A Living Wage
In the WSJ, Jason L. Riley writes about the supposed affordability issue and why he thinks increasing the cost of hiring an employee is an odd way of addressing the issue.
Yet some of the same people complaining about consumer prices are also celebrating the minimum-wage hikes set to take effect on Jan. 1.
A left-wing advocacy group reports that 19 states and 49 cities and counties will celebrate 2026 by implementing a higher wage floor for workers. According to the National Employment Law Project, more are coming in 2026.
“As affordability challenges grow,” the report says, “NELP supports 2026 wage increases that move us toward a good-jobs economy, rooted in living wages for all.”
It All Depends
Hold on a moment, advises Mr. Riley. Do minimum-wage hikes really increase incomes and reduce poverty? Yes, government can force an employer to pay a minimum hourly rate, but it can’t force the employer to hire someone in the first place, or to guarantee current employees a certain number of hours.
Minimum wage earners who can keep their jobs and maintain the same number of hours do benefit from a higher minimum wage, but there are snags. Some employees will be let go, some will have hours trimmed, and some will never be hired because they are too expensive at the outset to employ.
“This is a bad way to deal with affordability concerns,” warns American Enterprise Institute economist Michael Strain. “Businesses have to absorb higher labor costs in some way, and one way is by raising consumer prices. Another way is by reducing the number of people they employ. And things become a lot less affordable when you lose your paycheck.”
In a not-yet-released academic report, Mr. Strain and Jeffrey Clemens analyze changes to the minimum wage in the decade preceding the Covid pandemic.
They conclude that large increases harmed employment prospects for people with limited skills and work history—the same group who have experienced the most erosion in purchasing power since the pandemic. The authors estimate that “relatively large increases in minimum wages reduced employment rates among individuals with low levels of experience and education by just over 2 and a half percentage points.”
As Mr. Riley notes, between 2011 and 2019, California, New York state, and the District of Columbia lifted their wage floors by 50%, 53% and 61%, respectively. New York City’s minimum wage more than doubled between 2013 and 2020 and will rise to $17 an hour next year, 13% higher than in 2023. The biggest jump in 2026 will occur in Hawaii, where the minimum will rise by $2 to $16 an hour, a 14% increase.
The trend is not limited to blue states.
Republican-controlled Florida, Nebraska and Missouri are slated for significant increases in the coming year, another sign of the economic populism that has increasingly characterized GOP policymaking in the Trump era.
Minimum wage hikes are not effective as an antipoverty tool, contends Mr. Riley.
The most reliable route out of poverty is finding a job—any job—and keeping it. Workers aren’t paid the entry-level rate for very long. As productivity and experience increase, so do wages. What characterizes poor households isn’t that people earn the minimum wage. It’s that nobody works. To the extent that minimum-wage mandates hamper hiring, they don’t alleviate poverty.
Americans are right to be upset about prices for food, energy, housing, autos, and other goods since the pandemic. Mr. Riley notes how polls indicate that voters think the economy is in bad shape. President Trump campaigned on solving the problem. Trump still blames Joe Biden.
Polls show that voters now blame Mr. Trump. Democrats capitalized on economic anxiety in this year’s off-year elections.
The White House and Republicans in Congress will need to find a way to keep their opponents from doing the same thing in next year’s midterm contests. Making it harder for people to find employment won’t help their cause.
