OPINION:
America is experiencing a minimum wage meltdown, and the July wage hikes could make it worse.
On Wednesday, state and local governments will enact minimum wage hikes, with some areas moving above $20 per hour. These increases — a majority of them automatic based on inflation — ignore the growing evidence that they come with serious costs for workers, businesses and consumers.
The question is whether lawmakers will take a closer look.
Advocates claim that raising the minimum wage puts more money in workers’ pockets without significant downsides, but good intentions do not always produce good outcomes. In practice, minimum wage hikes are linked to fewer employment opportunities, strained business operations and a higher cost of living.
This should not come as a surprise. For starters, roughly three-quarters of the economists surveyed by the Employment Policies Institute this spring oppose wage hikes up to $15 per hour, and that opposition grows as targets rise. California and New York offer stark recent examples.
California lost nearly 20,000 fast-food jobs — double the rate of industry losses nationwide — after a mandate raising the fast-food minimum wage to $20 per hour went into effect in April 2024. New York lost nearly 10,000 restaurant jobs in just the past year as the state implemented a $17 hourly wage requirement, after years of stagnation in the hospitality industry because of a decade of state wage hikes.
One of the most recent examples comes from Los Angeles, where Big Labor pushed a first-in-the-nation $30 minimum wage for hotel and tourism workers, to be fully implemented by the time the city hosts the Summer Olympics in 2028. After the City Council enacted the law, hotels began withdrawing from room blocks and delaying planned renovations.
Now, most (88%) hotels have undergone layoffs or schedule reductions, resulting in the largest yearly job loss for the city’s hotels in more than a decade (besides the pandemic).
Mass job losses such as this have been particularly harmful to young Americans and those just starting their careers. This summer, a quarter of teens hoping to find a job may be unable to do so in states with mandates such as California’s. When entry-level jobs dwindle, young people lose the first rung on the economic ladder.
The economics are straightforward. When minimum wages increase, employers who cannot offset the cost by raising prices are forced to reduce staff or hire more experienced workers. Sometimes, the consequences go further than that. When jobs are disappearing and unemployment is on the rise, businesses are struggling to operate under higher wage demands.
In some cases, they do not survive at all.
After 25 years of success, a Carl’s Jr. franchisee overseeing 65 California stores filed for bankruptcy this summer after wages went sky-high. The franchisee’s CEO said the $20 minimum wage “made it impossible to cover expenses.”
Minimum wage mandates force once-thriving businesses into tight corners.
Yet businesses are not the only ones struggling to cover costs under misguided mandates. Thanks to minimum wage hikes, working families must pay more to put food on the table. That is because minimum wage increases make the cost of living worse, not better.
Decades of economic studies show that for every $1 increase in the minimum wage, the price of necessities can rise by an average of 5.5%. For perspective, if the minimum wage increases by $5, a family that spends $800 a month on essentials such as food or childcare may now need to spend $1,020.
Many Americans have had enough. The public appears increasingly skeptical that dramatic minimum wage hikes deliver the benefits politicians promise.
Oklahoma is a recent example of voters pushing back. On June 16, Oklahoma’s ballot measure to raise the state minimum wage from $7.25 to $15 per hour failed by a 10-percentage-point margin. Opponents pointed to the recent mountain of evidence from states and cities across the country, saying the increase would drive up the costs of goods and services statewide and raise the relatively low cost of living.
Similar minimum wage measures have failed in blue states as well, such as another $15-per-hour mandate in Massachusetts. Even the majority-Democratic Los Angeles City Council voted in May to delay its own minimum wage law for hotels.
This recognition is crucial. If minimum wage mandates continue to climb unchecked, the economic situation is likely to worsen.
The warning signs are everywhere: fewer jobs, struggling businesses, higher prices and growing voter resistance. The writing is already on the wall. The only question is whether lawmakers will read it before the damage snowballs.
• Michael Saltsman is an owner and partner at Berman and Co.
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