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Despite evidence, Minnesota Democrats want to hike the minimum wage by 74% for small businesses

Last week, I asked why, if people think businesses can easily swallow a hike in the minimum wage to $15ph, why not $33ph? Some Minnesota lawmakers seem to have thought to themselves “Why not?”

Two bills introduced in the state Senate on Monday by Senators Marty (D), Torres Ray (D), Eaton (D), and Laine (D), SF622 and SF626, would hike the state minimum wage from $9.86ph now to $16ph in 2023 for large employers (a rise of 62%) and from $8.04ph to $14ph (a rise of 74%) for small employers.

This is statewide, remember. We are not just talking about employers in the Twin Cities, where wage mandates are already on their way up to $15ph. We are talking about employers in places like Bagley, Wadena, and Mahnomen facing these hikes in their costs.

This is described as ‘Anti-Poverty Legislation’. But, as I’ve written before, empirical evidence shows that minimum wage hikes are bad public policy.

In 2008, economists David Neumark and William L. Wascher surveyed two decades of research into the effects of minimum-wage laws. They found that “minimum wages reduce employment opportunities for less-skilled workers … (that) a higher minimum wage tends to reduce rather than to increase the earnings of the lowest-skilled individuals … (that) minimum wages do not, on net, reduce poverty … (and that) minimum wages appear to have adverse longer-run effects on wages and earnings.” In 2014, along with economist J.M. Ian Salas, they examined the subsequent literature and concluded “that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.” In December 2018, David Neumark updated his review of the research, asking When minimum wages are introduced or raised, are there fewer jobs? He writes

The potential benefits of higher minimum wages come from the higher wages for affected workers, some of whom are in poor or low-income families. The potential downside is that a higher minimum wage may discourage firms from employing the low-wage, low-skill workers that minimum wages are intended to help. If minimum wages reduce employment of low-skill workers, then minimum wages are not a “free lunch” with which to help poor and low-income families, but instead pose a trade-off of benefits for some versus costs for others. Research findings are not unanimous, but especially for the US, evidence suggests that minimum wages reduce the jobs available to low-skill workers.

We all want to reduce poverty. But we can only do so with by getting the unemployed into work and making our state’s workers more productive. Waving a magic legislative wand, as these Senators propose, won’t do that.

John Phelan is an economist at the Center of the American Experiment. 

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