Affordability is the political buzzword for 2026. Last week, Sen. Chris Murphy (D-CT) announced plans to introduce the Living Wage for All Act, which would raise the federal minimum wage to $25 per hour. His argument is straightforward: if Americans cannot afford basic necessities, the government should require employers to pay more.
But would a $25 federal minimum wage make housing, groceries, childcare, or health care more affordable? Americans are better off either by earning more, paying less for goods and services, or some combination of the two. The question is whether a higher minimum wage can deliver the affordability its supporters promise.
At its core, a minimum wage law sets the lowest amount employers are allowed to pay workers. Raising that wage makes hiring more expensive.
As CEI Research Fellow Sean Higgins has argued, few workers earn federal minimum wage, so it has little effect on labor markets. A more modest increase would have a modest effect, mostly in a narrow set of jobs and industries. A $25 per hour minimum wage, however, would affect far more workers and firms.
Since workers are part of nearly every good and service, higher labor costs show up throughout the economy, whether it is restaurants, homebuilding, health care, or transportation. And because affordability depends on the relationship between wages and prices, these adjustments help explain why higher minimum wages are not a reliable way to improve affordability.
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