Everyone wants to earn more money. It’s a natural instinct. And in the United States, that’s just part of the path toward the old “American Dream” coming to fruition. And we should all want to earn more money. But — there is a huge “but” that has to come into the equation.
There is a dangerous (and seemingly ludicrous) bill that has been proposed which actually sounds great if it could just be explained in an economic vacuum. The reality is that a set of problems from this bill cannot just be looked at in an economic vacuum. The outcome would will likely lead to yet another inflation spiral, as well as fewer jobs and using robots and automation in even more aspects of the economy than what is already expected in the years ahead.
Perhaps the biggest primary down-range impact would be what a much higher minimum wage would do to other jobs that currently well-above minimum wage. Many of those higher paid jobs are currently under or just over the proposed $25 minimum wage. Guess what that will mean — all hourly jobs will have to rise, and that will only drive the prices of goods and services up all over again.
THE PUSH: WHO & WHY?
Democratic members of Congress recently introduced the Living Wage for All Act. The legislation aims to raise the federal minimum wage to $25 per hour. This same $25 per hour figure is being touted as “the floor that working families need to meet the real cost of living in America today.” The legislation also aims to eliminate all subminimum wages, including those who earn tips, youth workers and workers with disabilities.
It is also without surprise that the legislation has only been backed by Democrat members of Congress. A coalition of more than 100 organizations that includes teachers unions and lawmakers is in support of the bill, including the National Association for the Advancement of Colored People (NAACP). These are the members who stood to introduce the Living Wage for All Act:
- Delia C. Ramirez (IL-03),
- Jesús “Chuy” García (IL-04),
- Lateefah Simon (CA-12),
- and Analilia Mejia (NJ-11).
Mejia, who was just recently elected in a special election, ran on a platform that called for Medicare for All, this same $25 minimum wage, as well as a wealth tax and abolishing Immigration and Customs Enforcement.
THE REAL DOLLARS, CENTS & SENSE
Be advised that this review is not intended to just be a hit job to prevent workers from making more money. Again, it’s just a natural instinct from any worker to want to earn more money. It should also be no secret that the current $7.25 per hour is an antiquated figure in 2026, and that the amount does need to change. But to what exactly?
It should come as no surprise that forcing much higher wages, even after the main effects of inflation seem to have passed, that this effort for drastically higher wages will hurt small business owners much more than it will hurt large national chains. Many large businesses are public or backed by private equity groups with deeper pockets. They also have mechanized operations across all aspects of their businesses.
The U.S. Department of Labor lists that the current federal minimum wage in 2026 for covered nonexempt employees is $7.25 per hour. While very few workers actually earn just $7.25 per hour, it is obviously a figure that no one can actually live off of. And (again) the minimum wage needs to be higher than the $7.25 where it has been stuck at $7.25 since 2009. The outside U.S. Inflation Calculator shows that what cost $1.00 in 2009 is now about $1.54 in 2026 — a net change of 54% using rounded figures.
A move toward $25 per hour will only exacerbate the inflationary problems seen from 2020 to 2025. The Living Wage for All Act might as well be titled “The Robot-Worker Installation Act.” Many jobs targeting higher wage positions and many minimum wage positions are already seeing robot videos that can replace many of those jobs. Higher and higher wages will only make robots that much more economical for businesses.
Multiple cities and states already have their minimum wages pegged much higher in recent years. Here are just some of the larger and more obvious examples:
- California’s minimum wage in in 2026 is $16.90 per hour; and the state’s Department of Industrial Relations shows Fast Food Restaurant employers and Healthcare Facility employers also have a higher minimum wage.
- New York’s state minimum wage increased to $17.00 per hour (by $0.50) in higher cost areas of New York City, Long Island and Westchester County. Minimum wage also rose to $16.00 per hour (also by $0.50) for the rest of New York state. Future hikes will be tied to annual inflation readings. NYC Mayor Zohran Mamdani’s campaign pledge called for a “$30 by ’30′” minimum wage message.
- Chicago’s Business Affairs and Consumer Protection shows that the minimum wage in Chicago is $16.60 per hour for employers with 4 or more employees, while the minimum wage to be paid under city contracts or concessionaire agreements is $17.80 per hour.
Again, every worker should try to earn more money over time. This also should require planning and efforts by each worker. One harsh reality that this bill does not address is that minimum wage jobs are not supposed to be lifelong career ambitions of any worker. Most of the minimum wage jobs are for teenagers and those who lack skills to earn more money in better jobs and careers.
The U.S. Bureau of Labor Statistics shows the numbers and demographics of who earned minimum wage as of 2024 in Table 1 on its homepage. It’s only about 1.4% of the U.S. workforce, before considering that many of these minimum pay hikes would then move above the pay of many existing jobs pay higher than minimum wage today.
