Minimum wage increases seem to be a “hot-button” topic for many people. On the surface, it seems obvious—if we raise the minimum wage, workers will earn more and be better off. But, economics is rarely that simple, and in the real-world consequences often tell a more complicated story.
Productivity, Not Policy, Drives Wage Growth
To begin, we need to understand a fundamental economic truth: wages are ultimately tied to productivity, not legislation. Governments can set legal minimums, but unless a worker produces enough value to justify that wage, forcing businesses to pay more becomes unsustainable. Sustainable wage growth only occurs when individuals generate more value for their employers, whether that’s through skills, efficiency, or technology.
What Happens When Minimum Wages Go Up?
Raising the minimum wage might sound compassionate, but businesses don’t exist to pay more than necessary for labor. When mandated wages rise, businesses react, and not always in ways that benefit workers.
They have a few options:
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Cut jobs or hours
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Automate roles (think kiosks replacing cashiers)
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Outsource or offshore tasks
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Close or relocate altogether
A striking example came in 2024 when California implemented a $20/hour minimum wage for certain fast-food workers. The result? Over 10,000 jobs disappeared almost immediately. More than 1,500 restaurants shut down or moved operations to lower-cost states. Far from helping workers, this policy left many unemployed or underemployed, and some businesses simply vanished.
Who Actually Earns Minimum Wage?
Minimum wage debates often assume that millions of full-time workers rely on it. But this isn’t the case. Less than 2% of hourly workers earn the Federal minimum wage, and most of these are young part-time workers, typically between the ages of 16 and 24. Among full-time workers over age 25, only about 1 in 350 earn the minimum wage.
So while minimum wage hikes may be politically popular, their direct impact is limited to a very small portion of the workforce. That raises the question: are we making broad economic changes to address a narrow issue?
The Bigger Picture: Most Americans Earn Much More
According to the U.S. government, the median hourly wage in the country is around $36.24, which is nearly five times the federal minimum wage of $7.25. When benefits, payroll taxes, and other forms of compensation are included, the true median hourly compensation exceeds $50 per hour.
This is important context. If you want to measure the real economic standing of the American worker, you shouldn’t start with minimum wage statistics, because so few people actually earn that wage. The vast majority of workers are doing significantly better.
The Cost of Living vs. Minimum Wage
Does raising the minimum wage actually help?
It’s a fair question. But it confuses cause and effect. The cost of living rises due to a variety of factors including housing prices, interest rates, energy prices, supply chain issues, and wages. But primarily due to an inflationary monetary policy. In fact, because minimum wage increases affect such a small portion of the labor force, they often don’t cause noticeable inflation at all. When they do, it’s usually because businesses raise prices to offset higher costs, reduce staff, or both.
So, while raising the minimum wage might give a short-term boost to a small group of workers, it can also create long-term distortions—fewer jobs, higher prices, and more automation.
Getting Ahead Means More Than Earning Minimum Wage
Finally, no one will get ahead by earning the minimum wage. The minimum wage is for the least productive members of the workforce. This may be a lack of work experience, a lack of education, poor language skills, etc. It is expected that to earn more than the minimum wage, you will remedy these deficiencies. The higher your education, or the greater your skills, the higher the demand for your services and the more you will earn.
The real challenge isn’t the minimum wage—it’s economic mobility, education, and productivity. If we want to help people “get ahead,” we need to focus less on wage mandates and more on opportunity, training, and job creation in sectors that offer real long-term value.
In short: Raising the minimum wage might feel like a solution, but it often creates more problems than it solves. If prosperity is the goal, we need policies that empower people to become more productive and valuable—not just artificially raise their wages.
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