The news that the Minnesota Legislature plans to increase the state’s minimum wage by almost 30 percent to $9.38 is cause for concern, not celebration. The proposal may appear beneficial, but the actual effects of such a hike will be fewer opportunities for less-skilled jobseekers in a state where nearly 20 percent of them already can’t find work.
Businesses that hire entry-level employees and pay them minimum wage — restaurants or grocery stores, for example — keep 2-3 cents in profit from each sales dollar and can’t just absorb the increase. Raising prices on cost-conscious customers typically isn’t an option either because sales fall as a result. Businesses are instead forced to provide the same service at a lower cost — that means more self-service and fewer job opportunities for the same people the Legislature wants to help.
The evidence backs up the intuition: 85 percent of the most credible economic research on the minimum wage from the last two decades points to job loss following a wage hike.