Minimum Wage and Corporate Policy
66 Pages Posted: 10 Feb 2017 Last revised: 13 Nov 2018
Date Written: November 2018
Using cross-state and intertemporal variation in whether a state’s minimum wage is bound by the federal minimum wage, we provide evidence that minimum wage increases lead firms in minimum wage sensitive industries (i.e., retail, restaurant, and entertainment) to scale down relative to a control group of non-labor-intensive firms. This scaling down effect manifests via less total investment, less capital and mergers and acquisitions expenditures, and more negative total asset and establishment growth. We find no evidence that minimum wage changes affect research and development and little evidence of any significant effects outside of the most minimum wage sensitive industries.
Keywords: minimum wage, investment, capital expenditures, acquisitions
JEL Classification: G31, G32, G38, J38
Suggested Citation: Suggested Citation