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Harvard Business School: Every $1 increase in minimum wage causes 4%-10% increase in restaurant failure
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Rudy Canoza
2017-04-20 22:17:22 UTC
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"Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit"

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).

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110##


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.
Robert Carnegie
2017-04-20 23:50:41 UTC
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Post by Rudy Canoza
"Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit"
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).
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110##
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.
I notice the effect applies to "lower quality
restaurants". So, higher minimum wage (and a
dollar is a BIG increase), a better dining
experience.

Probably the shop isn't even paying minimum wage
anyway until wait staff are tipped.
Jeanne Douglas
2017-04-21 11:14:20 UTC
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Post by Rudy Canoza
"Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit"
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).
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110##
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.
Then the government MUST provide food and health support. The US taxpayers are subsidizing hugely profitable industries who refuse to provide a living wage and benefits for their employees. Like by the billions of dollars.

I'll never understand why people support the worst welfare queens, the Walmarts and fast food restaurants of the country.
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