 2003 and 2007 found no associated decline in state poverty rates. There are three well-established explanations for this disappointing record: First, a majority of working-age individuals who live in poverty don’t work, and thus cannot benefit from the raise. Second, a clear majority of those who do earn the minimum wage live in households that aren’t in poverty. Third, less skilled and less experienced employees lose employment opportunities when the cost to hire and train them rises as a result of a minimum-wage increase.

Advocates for a higher minimum wage are expert at using the plight of low-income families to marshal public support. But the poor performance and unintended consequences of their preferred policy are a matter of public record. In an era of 15 percent poverty rates and soaring unemployment for vulnerable groups, that record should stand as a cautionary tale for policy makers everywhere.