Minimum wages are rising nationwide. Beware this unexpected consequence – Daily News
Twenty-one states have raised their minimum wage in 2025, affecting more than nine million workers and thousands of employers. And there may be more to come: From Connecticut to Virginia, Democrats are protecting minimum wage increases or pushing for higher levels, just one example of pushback against Republican policymaking in the Trump era.
These days, minimum wages are politically contentious. But while neither side wants to admit it, the truth is that the myriad effects of the minimum wage—both positive and negative—are often difficult to untangle. A new study points to an overlooked outcome that matters greatly to businesses and workers: The number of applicants applying for jobs.
Small business owners affected by a minimum wage increase might assume that more people will be applying to work with them. Surely, paying higher wages will attract more applicants, right?
Not so fast. The National Bureau of Economic Research recently showed that, in fact, the opposite is true: Raising the minimum wage actually reduces the number of people looking for work in low-wage positions.
Using data from one of the largest online job search platforms in the United States, my colleagues and I measured the impact of recent minimum wage increases in Hawaii and Nebraska on job-seeking activity. The findings from both states are clear: Rather than spurring more people to look for work, higher minimum wages led to a decline in job searches for low-wage occupations such as cashiers, janitors, and dishwashers.
What explains this counterintuitive result? To be sure, people out of the labor force may be coaxed into seeking work by the prospect of higher earnings. Raising the minimum wage can also incentivize unemployed individuals to redouble their efforts to find a job.
But it is crucial to consider another group: Individuals who already have a low-wage job. For these workers, increasing the minimum wage boosts their income, improves their satisfaction, and reduces their motivation to seek job opportunities elsewhere. Simply put, a pay bump makes their current position more attractive, decreasing the desire to switch jobs.
The key insight is that a large proportion of job-seekers aren’t unemployed; they already have a job, but are keeping an eye out for better options. The real-world experiences of Hawaii and Nebraska bear this out. To tease out the effects of the minimum wage, we compared changes in job searches in these states against a “control group” of states where the minimum wage remained unchanged.
In Hawaii, where the minimum wage increased from $10.10 per hour to $12 in 2022, job search activity for retail and cleaning occupations dropped by 11 percent, while searches for food-related jobs fell by 13 percent. Nebraska raised its minimum wage from $9 an hour to $10.50 in 2023, and saw similar declines in job searches for the same categories of jobs.
These findings have important implications for policymakers and businesses. If minimum wage increases cause fewer people to look for work in low-wage positions, companies may struggle to fill openings, affecting economic output and consumer prices. Faced with fewer applicants, businesses may invest more in automation or seek other ways to reduce their reliance on human workers, and that could inflict long-term pain on the U.S. workforce.
Over the last decade, researchers have found that minimum wages affect many outcomes beyond employment, including health, crime, fertility, and educational attainment. Job search is another piece of the puzzle, and we overlook it at our own peril. As states continue to experiment with minimum wage increases, effective policymaking will require a deep understanding of unintended consequences.
On the minimum wage and other issues, let’s take all of the repercussions—including counterintuitive ones—into account.
Vitor Melo is a senior research associate with the Knee Regulatory Research Center and PhD Candidate in Economics at Clemson University.
