A minimum wage is a legally mandated pay floor. Governments across the world have been raising minimum wages sharply since 2014, reflecting a shift in economic thinking about their effects.
Between 2014 and 2024 Mexico doubled its minimum wage relative to median pay, from 37% of the middle income to 74%—the most extreme increase of a worldwide trend. Over the same period Britain increased its minimum wage from 47% to 61% of median earnings. South Korea followed a similar trajectory. Germany introduced its first minimum wage in 2015; it has since risen to 51% of median pay. New Zealand's pay floor is close to Mexican levels relative to its much higher incomes.
America's federal minimum wage is $7.25 an hour, last changed in 2009. Less than 1% of workers across the country receive it, because state and local legislators in Democratic areas have repeatedly raised local pay floors. California's minimum is $16.50 an hour, nearly double a decade ago. In Emeryville, a small city that is home to Pixar, the local minimum is $19.90 an hour. The "effective minimum wage"—the wage floor covering the average American worker—has reached around $12 an hour. Zohran Mamdani, New York's mayor-elect, has pledged to raise the city's minimum wage from $16.50 to $30 by 2030.
In Mexico the minimum wage stood at 278.8 pesos ($15.20) per day as of late 2025. Income poverty fell from 50% to 35% between 2018 and 2024, meaning some 15.8m people climbed above the poverty line. Although the law covers only the roughly 45% of workers who toil in the formal economy, it is believed to have dragged up pay in informal jobs too.
Economists traditionally disliked minimum wages on the basis of simple supply and demand: compulsory high pay destroys jobs and pushes workers into the informal sector. In 1994 the OECD cautioned against the policy, favouring "direct" redistribution.
The same year landmark research by David Card and Alan Krueger was published, finding that a minimum-wage increase in New Jersey had not affected fast-food employment compared with neighbouring Pennsylvania. Others devised similar studies; most found that minimum wages reduced employment, but only by a little. By the late 2010s a database maintained by Arindrajit Dube of the University of Massachusetts, Amherst and Ben Zipperer of the Economic Policy Institute showed the effect had fallen to around zero.
A counter-revolution stirred in a study of minimum-wage hikes in Seattle in 2015 and 2016, eventually published in 2022. The research found that while low-paid workers kept their jobs, the policy caused a modest fall in their hours worked and the hiring of low-wage workers slowed. By the third quarter of 2016 Seattle had 7.4% fewer low-paid jobs than a modelled counterfactual, an effect lost in the overall employment figures because highly paid professionals were in such high demand.
In a working paper Erik Hurst of the University of Chicago and three co-authors argued that it takes time for the costs of minimum wages to show up, as firms adjust their business models, but eventually a large increase "reduces the employment, income and welfare of precisely the low-income workers it is meant to help". Research published in June 2025 by David Berger of Duke University and two co-authors found that the threshold beyond which a blanket minimum wage distorts the American economy is below $8 per hour.
Other research has documented side-effects beyond raw employment numbers. Big increases in the wage floor lead employers to make working schedules less predictable, according to a working paper by Hannah Farkas of Columbia University. They lead to more workplace injuries, according to a 2024 paper by Qing Liu of Renmin University of China and colleagues. And they can cause firms to reduce their investment, according to a working paper by DuckKi Cho of the University of Sydney. A study using data from Brazil by Mark Bils of the University of Rochester and two co-authors found that the bargaining-power effects of minimum wages cascade up the wage distribution, with high earners gaining most, because specialised professionals are the workers over whom companies tend to have the most market power.
Many low-paid workers live in middle- or high-earning households, making minimum wages a relatively wasteful way to redistribute cash compared with direct transfers. Thomas MaCurdy of Stanford University found in 2015 that the price effect of minimum wages in America was more regressive than a typical state sales tax, disproportionately harming those on low incomes.
Britain is planning to scrap a lower minimum-wage rate for 18- to 20-year-olds, leading even the Resolution Foundation, the country's most prominent left-leaning think-tank, to warn the government to "tread carefully".
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