Is raising Missouri’s minimum wage to $15 per hour a good idea? Supporters of Proposition A, the minimum wage initiative on Missouri’s November ballot, clearly think so. But decades of economic research on the topic tell a different story.
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If Missouri voters approve Proposition A, the state’s minimum hourly wage will increase from $12.30 (the current minimum wage in Missouri) to $13.75 in 2025, and then to $15 in 2026. This is nearly double the state’s 2018 minimum wage of $7.85 and would tie Missouri with Illinois and Nebraska for the highest minimum wage among surrounding states.
Proponents of Proposition A argue there’s little consensus among academics on the effects of raising the minimum wage. Further, they suggest that adopting the minimum wage proposal in Proposition A would increase affected Missourians’ earnings by more than $1,000 per year. Unfortunately, none of these claims have much basis in reality or in academic research.
When Seattle began raising their minimum wage in 2015, workers immediately saw their hours reduced by 6% to 7%, and those with the lowest skill levels saw a decrease in job opportunities. When California raised their minimum wage for fast-food workers to $20 per hour this past year, approximately 10,000 jobs were quickly lost, and consumers experienced a nearly 4% increase in food prices.
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Unsurprisingly, these effects are completely in line with the findings of the vast majority of published minimum wage research. In 2022, economist Dr. David Neumark compiled every academic minimum wage publication from the past several decades and found that nearly 80% of them concluded that raising the minimum wage has a negative effect on the labor market.
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You don’t need to be an economist to understand that if the government mandates that some workers be paid more for their labor, as raising the minimum wage would do, then businesses will make changes in response to their higher costs. Those changes might happen immediately or over time, but it would be naïve to think that they wouldn’t happen at all.
Review of the minimum wage research suggests a number of ways businesses are likely to respond to higher labor costs both in the short and long terms. First, businesses that can do so may choose to reduce their employees’ hours or reduce the number of workers they employ. Second, if that’s too difficult in the short term, they could pass along the increased costs to consumers via higher prices. Or third, businesses could choose to operate with reduced profit margins for a period of time. Often, the result is a combination of the three.
In the longer term, the businesses that can’t find ways to absorb the government’s mandated higher labor costs will eventually be forced to leave the market. Those that are able to stay will likely need to adapt to do so, whether through the automation of tasks, hiring fewer workers, or limiting their hiring to the highest-skilled candidates. The result is higher prices, fewer job opportunities for Missouri’s lowest skilled workers, and minimal, if any, increases in earnings for those that retain their jobs. These are not merely economic theories; they describe exactly what has happened in Seattle and California.
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Taken together, these possibilities provide good reason to believe that raising the minimum wage, as Proposition A proposes, poses a serious risk to Missouri’s economy. Voters should be aware that the negative effects of the proposal could easily negate or offset any benefits the higher minimum wage may provide to the people the policy is supposed to help. There’s nothing wrong with good intentions, but it’s important to separate facts from fiction when considering a proposal that could have serious unintended consequences.
Elias Tsapelas is Director of State Budget and Fiscal Policy at the Show-Me Institute.
