Regarding the courts, a coalition of Missouri business groups, including the Missouri Chamber of Commerce, has filed a lawsuit challenging Proposition A.

The plaintiffs argue that combining wage increases with sick leave provisions violates the state constitution’s single-subject rule for ballot initiatives. Proposition A, which passed with 58% of the vote, would incrementally increase the minimum wage from $12.30 to $15 by 2026 and provide workers up to seven paid sick days annually starting in May 2025. Supporters contend that wages and benefits are integral to overall compensation and thus constitute a single subject. The Missouri Supreme Court has yet to schedule hearings for the case.

As for the legislature, because the proposition was a statute, the legislature may act to overturn it. One Missouri legislator introduced the Entrepreneur Rights Act, which would exempt some small and seasonal businesses from minimum wage increases.

Supporters may point to California’s recent mandate elevating the minimum wage for fast-food workers to $20 per hour as a triumph for labor rights. However, a closer examination reveals that the anticipated benefits, particularly in job creation, have not materialized. A study from the University of California, Berkeley, initially suggested that the wage hike did not adversely affect employment levels. Yet, upon scrutinizing the data, it becomes evident that fast-food employment in California has grown at a slower pace compared to the national average. In fact, since the law’s implementation, California’s fast-food employment increased by only 1.85%, while the national rate rose by 3.22%. This discrepancy indicates that the wage increase may have hindered job growth within the state. Such outcomes underscore the complexities of implementing blanket wage policies without fully accounting for market dynamics and the potential unintended consequences on employment opportunities.

Show-Me analysts have consistently been critical of the arguments for, and the claimed benefits of, increases in the minimum wage. Minimum wage hikes just don’t deliver on their promises—even if academic studies twist themselves into knots trying to demonstrate otherwise.

The post No, California’s Minimum Wage Hike Did Not Create Jobs appeared first on Show-Me Institute.

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As free-market economists have long explained, raising the minimum wage prices the most vulnerable workers out of a job. It can lead to reduced hours, less full-time work, layoffs, and increased prices for consumers. There is nothing moral about advocating for policies that produce these results.

A new survey from the Employment Policies Institute (EPI) highlights the negative impacts of California’s recent increase in the minimum wage. California passed a law that raised the minimum wage for most fast food restaurants to $20 an hour beginning April 1, 2024. EPI surveyed 182 restaurant operators to assess the effect of the increase in wages.

Here are some of the key findings of the report:

• A majority of restaurants say they have already raised menu prices (98%), reduced employee hours (89%), have limited employee shift pick-up or overtime opportunities, (73%) and reduced staff or consolidated positions (70%).
• Many (75%) say the number of employees will decrease (somewhat decrease, 50%; significantly decrease, 25%).
• Nearly all (99%) say prices will increase, with 73 percent saying they will “significantly increase.”
• A majority (74%) say there is an increase in the likelihood of shutting their restaurants down (somewhat increase, 38%; significantly increase, 36%).

Fast food jobs are entry-level jobs. They are well suited for individuals entering the job market for the first time or individuals who struggle to gain employment elsewhere. As such, they are a stepping stone to further career advancement. I say this as someone who began his career working minimum wage fast food jobs. Raising the minimum wage may help some workers earn more per hour, but it also leads to fewer job openings, diminished hours, and fewer opportunities for less skilled workers.

The post The Moral High Ground and the Minimum Wage appeared first on Show-Me Institute.

In recent years, several studies have also suggested a positive correlation between an increase in the minimum wage and property crime (such as burglary, larceny, and auto theft) committed by young adults, who are disproportionately impacted by an increase in the minimum wage. But why would a minimum wage increase lead to an increase in property crime?

The hypothesis is that when minimum wages increase, low-income and low-skilled workers experience a reduction in hours worked or increased unemployment, which often means a loss of income. The authors conclude that this decrease in earnings, reduction in hours worked, and increase in unemployment contribute to increases in property crime rates.

The effects of raising the minimum wage are particularly felt by workers who are younger, have a lower income, and are less skilled. The Journal of Economics study finds:

. . . using data from the 1998–2016 Uniform Crime Reports, we find that a 10 percent increase in the minimum wage led to increases in property crime arrests for those between the ages of 16-to-24 of approximately 2 to 3 percent.

Intuitively, this makes sense—losing your job or losing hours at your job could increase economic desperation, leading people to commit property crimes such as theft. In addition, jobs help give people structure and keep them on the right track. The Journal of Public Economics study mentions that more labor market opportunities for younger workers reduce criminal behavior because it increases the opportunity cost of crime. If you have a job, you have more to lose if you get caught committing a crime.

What does this all mean for Missourians? Raising the minimum wage can not only lead to fewer hours and jobs, but also more crime. To actually benefit low-income and low-skilled workers, shouldn’t we instead pursue policies that foster an environment enabling businesses to create more jobs, such as tax cuts or eliminating unnecessary occupational licensing?

