A national minimum wage is a bad fit for low-cost communities
A one-size-fits-all minimum wage, without any adjustments for the significant differences in the cost of living across the country, will disproportionately affect low-skilled workers in low-cost areas.

Dianna Ingram / Bergman Group

Article Highlights

  • Progressives are practically united in supporting periodic increases in the national minimum wage.

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  • Note that we call it the national minimum wage. It’s a federally mandated minimum wage that applies across the country.

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  • Costs of living vary from state to state and city to city. A national minimum wage doesn't make much sense.

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Progressives are practically united in supporting periodic increases in the national minimum wage. The only disagreement is by how much: some, like President Obama and his fellow Democrats, propose raising the national minimum wage by almost 40 percent over the next few years to $10.10 per hour and indexing it to inflation thereafter; others favor almost doubling the current minimum wage to a so-called “living wage” of $15 per hour or more.

But note that we call it the national minimum wage. It’s a federally mandated minimum wage that applies universally across the country — in cities, suburbs, and rural communities; in places where the cost of living is high, such as Washington, D.C., and New York; and in the countless small towns and cities where the cost of living is far lower. And it’s partly this uniform, one-size-fits-all aspect of a national minimum wage that guarantees that it won’t work as expected, or at least won’t work well at all in thousands of America’s low-cost communities.

Let’s assume that within a given labor market, there’s some mandated minimum wage that would both increase pay for low-skilled workers and cause little or no increase in unemployment. Now, that’s a pretty strong and unrealistic assumption: despite the publicity given to a number of studies claiming that minimum wages don’t hurt job prospects for low-skilled workers, most economists still believe that a substantial increase in the minimum wage would hurt job growth. University of California economists David Neumark and Ian Salas show that many of the studies that claim no adverse employment effects of minimum wage hikes can produce this result only under very narrow terms, such as by evaluating employment over short periods of time or using a certain statistical technique. Using different time periods and applying alternate statistical methods to the same data, researchers have confirmed the conventional economic wisdom: that a government-mandated floor on wages reduces employment opportunities for low-skilled workers.

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