Minimum Wage Increases and Employer Performance

40 Pages Posted: 12 May 2020

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Meghana Ayyagari

George Washington University - School of Business

Renata Kosova

Imperial College London

Date Written: April 14, 2020

Abstract

While there has been extensive research on the impact of minimum wages on employment and wages, there has been little on the impact on firm performance, prices, and quality. Exploiting the staggered changes in minimum wages in the US over 2000 to 2008 and using comprehensive data on the hotel industry, we find that doubling minimum wage reduces average hotel revenues by 6% per year and occupancy rates by 3.1%. This is robust to comparing hotels across contiguous counties, and to including state-specific trends. Price responses vary by hotel quality and organizational form. We also find quality downgrades and long-run adjustments via lower entry rates in response to minimum wage increases. The negative effects of minimum wages are in states without right-to-work regulation; suggesting the need for a more comprehensive approach to labor market regulations.

Keywords: Minimum wages, Firm performance, Entry rates, Hotel Industry

JEL Classification: J38, L25, L26

Suggested Citation

Agarwal, Sumit and Ayyagari, Meghana and Kosova, Renata, Minimum Wage Increases and Employer Performance (April 14, 2020). Available at SSRN: https://ssrn.com/abstract=3575689 or http://dx.doi.org/10.2139/ssrn.3575689

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Meghana Ayyagari (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Renata Kosova

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
15
Abstract Views
118
PlumX Metrics