Unsurprisingly, the editorial board of the Star Tribune is on board organized labor's "Raise the Wage!" bandwagon, asserting in the headline for its Sept. 1 editorial that a "higher wage floor would help families."
Who could be against "helping families" by increasing the minimum wage? Well, begin with practically every labor economist who would like one less piece of economic illiteracy to correct.
There is an "11th Commandment" of sorts in economics: "Thou shalt never do only one thing." This applies with a vengeance to public policy. All public policies present us with trade-offs, and all public policies create secondary effects.
The minimum wage is no exception. We can't simply impose higher wages and call it a day. To be responsible as well as compassionate, legislators must consider not only the seemingly obvious initial effects of public policy, but the less obvious secondary effects as well.
Wages are a price that firms pay to acquire the productivity of labor. The law of demand predicts that when the price of low-productivity labor is increased, employers will respond by purchasing less such labor. (This effect grows larger over time.)
Minimum-wage increases thus harm the most vulnerable and least competitive members of the labor force, typically the young and inexperienced. Forced to pay a higher minimum wage, many firms will find it sensible to replace those on the bottom rung of the employment ladder with higher-productivity workers.
Or, firms may respond by altering the terms of employment where they can, reducing non-money compensation like free meals, uniforms or hourly breaks that workers value.
Alternatively, rather than substituting higher-productivity workers for now-more-costly lower-productivity workers, firms might substitute capital instead. Just as consumers buy less of a good at higher prices, firms purchase less of an input at higher prices. (To repeat, this substitution process grows over time.) The unavoidable trade-off for raising the price of low-productivity, entry-level jobs is fewer of those jobs. Thou shalt never do only one thing.