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Editor's Pick

Minimum Wage Increases Hurt Lower-Skilled Workers

Jeffrey Miron and Jacob Winter

automation

States and cities throughout the US continue to raise their minimum wages, and some members of Congress are pushing for a federal increase. There have long been debates, however, about whether these policies cause unemployment.

A recent study sheds new light on this question by examining

whether minimum wage increases in the United States expanded companies’ innovation in automation technology.

The authors found

that a larger percentage increase in a state’s minimum wage led to a larger increase in the number of automation patent applications by firms headquartered in that state.

Additionally,

[a]fter minimum wage hikes, a 10 percent increase in automation patents was associated with a 1.6 percentage point decline in the share of employment held by workers without any college education who performed routine tasks … and a 1.2 percentage point decline in the share of wages paid to these workers.

The authors conclude by suggesting

that minimum wage increases make lower-skilled jobs more vulnerable to automation—harming the very workers legislators intended to help.

More broadly, minimum wage hikes generate a range of counterproductive effects; good intentions are not enough.

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