Minimum Wage Hikes and Capital Deepening: Evidence from U.S. Establishments' IT Budget
48 Pages Posted: 20 Sep 2019 Last revised: 9 Oct 2021
Date Written: September 11, 2019
This paper studies the effects of state minimum wage increases on the adoption
of information technology (IT) at the establishment level in the United States. We
find that establishments on average allocate $57,549 more per year to IT budgets
during the three years after experiencing significant state minimum wage increases.
The effects are heterogeneous across industry, firm, or establishment characteristics.
Additional evidence suggests that significant state minimum wage increases lead to a
higher number of personal computers per employee and a lower employment growth
rate. Our results suggest that establishments change the mixture between capital and
labor in production as a response to increases in the wage floor.
Keywords: Minimum Wage, Labor Law, Corporate Investment, Technology
JEL Classification: G31, J38, J88, K31, O33
Suggested Citation: Suggested Citation