Raising the minimum wage? Study using US tax data finds more gain than pain
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Most independent businesses can shoulder the added costs of higher minimum wages with new revenues, making only minor employment adjustments, according to new research from the University of Michigan and Carnegie Mellon University.
The study, which draws on the universe of U.S. tax returns to examine the impacts of minimum wages, debunks concerns that small businesses are hit hard by minimum wage increases. Still, the research reveals a bigger impact on the restaurant industry, where some small, less productive restaurants close while higher minimum wages raise worker retention rates at bigger, more productive restaurants—and even raise profits at those surviving businesses.
"For policymakers weighing tools for redistribution, our results show clearly that minimum wages do little harm to independent firms and even benefit some owners while meaningfully increasing both the earnings and employment of young and low-earning workers," said Nirupama Rao, a U-M assistant professor of business administration, business economics and public policy, who co-authored the study with Max Risch from Carnegie Mellon.
