Does the Minimum Wage Hurt Workers?

Some politicians argue that raising the minimum wage helps the poor and disadvantaged. While this may appear to be the case on the surface, economics professor Antony Davies explains that the common view of the minimum wage overlooks one important detail: The minimum wage does not force employers to pay a particular wage to every worker; it forces employers to pay a particular wage to every worker they choose to keep.

Using an example, Professor Davies shows that minimum wage increases may make the least productive workers too expensive for employers. Minimum wage increases do not help the worker at the expense of the employer; instead they help the most productive workers at the cost of the least productive workers. What’s worse is that over time the more productive worker likely would have been rewarded for productivity anyway.

The evidence is not just anecdotal. The data show that minimum wage increases have little effect on unemployment among college graduates. Minimum wage increases lead to higher unemployment among high school graduates, though, and significantly increase unemployment for the least skilled, least educated workers. The minimum wage may be a well-intentioned public policy, but it often hurts the workers most in need of help.