Relearning Old Lessons about the Minimum Wage

The question of the minimum wage is a hot topic this week, as the voters of the District of Columbia just approved Initiative 77,  which will change how tipped workers, like restaurants servers, are paid and require their employers to provide a $15-an-hour wage by 2025, whether the workers in question also earn substantially more in tips or not. Under the current system, a “tip credit” allows employers to pay a much lower hourly wage, as long as the tips the employee receives during a given pay period brings their total compensation up to the statutory minimum. 

CEI’s own Ryan Young and Marc Scribner are on the record as opposing the specific provisions of Initiative 77, but this is also an opportunity to revisit the often-taught but rarely-learned lessons of the minimum wage itself as a tool of economic policy. In a short video that’s racked up half a million views since its release in 2016, George Mason University economics professor Don Boudreaux debunks the well-intentioned myths of a government-imposed minimum wage.

But you may be asking, if minimum wage laws are so counterproductive, what can policymakers do to help low-income workers be more successful? If so, Ryan Young and Iain Murray have written just the study for you. In “The Rising Tide: Answering the Right Questions in the Inequality Debate,” Young and Murray analyse an array of policies that would eliminate barriers to job creation and economic growth, providing more opportunities throughout the economy, but especially to low-skill workers and low-income families. For a fuller look at the debate over income inequality and economic opportunity, see also Young and Murray’s companion study, “People, Not Ratios: Why the Debate over Income Inequality Asks the Wrong Questions.”