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A $20 an hour minimum wage really would cost a lot of people their jobs


If American fast food workers were as well-paid as Danish fast food workers, they would enjoy much higher living standards — but about 65 percent of them might lose their jobs.

That is not the conclusion that I saw liberals drawing from yesterday's New York times article about wages at McDonalds in Denmark by Liz Alderman and Steven Greenhouse. But it seems to be the conclusion that's warranted by their reporting,  albeit with the crucial fact buried in the 29th paragraph of the article:

Measured in Big Macs, McDonald's workers in Denmark earn the equivalent of 3.4 Big Macs an hour, while their American counterparts earn 1.8, according to a study by Orley C. Ashenfelter, a Princeton economics professor, and Stepan Jurajda, an economics professor at Charles University in Prague.

And the Danish restaurants are less profitable. With fast-food wages in the United States so much lower than in Denmark, and the price of Big Macs in the two countries similar, Mr. Ashenfelter said, "It must be that U.S. McDonald's are far more profitable." The higher wages and the higher menu prices help explain why there are 16 McDonald's per million inhabitants in Denmark, but 45 McDonald's per million in the United States, Mr. Jurajda said.

Obviously this is not a slam-dunk proof that forcing US McDonaldses to pay Danish wages would lead to the closure of two-thirds of the McDonalds restaurants in the country. But it's certainly suggestive. The Alderman/Greenhouse article dwells at length on the difficulties of international comparisons of living standards, but the normal minimum wage debate is about the impact on jobs and unemployment.

The good news about Denmark is that their unemployment rate is only very slightly higher than the USA's and was lower in the recent past. The Danish economy as a whole does a good job of keeping people employed, and it also does a much better job than the American economy of delivering high living standards for the poor. But mandating high wages for fast food workers has more or less the impact you would expect — low levels of fast food employment. The relevant question for the United States then becomes what would we have people do if half the fast food restaurants shut down?

Denmark proves that this is not an unanswerable question. There is something that they are doing in terms of education, training, active labor market policy, and regulation that is allowing them to maintain a low level of unemployment without nearly as much reliance on low-wage, low-productivity fast food jobs as we see in the United States. But that's the secret sauce, not the high minimum wage for fast food workers.

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