You could say that the month of July is filled with “maliversaries,” which is our word for a bad anniversary at Patriotic Millionaires. At the start of the month, we marked the first maliversary of the passage of Republicans’ One Big Beautiful Bill Act which overwhelmingly benefited the wealthy and corporations. Now at the end of the month, we’re marking the 17th (!) maliversary of the last time the federal minimum wage was raised.
The federal minimum wage was last raised on July 24, 2009 to $7.25 an hour. That was pretty low 17 years ago, but is now absolutely, positively abysmal. Today, there is almost no county in the United States where a single adult with no children can support themselves earning anything less than $15 an hour. And if that wasn’t enough, full-time minimum wage work—ringing in at $15,080 annually—actually puts someone below the federal poverty line.
It’s also worth putting into perspective just how long 17 years is, because it really is a long time. If you had a child in 2009, they would be old enough to drive, watch an R-rated movie, get a helicopter license, and enlist in the army. Over the course of 17 years, you can go through multiple mattresses, refrigerators, and careers. And we won’t even talk about all the major world events that have happened since 2009…or maybe just one. Kanye West famously interrupted Taylor Swift on stage at the MTV Video Music Awards on…September 13, 2009.
To mark this year’s maliversary, we’d like to devote a whole Closer Look to tackling myths about raising the federal minimum wage that we often encounter in our interactions with politicians, pundits, and members of the public. We talk a lot about the minimum wage in this newsletter—and particularly why raising wages is good for business folks like many of us—but we thought now would be as good a time as any to finally address the seven most common misconceptions we’ve seen floating around about the federal wage floor.
There are a lot of other misconceptions specifically about the subminimum tipped wage. We’ve addressed these in the past, so for today, we’ll stick to the “regular” $7.25 federal minimum wage. Let’s get started!
Myth 1: If we raise the minimum wage, many small, mom-and-pop businesses will be forced to close.
We encounter this myth the most, so thought it would be a good idea to debunk it first.
We know this fear is overblown given what we’ve learned from the states. Research shows that small businesses in states with higher minimum wages grow faster than states that follow the $7.25 federal minimum wage.
Contrary to popular belief, labor costs typically make up a small share of total business expenditures. For example, in restaurants, labor costs comprise roughly 30% of operating costs; that also includes salaries for upper management, so technically low-wage work makes up an even smaller share than 30%. That said, if you’re running your business well, you shouldn’t have too much of a problem handling higher labor costs brought on by an increased minimum wage.
Which brings us to another point: research does show that less productive businesses do sometimes close in the wake of higher minimum wages, but not higher-performing ones. One study found that higher minimum wages increase the likelihood that 3.5-star customer reviewed restaurants will close, but not 5-star ones. That may be startling to read, but maybe that’s not the worst thing in the world. If you can’t turn a profit without paying your workers basement-level wages—or, perhaps more egregiously, paying so little your workers rely on government assistance programs like SNAP and Medicaid to survive—it’s probably a net positive for communities that revenues flow to smarter and more productive businesses that can.
Myth 2: If the minimum wage is raised, businesses will have to cut jobs to save costs, which will end up decreasing the overall earnings of low-wage workers.
This is Myth 1’s close cousin and, boy, is there a lot of research out there on it to sift through. Luckily for us, in 2024, two researchers sifted through no fewer than 88 separate minimum wage studies for us to have the answer, once and for all, as to whether minimum wage hikes kill jobs.
The answer? An overwhelming no. Ninety percent of the studies they analyzed found either no job losses or small disemployment effects as a result of minimum wage hikes. This also naturally means that minimum wage increases have raised the overall earnings of low-wage workers.
As mentioned, lower-performing businesses may close in the face of higher minimum wages, but their workers end up fine. Research suggests their jobs are “reallocated” to more productive firms looking to hire more workers who are paid better. As for businesses that manage to stay open, they benefit from reduced turnover. They may not be hiring more workers, but they are also not losing workers with higher minimum wages, so there is no net effect on employment. This also ends up saving costs for employers, as it is well-documented that it is cheaper to retain workers than it is to hire and train new ones.
At the end of the day, companies hire people for one reason and one reason only: they need their work. If a position isn’t necessary, any good businessperson won’t hire someone for it in the first place—or they will cut it in the future if their needs change. And that’s true no matter what the minimum wage is.
Myth 3: If the minimum wage is raised, businesses will raise prices to offset it and inflation will spike.
