[[link removed]]

THE ECONOMIC EXPERIMENT THAT UPENDED REALITY  
[[link removed]]


 

Nick Hanauer and Eric Beinhocker
May 22, 2026
The Atlantic
[[link removed]]


*
[[link removed]]
*
*
[[link removed]]

_ Minimum-wage increases were expected to kill jobs. The fact that
they didn’t should make us rethink a lot of assumptions. _

,

 

IN THE FALL OF 2011, one of us gave a presentation on the idea of a
$15 minimum wage to a gathering of the Democracy Alliance—one of the
most influential networks of left-leaning donors and advocates in the
country. It did not go well. Heads shook. Some people in the audience
laughed out loud. Later, when we raised the idea with Democratic
members of Congress, progressive economists, and liberal think tanks,
the reception was similar. They thought we’d lost our minds.

These were not people who disagreed with our goal of fighting
inequality. But they were unwitting captives of an economic paradigm
that said a $15 minimum wage _had_ to be crazy. That paradigm, which
we call the neoliberal consensus, generally holds that markets, left
largely to themselves, allocate resources efficiently. One of its iron
laws is that anything that forces employers to raise wages kills jobs.
It was basic supply and demand: Make something (labor) more expensive,
and you’ll get less of it. If you accepted that premise, then a $15
minimum wage was an act of economic madness that would harm the very
people we were intending to help. Such is the power of a dominant
paradigm that, in the 1990s, after the economists Alan Krueger and
David Card published work suggesting that minimum wages didn’t
necessarily kill jobs, the Nobel laureate James Buchanan declared
[[link removed]],
“Fortunately, only a handful of economists are willing to throw over
the teaching of two centuries; we have not yet become a bevy of
camp-following whores.”

In 2014, Seattle went ahead and implemented a $15 minimum wage anyway.
And all the apocalyptic predictions failed to come true. The
restaurants did not close. The jobs did not disappear. Instead,
100,000 workers got raises, and spent them. Seattle’s economy, far
from collapsing, continued to boom. San Francisco soon passed its own
$15 minimum wage. Then came minimum-wage hikes in state after state,
including not just liberal New York and California but also Missouri,
Nebraska, Florida, and Alaska—red states where voters, given the
direct choice, said yes. In every case, predictions of economic
catastrophe proved false.

Annie Lowrey: How the low minimum wage helps rich companies
[[link removed]]

By now, most economists accept that raising the minimum wage doesn’t
mechanically lead to job loss. But the broader lesson hasn’t fully
sunk in. Although the neoliberal paradigm has taken heavy fire over
the past decade from academics, activists, and populist politicians,
it has proved stubbornly hard to eradicate, and its flawed assumptions
still shape large swaths of economic policy making. Within that
paradigm, recent experience with the minimum wage is an exception to
the otherwise-reliable rules of neoliberal economics. In reality, the
minimum-wage evidence isn’t an outlier. It was perhaps the first
clue that the entire paradigm was fundamentally wrong.

And yet the paradigm won’t quite die, in part because no one has
come up with a better alternative to replace it. We believe that a new
paradigm exists, emerging from the work of a large community of
researchers and practitioners. But understanding why it is correct
first requires understanding why neoliberalism got so much so wrong.

 
THE NEOLIBERAL CONSENSUS asserts that inequality is the price of
economic growth. Fairness and efficiency are in fundamental tension.
You can have a bigger pie or more equal slices, but not both.

This isn’t fringe thinking or exclusively Republican doctrine. Since
the late 1970s, it has dominated the shared intellectual
infrastructure of the political establishment, and it continues to be
taught in Econ 101 classes today. The two parties have differed on how
much growth to trade in for more fairness—not on whether such a
trade-off exists. When Larry Summers, Barack Obama’s top economic
adviser, wrote a glowing foreword to a new edition of Arthur Okun’s
1975 classic _Equality and Efficiency: The Big Tradeoff_, he noted the
book’s profound influence on his own thinking and on a generation of
Democratic policy makers. Donald Trump has broken with several
elements of neoliberal orthodoxy, as did Joe Biden, but the paradigm
still structures how most of the expert class approaches policy
choices.

