Worker Earnings, Service Quality, and Firm Profitability: Evidence from Nursing Homes and Minimum Wage Reforms
45 Pages Posted: 21 Apr 2021 Last revised: 3 Jul 2022
Date Written: July 1, 2022
This paper examines whether higher earnings for frontline workers affects the quality of employees' output. I leverage increases in the statutory minimum wage, combined with worker, consumer, and firm outcomes in the nursing home sector. I find that higher minimum wages increase income and retention among low-wage employees and improve consumer outcomes, measured by fewer inspection violations; lower rates of adverse, preventable health conditions; and lower resident mortality. Firms maintain profitability by attracting consumers with a greater ability to pay and increasing prices for these individuals.
Keywords: Minimum wage, nursing homes, efficiency wage, worker performance
JEL Classification: J08, J38, I18, I38
Suggested Citation: Suggested Citation