The next issue is what a phased timeline would look like. The proposed bill sets a two-track phase-in, requiring large, highly profitable corporations to lead the transition. Large employers would reach $25 by 2031, while smaller employers would phase in more gradually, reaching $25 by 2038. How would smaller employers be able to ask their workers to earn far less than those at larger companies? This may just lock in future inflation ahead for consumers who buy from companies with already-high wages (as a total percentage of expenses).
Most economists would point out that higher wages will lead to higher inflation. After all, many businesses have wages and costs of employment among their top operating costs. It may not have to be an assured outcome of higher inflation, but the degree of this sort of pay hike seems impossible to believe that prices will magically not adjust. The real world doesn’t exist in an economic vacuum.
Those who look at wages in a vacuum argue that higher wages do not contribute to higher prices paid by everybody else. While commodity prices and food input prices rose in recent years, the memory of fast food restaurant windows not even located in high priced cities showing “Hiring! $20/Hour!” should have been the first alarm that higher wages do eventually contribute to higher costs.
The most recent figure from the World Population Review site showed a $5.79 national U.S. average price of the infamous Big Mac from McDonald’s. That figure was $4.82 in 2020 and $4.29 in 2015. This should make at least some people ponder just how much of McDonald’s domestic inputs and food costs could really be tied to issues like tariffs. While McDonald’s did cite inflation and tariffs for a decrease in domestic sales in 2025, one of the main reasons cited in mid-2025 was a reduction of low and middle-income customers — while Jack in the Box, Wendy’s and Burger King were closing stores or considering closing locations.
In the United States, it has become quite normal to pay $15 for burgers and cheeseburgers in bars and full-serve restaurants. Now consider that the $15 stated price is actually closer to $20 for a burger after you include taxes and tips.
The reality is that excluding small business from much higher wages is a smokescreen. Who will work for “Mom and Pop’s Burgers” if they can go work for a lot more at large public chains with deep pockets? The “mom and pop” businesses have been gutted in the post-Covid inflationary years. Again, this cannot be looked as if the world operates in an economic vacuum where higher operating costs will not be passed down to consumers and business customers.
NOW USE SOME A.I. DATA
Do politicians making drastic proposals even use A.I. when crafting bills? One would hope that politicians and their teams do use at least some A.I. to help in their big proposals. Or maybe the same politicians are just looking for “Likes” and what sounds good in sound bites.
Using Anthropic’s Claude AI engine and Google’s AI search, typing in “How Wage Hikes Contribute to Inflation in the US” points out that, while not all wage growth is automatically inflationary, — the Federal Reserve closely watches the Employment Cost Index and wage growth data. Rapid wage growth (particularly above ~3.5% annually) is seen as a potential inflation trigger, which can prompt interest rate hikes to cool the economy. Claude also addresses:
- The Cost-Push Effect (protecting profit margins by passing costs of higher wages on to consumers through higher prices)
- The Wage-Price Spiral (repeats and accelerates inflation)
- Demand-Pull Inflation (when millions of workers spend more prices rise as aggregate demand rises faster than supply for goods and services)
- Sector-Specific Amplification (where labor-intensive industries like restaurants, retail, healthcare, and construction feel wage increases most acutely, making price hikes in those sectors faster and larger.
And after asking Claude, “How would a $25 national minimum wage impact future prices based on current prices including food, transportation, rents and other business input costs?”:
The core transmission mechanism is straightforward: a $25 federal minimum wage (roughly 2× the current $7.25 federal floor, and above most state minimums) raises the single largest business input cost — labor — which then ripples through prices depending on how labor-intensive each sector is. Businesses respond through some mix of: passing costs to consumers (price increases), absorbing costs via reduced profit margins, reducing labor hours or headcount, or accelerating automation.
Also from Anthropic’s Claude:
California’s 2024 $20 fast-food minimum produced documented price increases of 7–15% at major chains within 6 months — and $25 would be a larger jump still.
Claude also showed double-digit price gains at the median from a $25 per hour minimum wage versus the federal floor and most states already having higher minimum wages in fast food & QSR, sit-down restaurants, new construction costs, home service/repair, rideshare, home health aides, childcare… Claude’s bottom line:
A $25 minimum would likely add 3%–8% to the overall price level over several years, but that average hides enormous variation — restaurant meals and childcare could see 15%–25% price increases, while electronics and clothing would barely move.
IN THE END…
The definition of prosperity differs for every person. Rather than thinking this bill will actually help society as a whole toward prosperity, it seems highly likely that higher wages of $25 per hour being proposed (and the ensuing higher consumer costs that will follow) should push those of us who eat and use labor-intensive services to just rely on buying electronics and clothing for our food and services to avoid the inflationary pressure of a $25 minimum wage. But how do you eat electronics and clothes?
There are many obvious benefits when workers earn more money. There are also some really bad ways to go about how that outcome translates to a prosperous society — even considering the living wage argument. This bill will very likely hurt smaller businesses more than it will hurt larger businesses. It will also make America even more expensive and more uncompetitive in the old global economy.
The country has endured enough inflation over the last five years. Let’s use some common sense and fight to keep that inflation from getting even worse in the years ahead.
