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In 23 states plus the District of Columbia, 2025 will bring a boost in the legal minimum wage. The hourly increases will range from 25 cents in Ohio and Montana to $2.15 in Michigan. In several states, the lowest hourly rate at which a worker can be hired will be more than $16 and the rate in D.C., now $17.50, will be higher still.
So the lesson will have to be relearned yet again: Mandatory minimum wage increases hurt many of the people they are supposedly meant to help. Boosting the lowest wage at which someone may legally be employed ensures that many working people, especially those at the bottom of the economic pyramid, will find themselves priced out of a job.
Minimum wage increases are popular with lawmakers, journalists, and advocates who care more about good intentions than good results. But even the best of intentions can't override fundamental laws of economics, and the Law of Demand is about as fundamental as they come: All other things being equal, when the price of something goes up, demand for that something goes down. That is true whether the something in question is a house, an iced coffee, a pack of cigarettes, an automobile trip, a pizza — or an employee. Ever since the first federal minimum wage law was passed in 1938, such laws have had the effect of eliminating some people's wages entirely.
Again and again, the impact of minimum wage increases has been subjected to scrutiny. Again and again, the results have been confirmed. When Congress's fiscal research agency released one such study in 2021, the Globe ran a story on its findings. The headline told it all: "Minimum wage hike to $15 an hour by 2025 would result in 1.4 million unemployed, nonpartisan Congressional Budget Office says."
Yet politicians keep raising the minimum wage; activists keep clamoring to raise it even higher; and marginalized workers — those with fewer skills, little experience, substandard education, or a frail social network — keep paying the price.
Now, from California, comes still more proof.
In 2023, Governor Gavin Newsom signed a bill imposing a targeted $20 minimum wage on fast-food chain restaurants — an amount 25 percent higher than the $16 per hour that applies in every other sector of California's economy. Even before the law took effect in April 2024, its damaging consequences were apparent. "California Restaurants Cut Jobs as Fast-Food Wages Set to Rise," a Wall Street Journal story on March 25 was headlined.
"Some pizza-chain operators in California are laying off drivers ahead of the wage law's start and farming out delivery service to apps," the Journal reported. "Franchisees for Pizza Hut and Round Table Pizza … said they plan to lay off around 1,280 delivery drivers this year." Other chains announced a freeze on hiring or reductions in workers' hours.
According to the US Bureau of Labor Statistics, fast-food employment in California shrank from 570,909 jobs in September 2023, when the legislation was signed, to 564,743 in June 2024 — a loss of 6,166 jobs, or 1.1 percent. During the same 10-month period a year earlier, California's fast-food sector had grown, adding 17,528 jobs, or 3.1 percent.
Could there be other explanations? Perhaps the thousands of lost jobs in California reflect a bad year for the fast-food sector nationwide? Nope: According to the Employment Policies Institute, "California's fast-food job losses are unique to the state ’ total private sector fast-food employment nationwide grew over the same period," adding more than 74,000 jobs.
Nor can the layoffs and hiring freezes at fast-food restaurants be attributed to California's broader economic struggles. It is true that overall private employment in California fell during those 10 months, but only by 0.3 percent. The decline in the fast-food industry was almost four times as steep.
So once again we are reminded that reality isn't optional. Minimum wage laws invariably make some jobs unaffordable and some workers unemployable. Populist rhetoric about bestowing "a raise" on low-income workers may give politicians and advocates a warm and fuzzy glow. But workers still struggling to grasp the lowest rung of the economic ladder aren't helped by foolish laws that push that rung higher than they can reach.
A postscript: Perhaps California voters are starting to get the message. In last month's election, they narrowly rejected Proposition 32, a ballot measure that would have increased the state's overall minimum wage from $16 to $18. Never before had a majority of California voters defeated an initiative to hike the statewide minimum wage. The vote won't undo the harm inflicted on all those unemployed fast-food workers, but it will prevent thousands of other jobs from being lost. It's a step in the right direction.
Jeff Jacoby is a columnist for The Boston Globe, from which this is reprinted with permission.
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