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, “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]
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—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 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]
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 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. 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.
The post The Economic Experiment That Upended Reality appeared first on The Atlantic.
