The Moral High Ground and the Minimum Wage

Proponents of raising the minimum wage like to try to take the moral high ground. "Workers deserve a living wage!" they shout. They couch their arguments in terms of fairness and justice for workers. Their high ground, however, is built on a foundation of sand, and it is slipping out from beneath them.

As free-market economists have long explained, raising the minimum wage prices the most vulnerable workers out of a job. It can lead to reduced hours, less full-time work, layoffs, and increased prices for consumers. There is nothing moral about advocating for policies that produce these results.

A new survey from the Employment Policies Institute (EPI) highlights the negative impacts of California's recent increase in the minimum wage. California passed a law that raised the minimum wage for most fast food restaurants to $20 an hour beginning April 1, 2024. EPI surveyed 182 restaurant operators to assess the effect of the increase in wages.

Here are some of the key findings of the report:

• A majority of restaurants say they have already raised menu prices (98%), reduced employee hours (89%), have limited employee shift pick-up or overtime opportunities, (73%) and reduced staff or consolidated positions (70%).
• Many (75%) say the number of employees will decrease (somewhat decrease, 50%; significantly decrease, 25%).
• Nearly all (99%) say prices will increase, with 73 percent saying they will "significantly increase."
• A majority (74%) say there is an increase in the likelihood of shutting their restaurants down (somewhat increase, 38%; significantly increase, 36%).

Fast food jobs are entry-level jobs. They are well suited for individuals entering the job market for the first time or individuals who struggle to gain employment elsewhere. As such, they are a stepping stone to further career advancement. I say this as someone who began his career working minimum wage fast food jobs. Raising the minimum wage may help some workers earn more per hour, but it also leads to fewer job openings, diminished hours, and fewer opportunities for less skilled workers.