Another Repetitive Verse on the Minimum Wage


This study would be more interesting if its findings weren’t so predictable:

Beginning in 2014, the state of Minnesota began a series of minimum wage increases. By contrast, Wisconsin increased its state minimum wage in 2010 to keep pace with the federal minimum wage, but has not increased it since. While the effects of minimum wages changes remains a controversial topic, comparing relative outcomes in Wisconsin and Minnesota suggests that the minimum wage increases led to employment losses in Minnesota, particularly in the restaurant industry and youth demographic most affected by the changes.

Over 60% of employees in the restaurant industry in Minnesota work for the minimum wage or less, and workers under the age of 24 account for 54% of minimum wage earners. Following the minimum wage increases limited service restaurant employment fell by 4% in Minnesota relative to Wisconsin. Further, youth employment fell by 9% in Minnesota following the minimum wage increases, while it increased by 10.6% in Wisconsin over the same time period.

By the appearances of the study, it looks like, in addition to decreasing employment, Minnesota restaurants raised prices on customers.

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Yes, the results do appear to present the upside of higher earnings for those workers who keep their jobs.  Among fast food restaurants, for example, average annual salaries increased 5.5% in Minnesota.

This outcome merits more exploration, though.  The higher pay could simply be compensation for longer hours or a change in the role (more management of automation, for example).  We also don’t know what we might find if we looked at individual people; somebody who would have otherwise sought a more lucrative career might have lost motivation with the slightly higher pay, producing a short-term gain but long-term loss.

Of course, as is too often the case, we can only trace these market distortions by one or two ripples.  One speculative positive is that people at the next employment tier will see increases to maintain the relative distance, but part of the mechanism to produce that effect could be that the incentive has decreased for people at lower tiers to move up, thus decreasing the competition for the higher-tier jobs.  In other words, the average manager might be making more money, but only because fewer people are pursuing those jobs, even though they’d have been better off getting the promotion than the minimum wage increase.

  • Hukabee Katz

    …suggests that the minimum wage increases led to employment losses in Minnesota…” Really? It’s just that simple. You know no other factors were involved?