Minneapolis Is the Wrong Place to Try a $15 Wage

Organizers in Minneapolis are pushing for a referendum that would raise the minimum wage in the city to $15 an hour, joining the growing movement across the country to raise local minimum wages far above current or historic levels.

I haven’t been a fan of this idea in cities like Los Angeles, where the rationale at least is obvious: The price of low-wage labor has fallen, even as the local cost of living is rising because of various structural and regulatory barriers to real estate development. But as economists will tell you, the price of labor is generally set by the intersection of demand and supply. As price falls, people want to consume more but suppliers want to supply less. The market price is normally set by those forces meeting, otherwise known as the “market-clearing price,” because it’s the price at which no one who wants to supply labor at that price is left without a job, and no one who wants to buy it at that price is left without an employee.