Huge changes, such as the push by President Joe Biden and Democrats in Congress to more than double the minimum wage to $15 an hour, can produce detrimental unintended consequences.
If you raise the price of something, people buy less of it. If you raise the minimum wage too high too fast, employers will hire fewer minimum wage employees. They will turn to automation instead, and people will lose jobs.
If your goal is to reduce income disparity and raise those on the lower end, there are better ways: for starters, the Earned Income Tax Credit (EITC).
EITC has been around for 45 years. Lower-income workers get money from the government instead of paying taxes to the government. It’s computed on a progressive scale, which minimizes disruption to labor markets. Increasing EITC tax credits could have the exact same effect as raising the minimum wage, without creating unemployment and putting a huge burden on businesses. In addition, lower-income workers would still be eligible for other subsidies, such as for rent and food, because they would not be making more money.
Congress should raise the minimum wage, yes, but not so fast that it hurts the people lawmakers are trying to help.