New Study: A $15 minimum wage could cost 2 million jobs

Perhaps in an unsurprising turn of events, minimum wage proponents are using the plight of essential workers to call for a minimum wage hike.

As research has shown, time and again, however, the minimum wage is detrimental to businesses — especially small businesses — and low-skilled workers. So, the idea that raising the minimum wage will raise earnings for low-skilled workers is likely misguided.

Even more concerning, the pandemic has especially worsened the financial standing of small businesses, making them more fragile. Minimum wage hikes, if enacted now, would spell even more disastrous results, as a recent study has found.

Raising the minimum wage would be more disastrous now after Covid-19

In July 2019, the Congressional Budget Office (CBO) estimated that raising the federal minimum wage to $15 by 2025 would, among other things, result in a loss of 1.3 million jobs. Using the same methodology, economists William Even and David Mcpherson have found that those losses would be even higher if changes between 2019 and 2020 are taken into account.

The new report, which is published by the Employment Policies Institute (EPI) analyzes the impact of the Raise the Wage Act that was passed in 2019 in the US House of Representatives. If enacted, the Raise the Wage Act would raise the federal minimum wage to $15, and the tipped wage to $12.60 by 2027.

Taking into account the pandemic, Even and David

estimate that if enacted, the Raise the Wage Act would result in 2 million jobs lost across the United States. The Arts, Entertainment, and Recreation and Accommodation and Food Services sectors will account for half of these job losses. Workers aged 16-24 will see the highest proportion of job losses, and the majority of jobs lost will be those held by women. Tipped workers will also lose a greater share of jobs affected by minimum wage than non-tipped workers—one in three tipped workers affected by this federal minimum wage increase will lose their job.

As I have written before, most small businesses, which tend to bear the brunt of minimum wage raises, operate on a very thin profit margin.COVID-19 has worsened the economic outlook of these already fragile businesses.

It would be very unwise for policymakers to place an extra burden on these businesses as they are trying to recover.