The Unintended Consequences of Minimum Wage Hikes

As we enter the new year, new state policies are bound to impact millions of workers, taxpayers, and consumers. In 2026, 19 states will see state-mandated minimum wage increases, affecting more than 8.3 million workers and purportedly raising total earnings by $5 billion nationwide. It’s not only states that are increasing minimum wages. Cities and local municipalities are also raising them. Seattle’s minimum wage rose to $21.30 an hour, and Minneapolis’s minimum wage is now $16.37 an hour.

While supporters of minimum wage increases admirably aim to help low-income workers, they often overlook unintended consequences such as job losses for young and low-skilled workers and higher costs for business owners and consumers. States and localities should back away from minimum wage increases and instead increase opportunities through market-based reforms.

Increased labor costs through minimum wage hikes can significantly harm small businesses, leading to fewer jobs, reduced benefits, and ultimately higher prices for consumers to cover the new costs. According to comprehensive reviews of the available economic research, there is a “clear preponderance” of evidence showing the detrimental impact of mandated wage hikes on employment. While this impact is most pronounced—and reported on—for jobs at large chains, grocery stores, movie theaters, etc., job losses can show up in unexpected places of the economy with a devastating impact. According to one 2025 working paper by researchers Ina Ganguli and Raviv Murciano-Goroff, “state minimum wage increases reduce employment of undergraduate research assistants in labs by 7.4%. Undergraduates exposed to these minimum wage increases graduate with 18.1% fewer quarters of lab experience.” This not only results in less educational experience, but diminishes scientific advancement and understanding across society—all under the banner of “progress” and “fairness.”

At the center of minimum wage hike efforts is a misconception that the government can accurately dictate employment and labor rates. Yet, the market is uniquely capable and positioned to coordinate extraordinarily complex economic realities through constantly-changing prices. When the government inserts itself into the labor market and imposes onerous minimum wages, the adverse outcomes of reduced employment and inflation have the opposite effect of the original intention and eliminate individuals’ ability to work for a fair and honest living. 

A landmark 2018 American Economic Review study predicted that minimum wage increases would reduce the supply of low-skilled jobs, and the findings have been vindicated even as economists such as Paul Krugman deny the policy’s harmful impact. The study focused on past wage increases in three major cities — Seattle, Los Angeles, and San Francisco. The cities previously passed laws raising the minimum wage to $15 per hour. The report predicted a more than 10 percent drop in jobs for Seattle for workers earning $10 per hour and a slightly smaller 7 percent decline for workers at or below $15 per hour. The negative impacts were predicted to be largest in Los Angeles and smallest in San Francisco, because Los Angeles has a greater share of people paid at the lower end and San Francisco already pays closer to $15 per hour, making the impacts smaller. The experience of cities such as Seattle shows this and similar predictions have been spot-on. As Washington Policy Center scholar Mark Harmsworth noted last May, “the Seattle Metropolitan Division lost approximately 4,200 jobs between January and April 2025, with the unemployment rate in King County rising to 5.1%, compared to the state average of 4.6%. This marks a significant departure from the robust job growth of the 2010s, when Seattle added tens of thousands of jobs annually.” Minimum wage hikes are uniquely effective in bringing job creation to a screeching halt.

As said by the influential economist Thomas Sowell in his book Basic Economics: A Citizen’s Guide to the Economy: “Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force. Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed.”

Instead of raising the minimum wage, state and local governments should focus on job training and educational opportunities to improve individuals’ skills and help them leverage those skills for higher pay. Reducing government involvement in these areas would improve the lives of millions of Americans without the negative consequences of reckless government intervention. Additionally, states and localities should pursue tax reform to allow American workers to keep more of their hard-earned money. In contrast, minimum wage hikes are tragically misguided, and policymakers should avoid this failed idea.