Last week, Sen. Chris Murphy (D-CT) introduced the Senate version of the Living Wage for All Act, which raises the federal minimum wage from $7.25 to $25 per hour — a 245 percent increase — over 12 years. It begins by increasing the minimum wage 66 percent to $12 an hour and then establishes separate schedules for large and smaller employers, with the former being required to raise hourly pay to $25 in only 5 years.
While this bill is unlikely to pass, news-making proposals like a $25 minimum wage provide an opportunity to revisit why most economists oppose any wage floor at all. They force higher costs onto employers, which winds up disproportionately hurting hourly workers.
Today, much of the US enjoys non-binding minimum wages. That is, 99 percent of employees already earn above the federal minimum because local labor conditions and productivity push wages higher. According to the Cato Institute, the median effective minimum wage was $13.73 in January 2026. Mandated increases beyond this level bind employers to artificially high wages.
Once the minimum wage becomes binding, employers face trade-offs: mainly, fewer non-wage benefits. Another Cato study found that after California increased its minimum wage from $11 to $12, the average affected employee worked five fewer hours per week. Fewer workers qualified for employer-sponsored health and retirement plans, while average wages actually fell by 13.6 percent.
Job losses still occur under high minimum wages. Between...
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