For most, work and wages determine their day-to-day financial stability. People rely on wages to pay bills, save for the future, and invest in education and training for themselves and their children. Yet work does not automatically lead to the same prosperity potential for all, as wages for many Americans have not kept pace with the cost of household necessities, including housing, child care, and groceries. Today, some 52 percent of Americans struggle to afford basic needs.

To support prosperity for all, public and private leaders can pursue policies supporting wages that allow workers to reach financial stability and eventual economic mobility. Aaronson, Agarwal, and French found that a $1 increase in the minimum wage resulted in a $700 increase in spending per quarter in the first year following the increase; the increased wages encouraged spending and local economic growth. Here, we outline how raising minimum wages can improve economic mobility for all.

Raising the Wage Floor for All Residents

In principle, minimum wages should support a community’s lowest-paid workers, seeking to keep them out of poverty and raise living standards. Based on the US Census Bureau’s Current Population Survey data from 1979 to 2014, nearly 8 percent of all workers earned within 10 percent of the effective minimum wage. Some estimates show that increases to the federal minimum wage would impact at least one-third of all workers in the US. Studies show that minimum wage laws also increase wages for some workers already above the threshold.

While the federal minimum wage has increased slightly over time, some states and cities have far outpaced its wage protections (particularly as the federal minimum wage has remained stagnant since 2009). It has not kept up with the cost of living, and the “real value” of the minimum wage is now at its sixty-year low point due to inflation. As of 2025, across the country, 69 US counties and cities have adopted minimum wage floors. This place-based scaling has allowed communities to tailor the policy to their specific needs in the form of wage schedules or guidelines based on employer size. Some have targeted minimum wage policies for especially vulnerable workers and sectors. For example, California implemented a $20 hourly wage floor for large fast food chain workers in 2024, which the University of California, Berkeley’s Institute for Research on Labor and Employment (IRLE) research found increased average weekly wages for workers by 10 to 11 percent without reducing employment.

Do minimum wages encourage economic mobility?

Yes. When wage floors rise, workers save more, move to better jobs more frequently, experience improved job quality and greater financial well-being, and enjoy better prospects for economic mobility. Minimum wage increases are also associated with reduced debt and increased access to credit for households with low credit scores.

Furthermore, Derenoncourt and Montialoux showed that minimum wages effectively narrow racial wage gaps, with the 1966 extension leading to wage gains for Black workers that were nearly double those of white workers. Closing the racial wage gap would have significant benefits to the economy. Rinz and Voorheis found that minimum wage increases boost earnings growth for low-wage workers, with those effects persisting long-term. Kearney and Harris found that a higher wage floor increased wages for those who were previously earning 150 percent of the minimum wage.

Urban Institute research estimates that raising minimum wages to $15 would benefit millions of Black workers, reducing wage gaps and improving job quality in some sectors. By raising minimum wages, policymakers can create more labor market opportunities—leading to greater economic mobility for all. Higher minimum wages offer policymakers a broad-based strategy to increase prosperity for all while closing racial wage gaps and affording greater financial stability to low-wage and other disadvantaged workers.

Do minimum wages hurt local economies?

Most studies say no. Increase in minimum wages have been shown to raise household spending and bolster local economies, and, in general, have not been shown to negatively affect overall employment. Dube and Lindner showed that city-level policies do not substantially change labor market allocations. Additionally, IRLE did not find significant negative effects on overall employment. Similarly, Derenoncourt and Montialoux found no evidence that the original extension of the federal minimum wage led to job losses.

Minimum wages also do not require additional public funding. Most of the added costs are absorbed by businesses, but these cost increases are offset by retention cost savings and greater economic activity in the community.

Still, 25 states have passed preemption laws that prevent localities from setting their own minimum wages. These states argue that unequal wage levels could create complexity for businesses, but research does not support these arguments. Dube, Lester, and Reich found that variance in minimum wage policies at state borders showed no adverse employment effects for those with higher floors.

Policy in Action: Chicago’s $15 Minimum Wage

In 2014, Chicago instituted a plan to increase its minimum wage to $13 by 2019. Evaluations of this policy found that it

• increased worker incomes by 2.5 percent;
• narrowed income inequality, especially for low-wage and nonprofit workers; and
• did not affect unemployment or business growth in a measurable way.

In 2021, the city further raised its threshold to $15, with a schedule of annual increases to reflect inflation. In 2022 and 2023, the city introduced tiered rates for large and small employers, before removing the tiers in 2024. Prior to implementation, Bruno and Manzo forecast that an increase to a $15 wage would reduce poverty for roughly 100,000 Chicago residents with minimal effects on inflation, which is in line with the 2015 to 2019 increase.

These findings are not unique to Chicago—a 2019 study examined the impact of minimum wage increases across six cities: the District of Columbia, Oakland, San Francisco, San Jose, Seattle, and Chicago. Recognizing that these are cities with large private-sector growth, the study isolated the causal effect of the minimum wage policy and found that earnings increased while employment remained relatively constant. The target population for the policies was substantial, with the minimum wage increase directly impacting 15 to 30 percent of the total workforce in these cities.