Do minimum wage increases encourage automation? This is an important question given the ongoing increases in minimum wages across the United States. As of July 2025, 30 states and the District of Columbia had a minimum wage higher than the federal rate. In addition, cities such as Seattle and San Francisco have adopted minimum wages above those set by their states, and some Democrats are pushing to more than double the federal minimum wage to $15 per hour. The minimum wage was originally introduced to reduce the exploitation of labor, but it has increasingly become synonymous with a living wage—a wage necessary to help workers achieve self-sufficiency. However, if increases in minimum wages prompt firms to develop automation technology, lower-skilled workers could be replaced, resulting in the opposite of these policies’ intended effect.

There are reasons to be skeptical that minimum wage hikes stimulate innovation. Industries that hire minimum wage workers, such as leisure and hospitality, are not traditionally innovative industries. Firms in these industries are likely to adopt existing automation technology when the minimum wage increases. However, there are plausible ways in which minimum wage hikes could encourage the invention of new tools, technologies, and methods. First, firms in the highly innovative information sector may ramp up investment in automation technology to sell their products to firms in industries sensitive to the minimum wage. Second, prior research suggests that minimum wage increases also raise the wages of workers earning slightly above the minimum wage. Therefore, manufacturing firms employing low-wage workers may respond to higher labor costs by developing automation technology.

Our research explores these questions by examining whether minimum wage increases in the United States expanded companies’ innovation in automation technology. We analyzed federal and state minimum wage increases between 1987 and 2017. (The average increase was 13.4 percent.) Additionally, we measured innovation in automation technology by identifying patents that include automation-related terms such as “automatic,” “mechanize,” “robot,” and others. We refer to these patents as “automation patents” and to other patents as “nonautomation patents.”

Our research examines innovation during the two years before and the two years after each minimum wage increase. Our findings reveal that a larger percentage increase in a state’s minimum wage led to a larger increase in the number of automation patent applications by firms headquartered in that state. Additionally, larger minimum wage hikes increased the number of patent applications that cited existing automation patents. In contrast, there was no relation between minimum wage increases and the number of nonautomation patent applications, which suggests that our findings were driven by minimum wage increases and not overall trends in innovation.

Nevertheless, our research considers factors other than minimum wage increases that may have increased automation patents. First, prior growth in automation may have caused some states to pass larger minimum wage increases. However, our research finds no evidence of changes in automation patents before minimum wage increases. Second, states may have increased their minimum wages in response to local economic conditions that also affected innovation. We explored this possibility by comparing the patent activity of firms in adjacent counties but different states: one state that increased its minimum wage and another state that did not. These firms faced similar economic conditions, yet after minimum wage increases, automation patents increased only for firms in the state that increased its minimum wage. Moreover, these firms had no changes in their number of nonautomation patents. Additionally, we examined only federally mandated increases in states’ minimum wages—policy decisions less connected to local economic conditions—and found that they were still associated with more automation patents.

Additional analyses bolster the reliability of our findings. First, larger minimum wage increases were followed by greater increases in automation patents in industries with a high share of minimum wage workers. In industries with fewer minimum wage workers, there was no significant relation between the size of minimum wage increases and the number of automation patents. Second, there was a strong positive relation between increases in the minimum wage and the number of automation patents in states where the share of workers earning at or below the new minimum wage prior to the increases was high. In other states, there was no significant change in automation patents. Third, larger minimum wage increases were followed by larger increases in the number of automation patents in industries that rely on routine tasks. In other industries, there was no relation between minimum wage increases and automation patents. Fourth, the increase in automation patents was driven by small firms in the manufacturing and information sectors. These firms are more likely to have local operations, so their labor costs (or the labor costs of their customers) were likely more sensitive to local minimum wage increases.

Finally, our research examines the implications of these findings for workers employed in automatable jobs. After minimum wage hikes, a 10 percent increase in automation patents was associated with a 1.6 percentage point decline in the share of employment held by workers without any college education who performed routine tasks. Additionally, a 10 percent increase in automation patents was associated with a 1.2 percentage point decline in the share of wages paid to these workers. In contrast, in industries where tasks are not easily automatable, there was no significant relation between automation patents and the employment outcomes of these workers. Therefore, our research suggests that minimum wage increases make lower-skilled jobs more vulnerable to automation—harming the very workers legislators intended to help.

Note
This research brief is based on Amrita Nain and Yan Wang, “The Minimum Wage and Labor-Saving Innovation,” Social Science Research Network, April 15, 2025.