The post Does the Minimum Wage Impact Crime Rates? appeared first on Show-Me Institute.

James V. Shuls speaks with Russell S. Sobel, Professor of Economics and Entrepreneurship at the Baker School of Business at The Citadel, about his latest paper, “Why Markets Matter for Human Progress & Prosperity.” They discuss how free markets drive innovation, prosperity, and human flourishing, the historical context of market-based economies, the pitfalls of government intervention, the long-term benefits of entrepreneurship and competition, and more.

Read the full paper here.

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Produced by Show-Me Opportunity

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Similar to Missouri’s potential $15.00 minimum wage, Seattle’s minimum wage ordinance passed in 2014 phased in an increasing minimum wage in the City of Seattle from the state’s $9.47 minimum to $11 in 2014, $13 in 2016, and $15 in 2017. A 2017 study at the University of Washington found that the increase to $15 an hour resulted in low-skilled workers experiencing a reduction in hours worked or even job loss. This decrease in hours worked for low-skilled workers resulted in “a net loss of $74 per month.” A pay cut of $74 per month can have a significant impact on low-income workers. The study found that employers opted to replace low-skilled workers with higher-skilled workers who could perform the job more effectively and therefore warrant a wage equivalent to the new minimum wage.

Seattle’s experiences are just one example of how a minimum wage increase negatively affects low-income workers. California recently increased its minimum wage to $20 for fast-food workers, resulting in many workers suffering from a loss of income. Mark Harmsworth, director of the Small Business Center at the Washington Policy Center, said:

Sometimes, instead of a salary bump, many workers instead find their work hours cut or their jobs eliminated completely. For some employees, if they fall below a minimum hour threshold required for benefits, they lose benefits too.

Increasing the minimum wage is a misguided way to try and help workers. If policymakers and voters want to assist low-income workers, then increasing the Earned Income Tax Credit would be a better approach.

The post A Closer Look at the Effects of a $15 Minimum Wage for Missouri appeared first on Show-Me Institute.

In this episode, Susan Pendergrass speaks with Ryan Bourne, the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute and editor of the book The War on Prices: How Popular Misconceptions about Inflation, Prices, and Value Create Bad Policy. They discuss the effects of price controls, recent interventions in the economy, how to remind people about free market principals, and more.

Ryan Bourne occupies the R. Evan Scharf Chair for the Public Understanding of Economics at Cato and is the author of the recent books Economics In One Virus, and The War on Prices. He has written on numerous economic issues, including fiscal policy, inequality, minimum wages, infrastructure spending, the cost of living and rent control.

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Aaron Hedlund is chief economist at Show-Me Institute and an associate professor with tenure in the economics department at the University of Missouri-Columbia as well as a research fellow at the Federal Reserve Bank of St. Louis.

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Titled “Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States?” it surveys the existing research on the effects of the minimum wage.

What does it find? According to the authors:

Our key conclusions are: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults as well as the less-educated; (iii) the evidence from studies of directly-affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided.

Labor economics isn’t my field of expertise, but from an outsider’s perspective, raising the minimum wage doesn’t look good!

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Their media release includes the following from Mayor James:

Workers in our cities and across the entire state work at one, two, or sometimes even three jobs, but they still cannot earn enough to provide for themselves and their families. This injustice creates a burden on state and city resources and stalls economic activity in Missouri. While we weren’t able to implement a local ordinance to raise the minimum wage in Kansas City, my commitment to pursuing this policy change has not wavered.

Not to be outdone, Mayor Slay discussed the statewide implications:

A living wage rewards work and alleviates taxpayers from the burden generated by employers who pay too little and whose employees must rely on government subsidies to fill the gaps created by the current minimum wage. Not only would a higher minimum wage benefit employers of our cities by attracting the best workforces, but also I believe that a higher statewide minimum wage would help Missouri attract the best workers in the region.

Kansas City and St. Louis have some of the highest taxes in the region. Both cities tax food, one of the most regressive forms of taxation and the most damaging to the poor. As we've written previously, not only does Kansas City levy regressive sales taxes, but its poor areas actually have a higher rate of sales taxes than wealthier areas. While some may argue that an equitable tax structure should broaden the base, what’s clear is that these tax policies are not written with any concern for the working poor. In fact, both cities also saddle workers with an additional 1% earnings tax, a tax imposed on the first dollar earned. There are no exemptions to spare the poor. And if a low-skilled worker in Kansas City is able to get a job in a restaurant, the city requires that they pay a food-handlers fee, something almost unheard of in the rest of the country. 

Both cities' public school districts suffer because the mayors and tax increment financing (TIF) commissions are eager to redirect property taxes to wealthy developers and away from the classrooms that would otherwise get the funds. Developers take the money and use it to build in the nice parts of town, away from the poor and legitimately blighted neighborhoods of Kansas City's East Side and St. Louis' North Side. Because of the disincentives of high city taxes and low city services, the city governments give out massive subsidies to businesses in the hope that they’ll stick around. 

