A study suggests that higher minimum wages hit poorer bosses’ pockets
Jan 2nd 2020NEW YORKA MINIMUM WAGE is supposed to redistribute money from rich to poor. But economists disagree about whether it actually does so. Some researchers, for example, have found that, in America, Canada and Europe, raising the minimum wage tends to decrease employment among the least-skilled workers, as firms downsize to trim costs. Others have found no effect on employment. And although no one doubts that the policy raises wages for the workers who stay employed, still unsettled is the question of where that extra money comes from. A new paper by Lev Drucker and Katya Mazirov of Israel’s Ministry of Finance, and David Neumark of the University of California, Irvine, examines increases in Israel’s minimum wage in 2006-08 in search of an answer. The more low-wage workers a company employed, they found, the more its profits declined. Companies with 60-80% of staff earning the minimum wage saw their profits cut by almost half.Choose us for news analysis that respects your time and intelligenceSubscribe to The EconomistWe filter out the noise of the daily news cycle and analyse the trends that matterWe give you rigorous, deeply researched and fact-checked journalism. That’s why Americans named us their most trusted news source in 2017Available wherever you are—in print, digital and, uniquely, in audio, fully narrated by professional broadcastersThis website adheres to all nine of NewsGuard‘s standards of credibility and transparency.ORContinue reading this articleRegister with an email address