Wednesday, June 21, 2017

Harvard Study: Minimum Wage Hikes Killing Businesses

Ignoring the fact that Harvard actually needed a study to reach a conclusion that is obvious and could have been reached by simple deduction and basic observation, this is interesting historical work.

The Daily Wire reports, a new Harvard Business School study found that minimum wage hikes lead to closures of small businesses. "We find suggestive evidence that an increase in the minimum wage leads to an overall increase in the rate of exit," the researchers conclude.

The study, titled Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit, looks at "the impact of the minimum wage on restaurant closures using data from the San Francisco Bay Area" from 2008-2016.

Researchers Dara Lee Luca and Michael Luca chose the Bay Area due to their frequent minimum wage hikes in recent years. "In the San Francisco Bay Area alone, there have been twenty-one local minimum wage changes over the past decade," they write.

"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," says the study. "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)."

   RW

1 comment:

  1. Who would have guessed that labor has a downward-sloping demand curve?

    ReplyDelete