IT’S NOT JUST ABOUT THE MONEY: Why Are There So Few Job Losses from Minimum-Wage Hikes?

Those in favor of a minimum-wage increase are willing to accept these minor employment losses for the few in exchange for income gains for the many. But this view fails to recognize that wage income is not the only form of compensation with which employers pay their workers. There are many other forms of compensation, including fringe benefits, relaxed work demands, workplace ambiance, respect, schedule flexibility, job security, hours of work and so forth. . . .

Competition among employers and workers will not disappear with a wage increase but will merely be redirected into the components of compensation packages not covered by the wage mandate. Wage floors, therefore, restrain competitive pressures in only one of the many ways in which businesses compete. With a minimum-wage increase, employers will move to cut labor costs in other areas. As such, employers are likely to reduce fringe benefits and/or increase work demands.

Indeed, past experience has confirmed the nonmonetary impact of a minimum-wage hike on workers, not only in reduced fringe benefits but in increased work demands and decreased job training.