Washington’s statewide minimum wage is set to increase from $17.13 per hour to $17.73 per hour beginning January 1, 2027. While many progressives are celebrating the increase as a win for workers, they might be making some dubious assumptions about economics and forgetting some core truths.
Priced Out Of The Job
The key fallacy in the idea that a higher minimum wage leads to higher prosperity is that the minimum wage does not account for who is employed. Many businesses have trouble affording to pay their employees minimum wage and decide to cut back staff so the company can remain profitable.
Not only that, but younger or lower-skilled workers sometimes do not get hired at all. In a true market system, the wage an employer pays a worker signifies how much value the worker brings to the company.
When an artificially high wage floor is set, employers often choose to hire only workers with significant experience or even automate job positions to avoid having to pay a low-skilled worker more than they think he is worth.
Therefore, minimum wage laws, while leading to higher prosperity for the employed, often box out people from jobs who need them the most. The statistics bear this out.
The Statistics
African American teenagers, who have historically had less access to education and higher-paying job opportunities, have been hit particularly hard. In 1948, before artificially high minimum wage floors were set, they had an unemployment rate lower than white teenagers at around 10%. Today, that number has increased to around 30%–40%.
Looking at teenagers across all demographics, countries without minimum wage laws, such as Switzerland and Singapore, have seen unemployment rates for teens in the single digits. On the contrary, progressive European nations with high minimum wages have seen youth unemployment rates in the 20%–30% range for extended periods of time.
The Minimum Wage Study Commission found that every 10% increase in the minimum wage leads to a 1%–3% drop in teen employment on average.
Answering The Critics
Beyond employment, the minimum wage often chokes companies and forces them to charge higher prices for products, leading to an elevated inflation rate.
Critics may argue that workers are struggling to afford a basic standard of living as it is, and so any lowering of the minimum wage would be catastrophic. However, these tend to be the same people who support the mass-regulatory state that jacks up prices for everything from housing to gas.
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How about Washington State lowers taxes, stops tying the hands of small businesses, cuts red tape, refrains from stealing people’s income, and lets market forces flow? Maybe then life would be truly affordable.
However, common sense doesn’t win votes. What gives?
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