2017-04-20 22:17:22 UTC
We study the impact of the minimum wage on firm exit in the restaurant
industry, exploiting recent changes in the minimum wage at the city
level. The evidence suggests that higher minimum wages increase overall
exit rates for restaurants. However, lower quality restaurants, which
are already closer to the margin of exit, are disproportionately
impacted by increases to the minimum wage. Our point estimates suggest
that a one dollar increase in the minimum wage leads to a 14 percent
increase in the likelihood of exit for a 3.5-star restaurant (which is
the median rating), but has no discernible impact for a 5-star
restaurant (on a 1 to 5 star scale).
This was obvious, of course. Raising the price of labor, either by
raising the minimum wage or by restricting the supply of laborers
(kicking out illegals), is going to have an effect on retail prices.
When you raise the retail price of things, people buy less of them, and
some businesses fail.