Should Missouri Raise Its Minimum Wage?

Some advocates in Missouri would like to see the state’s minimum wage increased to as much as $8.25, and to index it to the rate of inflation so that it will continue to climb in subsequent years. If Missouri was to increase the minimum wage to that level, it would be higher than all but one of its surrounding states. The main argument proffered in favor of a minimum wage increase is that it will help poor and low-income families. But a higher minimum wage is unlikely to achieve this goal.

A higher minimum wage will likely reduce employment among the very low-wage, low-skilled workers that minimum wage proponents are trying to help. A large body of research illustrates the disemployment effects of minimum wage.

Moreover, even if many workers affected by a higher minimum wage would see increased wages and suffer neither reductions in employment nor hours, minimum wages may do little or nothing to help poor and low-income families. Minimum wage laws mandate high wages for low-wage workers, rather than higher earnings for low-income families. But low-wage work and low family income are quite distinct, because many minimum wage workers are in higher-income families, and many poor families have no workers.

Mandating higher wages for low-wage workers in high-income families, such as teenagers from welloff families working a summer job, does nothing to help poor and low-income families. Indeed, if the job losses from a higher minimum wage are borne by minimum wage workers in poor, low-income families, minimum wages can have unintended harmful distributional effects — possibly increasing the number of poor or low-income families. Reflecting these issues, research fails to establish that higher minimum wages help poor or low-income families.

These are perennial issues in debates about a higher minimum wage. In the current economic environment, with unemployment remaining high and job growth fairly stagnant, it may be far wiser for policy to focus on increasing employment among the unemployed, rather than trying to increase the wages of the employed.