While it's nice that the Mayors take time away from doggedly pursuing such "touristy frou frou" as streetcars, convention hotels, and airport terminals to consider the needs of workers, it is not enough. The need for sound economic policies in Kansas City and St. Louis requires a more serious approach. If mayors want to be advocates for the poor, they should focus on running their cities effectively and efficiently, rather than passing the buck in the form of wage controls. After all, increasing the minimum wage will likely hurt the very people it is intended to help.

The post Missouri Mayors and the Minimum Wage appeared first on Show-Me Institute.

McDonald’s’ “Create Your Taste” kiosk allows customers to fully customize their burgers by selecting different buns, cheeses, and toppings without having to interact with a real person. The automation occurring in McDonald’s and other places might be an inevitable feature of the the 21st-century economy, and this has the potential to put many people out of work.

In a purely free market, this is creative destruction. Some jobs are destroyed in the process of delivering increased efficiency. That’s not to diminish the pain of those now out of work; however, it is necessary for the economy to grow. Even though some job losses are inevitable, government should not be expediting the process through regulations. Mandating increased labor costs through a higher minimum wage will encourage employers to use less labor. They instead will substitute other inputs, such as capital, that may have a lower relative cost because of the increase in wages. In other words, if you make labor more expensive, you give employers an incentive to invest in ways to cut down on labor. Forcing employers to pay their lowest-skilled employees more is such an incentive.

Many businesses already have a financial incentive for installing more kiosks like the ones McDonald’s is introducing. According to the Harvard Business Review, “Taco Bell recently announced that orders made via their new digital app are 20% pricier than those taken by human cashiers, largely because people select additional ingredients. Chili’s, after installing self-service tablets, reported a similar increase in dessert orders. Cinemark theater’s new self-service kiosks have ‘had concession spending per person climb for 32 straight quarters.’”

The intention behind raising the minimum wage is presumably to help low-wage workers make more money. However, with this oncoming wave of automation, policymakers might just put these people out of work altogether. Government should encourage work, not mandate that people lose it. 

The post Incentivizing Unemployment appeared first on Show-Me Institute.

I testified on the minimum wage in May; a video of the testimony is available here. Afterward, then-councilwoman Cindy Circo asked about a chart presented previously in testimony that appeared to show that worker productivity has been rising since the 1970s while wages had not. For anyone following the minimum wage issue, that claim was a familiar one. Here is a version of the chart that has been circulating most recently:

There has been criticism from the right and the left concerning this chart and what it claims to show. The Heritage Foundation weighed in with data that actually compare the productivity of hourly workers with the compensation of hourly workers. The increases over time line up nicely.

If the voters of Kansas City have an opportunity to vote on an increase to the minimum wage, they deserve an honest policy discussion about the costs and impacts of a wage hike, who will really benefit, and how it will affect the services on which they rely. 

The post More Analysis on Minimum Wage Claims appeared first on Show-Me Institute.

Despite intentions, increases to the minimum wage do not necessarily help the poor. Even Christina Romer, who led President Obama’s Council of Economic Advisors, openly conceded there were questions about “whether a higher minimum wage will achieve better outcomes for the economy and reduce poverty.”

The reasons why are simple. First, most minimum wage earners don’t actually live in poverty. Two-thirds come from households making at or above 150 percent of the poverty line; 44 percent live in households whose income is three times the poverty level. From the viewpoint of earners, raising the minimum wage is a clumsy tool and is more likely to benefit the non-poor than the poor.

Second, the number of people paid the minimum is not especially high. Today, less than 5 percent of hourly workers are paid minimum wage. Among all U.S. workers, minimum wage employees constitute just 3 percent of the American workforce. Not only are relatively few people being paid the minimum technically living in poverty, but relatively few people are being paid the minimum at all. Targeting low-wage workers is not the same as helping low-income families.

Third, and most important, there is a wealth of economic analysis that shows minimum wage laws punish the very people they are supposed to help—making it harder for people with few skills or work experience to find entry-level jobs. The Congressional Budget Office estimated that a national minimum wage increase to $10 per hour would reduce available jobs by 500,000. Doubling the minimum wage in Kansas City from $7.50 to $15 would have even more dramatic results here. The reason for this is simple: As labor costs rise, employers may turn to cheaper technological substitutes, cut employees, or have employees work fewer hours. This trend is already occurring in grocery stores and restaurants.

As workers have to compete for fewer entry-level jobs, those with the fewest skills are left behind. A study by the University of California, San Diego found that increasing the minimum wage reduced the earnings potential of low-skilled workers whom the higher minimum wage was meant to help by limiting job opportunities. These workers need entry-level jobs that enable them to develop skills and gain experience.

As a compassionate people, we are eager to promote policies that help alleviate poverty. We do not succeed by making jobs more scarce, which is what would happen if Kansas City enacted a “living wage.”

The post Minimum Wage Increases Not Effective at Fighting Poverty appeared first on Show-Me Institute.