A recent working paper from the National Bureau of Economic Research by the economists Jeffrey Clemens, Lisa B. Kahn, and Jonathan Meer should make us pause and question the wisdom of higher minimum wages. The economists explore how minimum wages affect the probability of employer-provided health coverage and find that a chunk of the increased earnings for workers who get higher wages will be offset by a reduction in employer-provided health coverage.
There are a lot of ways minimum wages can hurt the people they’re supposed to help. By raising the price of something in a competitive market, people will demand less of it. And while there is some mixed evidence, it does appear to be the case that minimum wages reduce employment.
In the simplest versions of the labor market, we assume that workers work for one thing and one thing only: wages. We know this isn’t strictly true, but it’s a good enough approximation that brings us some important insights into how labor markets work.