Minimum Wage Hikes Bring Tradeoffs beyond Pay and Jobs

In public debate, the pros and cons of the minimum wage are frequently boiled down to simple tradeoff between earnings gains and job losses. This chapter argues that an exclusive focus on tradeoffs between earnings gains and job losses is too narrow, as firms can make myriad adjustments to blunt the minimum wage’s impact on their costs. These adjustments can often be described as entailing reductions in the quality of the job from a worker’s perspective. It is thus crucial to appreciate that these adjustments will tend to mitigate, if not reverse, the minimum wage’s effect on workers’ well-being. This chapter provides an overview of the relevant concepts alongside examples from recent empirical research.