One hint that the paradigm might be wrong is that it delivered the
opposite of what it promised. Tax cuts, deregulation, globalization,
and reduced worker power were supposed to grow the economic pie, to
society’s collective benefit. Instead, the neoliberal era produced
the greatest upward transfer of wealth in American history—$79
trillion from the bottom 90 percent to the top 10 percent since 1975,
according to a RAND study
[[link removed]]—without the
growth that was supposed to make that transfer worth it. GDP growth
averaged 3.8 percent annually in the postwar Keynesian era but slowed
to 2.6 percent from the 1980s onward.

The minimum wage was a perfect test case for the trade-off theory of
growth versus fairness—and the theory failed. The University of
Massachusetts economist Arindrajit Dube and colleagues analyzed 138
state-level minimum-wage changes from 1979 to 2016 and found no
evidence of job loss. Studies of 42 major minimum-wage increases in
metro areas that spanned state borders found employment growing on
both sides, in fact slightly faster on the side that raised the wage.
Germany introduced its first national minimum wage in 2015, affecting
15 percent of its workforce; dire predictions of the loss of up to
900,000 jobs proved completely wrong. The United Kingdom raised its
minimum wage to two-thirds of its median wage—among the highest
ratios in the developed world—with negligible employment effects.
Warnings that minimum-wage increases would unleash inflation were also
debunked. For example, a 2020 Berkeley study using
grocery-store-scanner data across multiple states found that a 10
percent minimum-wage hike resulted in a onetime 0.36 percent increase
in grocery prices—so tiny as to be lost in the statistical noise.

Even more interesting than what didn’t happen is what did. The
Federal Reserve Bank of Chicago found that low-wage households spent
an additional $2,800 on average in the year following a $1 wage
increase, stimulating the broader economy. And a 2025 study
[[link removed]] by the IZA Institute of Labor
Economics showed that state minimum-wage increases meaningfully
reduced poverty and food hardship, not just for minimum-wage workers
but across the broader working-age population.

An economic paradigm is not a list of policies. It is the invisible
logical architecture within which policy debates occur and the
framework that determines how we see economic cause and effect. Inside
the neoliberal paradigm, raising wages was presumed guilty until
proven innocent, yet any evidence that proved innocence was dismissed
as an outlier.

More recent scholarship provides a more accurate picture of the
economy, though it has been built largely out of view of the
Washington policy establishment. It begins with the insight that
economies are not competitive allocation machines tending toward
optimal equilibrium. They are cooperative ecologies that evolve and
grow. Three interlocking scientific revolutions, each based in part on
Nobel Prize–winning work, have established this fact, and each one
helps explain why the minimum wage did the opposite of what the expert
class expected.

Annie Lowrey: The counterintuitive workings of the minimum wage
[[link removed]]

The first revolution demolished the neoliberal picture of human
nature, in which people are the rational, self-interested maximizers
of economic textbooks. The behavioral-psychological work of Daniel
Kahneman and Richard Thaler showed that humans don’t behave that
way. And research by the economist Samuel Bowles and the
anthropologist Joseph Henrich demonstrated something deeper still:
Humans are not primarily self-interested at all. We are social to the
core. We cooperate, we reciprocate, we punish cheaters even at cost to
ourselves—consistently, across every culture ever studied.

Building on this research, we see that workers are not commodities.
They are participants in a cooperative enterprise. When you pay them
more fairly, they engage more fully. They stay longer, work harder,
and, crucially, spend more, circulating money back into the very
economy that employs them.

The second revolution demolished the neoliberal picture of markets.
The mathematical foundations of market efficiency—the framework that
makes “wages up, jobs down” seem like a law of physics—hold only
in a world of perfect competition, perfect information, and no
externalities. That world has never existed. The more accurate
picture, developed by scholars affiliated with the Santa Fe Institute,
Oxford, Harvard, and elsewhere, treats markets as evolutionary
ecologies: complex, dynamic, constantly adapting systems in which
people and organizations compete to be the best cooperators, combining
knowledge and effort to discover better solutions to human problems.
In an ecology, growth in one part of the system doesn’t require
shrinkage somewhere else. When plants grow, animals don’t shrink.
When wages rise and workers have more to spend, businesses have more
customers, and more customers create more jobs. The economy expands.

