New York’s Minimum Wage Increase: Severe Trade-Offs

New York’s vote to implement a $15 per hour minimum wage isn’t as much a victory for the “99 percent” as Governor Cuomo’s panel thinks it could be.

CEI Fellow Ryan Young describes the unintended consequences of a minimum wage hike:

“…[T]he minimum wage has a reverse-Robin Hood effect. Some workers lose their entire income, which gets transferred instead to other workers fortunate enough to keep their jobs, and get raises besides. Income redistribution programs are supposed to flow from better-off people to worse-off people—not the other way around.

If the goal is to lift as many people as possible out of poverty, minimum wage increases are simply not up to the task. The tradeoffs are too severe.”

Breaking out of the cycle of poverty is difficult for many people, and the evidence shows that a minimum wage hike adds to the difficulty. In addition to losing non-wage benefits, many of the poorest face the bleak prospect of also losing their jobs.

Vice President for Strategy Iain Murray explains why the effects of a minimum wage increase damage the most vulnerable in the job market:

“The minimum wage transfers resources not from the rich to the poor, but among the poor. Some of America’s least well-off workers would get a raise, but many more others would see theirs hours cut, or lose their jobs entirely… There are other workers, particularly inexperienced young ones, who will not be hired in the first place because the cost of their wages is too high.”

CEI Warren Brookes Journalism Fellow Carrie Sheffield succinctly describes the division between the seen and unseen effects of a minimum increase:

"At its core, a minimum wage hike is a temporary, Band-aid fix to a deeper, chronic problem."