Research does show that raising the minimum wage leads to increased prices, but these increases are very modest. One study found a 10% increase in the minimum wage was associated with a small 0.58% spike in menu prices at restaurants. And remember—labor costs are a relatively small part of doing business, so good and productive businesses should be able to reasonably absorb wage increases without passing them on to their customers.
The good news here is that, for low-wage workers, the income gains they receive through higher minimum wages dwarfs any minor price increases they face as consumers. This is a win for them but also their local economies, seeing as they are able to spend more on goods and services with more disposable income.
People then worry that workers’ increased spending will spark inflation in the broader economy, but this fear is also unfounded. When the minimum wage was raised in 2009, inflation actually slowed in the years following. And when inflation peaked in 2021 and 2022, states with higher minimum wages experienced roughly the same degree of price hikes as states with lower ones.
Myth 4: The minimum wage is just a starter wage for teens and college students.
This one is a big fat “no.” Contrary to popular belief, the majority of low-wage workers are adults. According to the Economic Policy Institute, if Congress raised the federal minimum wage to $17 an hour, 86% of the workers who would benefit would be 20+ years old. Also, 24% of them would have children, 57% of them would be women, 50% of them would be people of color, and 59% of them would be full-time workers.
Myth 5: Not many people earn the federal minimum wage anymore, so there’s no point in raising it.
It is true that relatively few workers in America today earn exactly the $7.25 federal minimum wage. In 2024, 82,000 workers earned this wage, while 760,000 workers earned subminimum wages. But this doesn’t mean that there’s no use in raising it. That’s because the minimum wage exerts upward pressure on low-wage workers more generally. When the minimum wage is raised, wages up the ladder are increased too as companies work to keep pay scales and seniority consistent.
Here’s a relevant excerpt from Pay the People! Why Fair Pay is Good for Business and Great for America, written by our very own John Driscoll and Morris Pearl: “Stomp your foot on the floor. Now stand up and jump up and down. Did the floor collapse? If so, we’re terribly sorry, but that will teach you how important it is to have a solid floor underneath you. The wage floor is like that. The minimum wage—the wage floor—provides a foundation on which wages much further up rest.”
Myth 6: Minimum wage workers don’t earn more because their labor isn’t worth more.
Remember, companies hire people because they need their work. But it’s also worth noting that there is no such thing as unskilled work.
Restaurant servers are a classic example here. Imagine this. You’re the only server in a restaurant with eight full tables. One table needs a drink refill; another needs a bread basket; another needs their food delivered; another needs their order taken; and another wants to complain to your manager about their meal (after they, of course, ate the whole thing). Which one do you deal with first and how do you handle it all with just two hands and two feet in a timely manner? That takes skill in the form of mental dexterity, physical strength, and emotional intelligence.
We see nothing inherently wrong with some degree of wage inequality. As we’ve said before, we believe people need financial incentives in order to create new businesses and products which benefit the whole economy. But all jobs are necessary, require skill, and are “worthy” of a living wage. If people want to hustle some more to become rich, that’s perfectly fine. But can’t we all agree that they should have food on the table and a roof over their head along the way?
Myth 7: Raising the minimum wage will lead to automation, which will eliminate low-wage jobs.
We saved this one for last because it’s not entirely a myth. It’s just a little more complicated than people think it is.
Several studies have shown that increasing the minimum wage does lead firms to accelerate their adoption of automation. Interestingly enough, while low-wage jobs involving routine cognitive and manual tasks are being shed by automation, there has been a corresponding increase in jobs involving interpersonal tasks. At the moment, the growth in interpersonal jobs is not fully offsetting the loss of routine jobs, but it’s still an important part of the puzzle of automation to keep an eye on.
This should not be taken as an argument against raising the minimum wage. If anything, it’s an argument for it. As automation changes the composition of jobs and there is flux in the economy, it is more important than ever that workers have a strong wage floor to fall back on. There are other complementary policies that would make this transition smoother, e.g. worker retraining and more focused skill development, but these cannot substitute for a higher, more durable minimum wage.
Conclusion
We are now in the longest stretch without an increase to the federal minimum wage since it was first introduced in 1938. It’s also at its lowest real value in 77 years. Needless to say, we have some work to do on wages in America.
The Patriotic Millionaires are committed to doing our part by debunking these and other myths about raising wages. No matter what anyone tells you, raising the federal minimum wage would be good for workers, good for business, and good for the whole economy. It won’t make up for the suffering and stagnation we’ve endured over the last 17 years, but it will never be too late to right a wrong as wrong as this one.
It would also be nice if we didn’t have to mark this maliversary again next year.