The answer to the question posed in the headline above has long been controversial. A white paper examining both sides of the topic published earlier this year by Investopedia noted that “the primary argument advanced in favor of raising the minimum wage is that higher earnings would improve the overall standard of living for minimum wage workers by providing them with a more appropriate income level to handle the cost-of-living increases.”
On the other side of the coin, the white paper notes, one of several projected problems resulting from an increased minimum wage “is that of potential job losses. Many economists and business executives who point out that labor is a major cost of doing business argue that businesses will be forced to cut jobs to maintain profitability.”
Now wading into the fray is Los Angeles-based Beacon Economics, which has released a new study concluding that a rise in California’s unemployment rate to the highest in the nation could be a direct result of the state’s recent minimum wage hikes. (The minimum wage in California for all employers starting Jan. 1, 2024, was raised to $16 per hour. Fast-food employers were required to provide a minimum wage of $20 per hour on April 1, while the wage for healthcare facilities also increased June 1 (it can be between $18 to $23 per hour).)
Most concerning, the report says, is that the current unemployment effect is harming some of California’s most vulnerable residents—its youth, with 90% of newly unemployed in the state over the past year-and-a-half being under the age of 35, with the hardest hit group being teenagers.
“This loss of youth work opportunity carries with it real long-run harm,” said Christopher Thornberg, Founding Partner of Beacon Economics and co-author of the new analysis. “It not only denies younger workers a critical source of income it deprives them of work experience that has been empirically shown to improve their chances of long-run success.”
The report does acknowledge the need for policies to help alleviate the strain on lower-income households in pricey California, but argues that this policy remedy doesn’t work as intended, and when pushed too far, can inflict real harm on some of the state’s most vulnerable residents.
Better policy options, the authors say, include the Earned Income Tax Credit, early childhood education and increased training for lower-skilled adults.
Click here for more from the Beacon Economics study.