Heritage Study: $15 Minimum Wage Would Wipe Out Equivalent of 218,000 Missouri Jobs
Show-Me Institute analysts have written for years about the economic research on—and the damaging effects of—mandating a higher minimum wage in Missouri, particularly if the increase is radically above the current floor of $7.65 per hour. That fact hasn't stopped some activist groups from trying to double Missouri's minimum wage to $15 per hour, which we've argued again and again would cost many of our state's workers their jobs.
But exactly how many Missourians would be put at risk if the state actually went through with such a hike? In a recent study, the Heritage Foundation puts a number to the cost of a $15 minimum, suggesting that the full-time equivalent job losses in Missouri could reach a staggering 218,000 if such a wage became law. The problem isn't just that a massive hike would imperil the jobs of the lowest-paid workers; rather, every worker paid a wage between the old wage and the new one would suddenly be put at risk by the government, as well.
Fifteen-dollar-per-hour mandatory starting wages would cover roughly one-third of U.S. wage and salary workers—considerably more than the minimum wage has ever covered. Existing minimum-wage studies shed little light on the number of jobs a $15 mandate would cost, as they examined much smaller minimum-wage increases that affected relatively few workers. In fact, most of the studies look only at sectors significantly impacted by past increases, like teenage employment or the restaurant sector. These studies provide little guidance on the effects of a minimum wage covering one-third of the workforce.
However, economists have extensively studied how businesses respond to higher wages overall, not just minimum-wage increases. On average these studies find a 10 percent increase in labor costs causes firms to reduce employment of less-skilled workers by 6.8 percent in the long run. This is not a precise estimate—some studies find greater job losses, others find lower. This figure does indicate, however, the approximate magnitude of job losses that occur when labor costs rise.
Contrary to what "Fight for $15" supporters might suggest, simply raising the government-imposed minimum wage for the employed isn't an effective way to help our poorest citizens. Rather, such a move could dramatically harm them, thousands of others in Missouri, and millions nationwide. There are many ways to improve the lot of low-wage earners, but government tinkering in the labor market with minimum wage manipulations is neither a serious nor effective means to that end.