The third revolution demolished the paradigm’s moral
justification—that inequality is meritocratic and that wages reflect
what workers are truly worth. A recent National Bureau of Economic
Research study [[link removed]] shows this in
empirical detail: A major reason wages stagnated from 1982 to 2023 was
because concentrated employers, armed with noncompete agreements and
market power, no longer faced competitive pressure to pay more.
Workers today are half as likely to receive a better-paying outside
job offer as they were in the 1980s. One reason the minimum wage
didn’t kill jobs is because wages were never set by some natural
equilibrating force to begin with.

The minimum wage isn’t the only place the paradigm’s predictions
failed. In 2018, researchers at the International Monetary Fund
investigated the claim that fairness must come at the expense of
growth across almost every country on Earth. They found the opposite:
Lower inequality correlates with faster, more durable growth.

We believe that this emerging cross-disciplinary body of scholarship
represents a new and coherent economic framework that we call market
humanism [[link removed]]. Its central claim
is that we must make markets serve human well-being
broadly—producing high standards of living, good jobs, a sustainable
environment, and healthy democracies. Fairness and efficiency are not
in tension; fairness enables the cooperation and trust on which
economic efficiency depends. Large, broadly prosperous middle classes
have always been built deliberately—through labor protections,
public investment, antitrust enforcement, and progressive taxation.
These are not concessions to fairness that growth must reluctantly
absorb.

Consider what this means in practice. Under neoliberalism, public
investment in education, health care, and infrastructure crowds out
private capital. Under market humanism, it is investment in the
cooperative capacity of the workforce—the foundation on which all
private growth depends. Under neoliberalism, tax cuts for the rich
supposedly stimulate investment and growth. Under market humanism, tax
cuts for the middle class (made up for by higher taxes on the top) are
what in reality stimulate growth, by encouraging both spending and
saving by (in the case of the U.S.) about 70 million middle-class
households.

The neoliberal paradigm treats capital efficiency as the supreme
social good and worker compensation as simply a cost to be minimized.
It looks at a policy such as a minimum-wage hike and asks, _How much
damage will this do?_ Under market humanism, the questions change.
What level of minimum wage produces the best outcomes for the whole
system—for workers, for consumer demand, for the trust and
participation on which growth depends? At what point do returns
diminish? How do we combine wage floors with antitrust enforcement,
labor protections, and public investment to build the broadly
prosperous economy that actually generates growth? These might be
harder questions, but they are also better ones.

The debate around the minimum wage matters far beyond the incomes of
the people who earn it, significant as those are. The iron law was not
an isolated claim. It was one of the load-bearing walls of the whole
neoliberal edifice. If raising wages doesn’t kill jobs, then labor
is not simply a commodity priced by supply and demand. If labor is not
simply a commodity, then workers are also consumers, and suppressing
their wages suppresses the demand that drives growth. If that’s
true, then the IMF’s finding makes perfect sense: Inequality isn’t
the price of dynamism; it’s the destroyer of it.

The iron law that said raising wages kills jobs is dead. The evidence
killed it. What remains is to bury the paradigm that kept it
alive—and to rebuild the country it broke.

Nick Hanauer [[link removed]] is an
entrepreneur and a venture capitalist, the founder of the
public-policy incubator Civic Ventures, and the host of the podcast
_Pitchfork Economics_ [[link removed]].

_Eric Beinhocker_
[[link removed].]_
is a professor at the Blavatnik School of Government and executive
director of the Institute for New Economic Thinking, University of
Oxford._

_Let the best of The Atlantic come to you. Select from our__ free
newsletters_ [[link removed]]_, and get
Atlantic insight straight to your inbox. Get unlimited access to The
Atlantic on all of your devices with a__ digital subscription_
[[link removed]]_._

* Minimum Wage
[[link removed]]
* $15 Minimum Wage
[[link removed]]
* economics
[[link removed]]
* neoliberal economic policies
[[link removed]]

*
[[link removed]]
*
*
[[link removed]]

 

 

 

INTERPRET THE WORLD AND CHANGE IT

 

 

Submit via web
[[link removed]]

Submit via email
Frequently asked questions
[[link removed]]
Manage subscription
[[link removed]]
Visit xxxxxx.org
[[link removed]]

Bluesky [[link removed]]

Facebook [[link removed]]

 




[link removed]

To unsubscribe, click the following link:
[link removed]