Critics say raising the minimum wage would essentially price out the most vulnerable people from the market. Immigrants, low-skilled workers and others who rely on minimum wages can't easily acquire new skills. Raising the wage would lead to job destruction as employers turn to automation and other alternatives, effectively freezing out an entire segment of people from the economy.
But when the minimum rises so dramatically, we will likely see much larger employment losses among young or low-income workers. The hard truth is that too many of them have too few skills to merit such high wages, at least in the eyes of prospective employers. Some (particularly immigrants) might instead be hired off the books, and paid in cash, while many more will lose employment entirely.
Over long periods of time, employers facing such high wages might turn to automation—say, using robots in fast-food restaurants or coffee shops—more quickly than they otherwise would. In other cases, they will likely relocate to lower-wage states or localities, as employers in Washington, D.C. threaten to do when Virginia is becoming a much cheaper place to do business.
All of this is to say: The increase helps fairly few of the people most in need, and it could badly hurt at least some of them.
The reality is people rely on minimum wage jobs to provide for their families. Raising the minimum wage ensures that anyone who works full time does not live in poverty. It's about creating better jobs. Studies have found raising the minimum wage is an effective way to achieve this goal.
But instead of diving into that controversy, let’s take a look at where these economists, and all the other researchers investigating the minimum wage, do agree: They all tend to think that raising the minimum wage would reduce poverty. That’s the conclusion of a major new paper by Dube, titled “Minimum Wages and the Distribution of Family Incomes.”
The biggest takeaway is raising the minimum wage is worth it if you want to lift people out of poverty.
What should people take away from this? The first is that there are significant benefits, whatever the costs. If you look at the economist James Tobin in 1996, for instance, he argues that the “minimum wage always had to be recognized as having good income consequences….I thought in this instance those advantages outweighed the small loss of jobs.” Since then there’s been substantially more work done arguing that the loss of jobs is smaller or nonexistent, and now we know that the advantages are even better, especially when it comes to boosting incomes of the poorest and reducing extreme poverty.