The case for increasing the minimum wage

By Pierre Briancon Nov 19, 2019

Electoral campaigns are the moment when political parties remember that there are more poor than rich voters, and in most western democracies, this is the time when promises to raise the minimum wage flourish. In the U.S., Democratic candidates for their party’s presidential nomination all seem to agree on the need to raise the minimum wage to $15 per hour, either right away or over time.

In the U.K., where a general election is due on December 12, both the ruling Conservative Party and the Labour opposition have made similar pledges, even though they differ on the details. Chancellor of the Exchequer Sajid Javid has announced that, under a Conservative government, the minimum wage would rise to two-thirds of the median wage (best defined as the level marking the midpoint between two halves of the working population). And Labour wants to raise the minimum wage to £10 an hour for all workers on its first day in office.

The arguments against significant increases in the minimum wage have traditionally centered on their (negative) impact on employment. By raising the cost of employing workers, it reduces incentives for businesses to hire, goes the theory. However, a closer look at western economies’ recent experience reveals a more complex interaction.

1 — Minimum wage hikes are not always bad for employment.