Higher minimum wages “worsen the financial health of small businesses,” researchers said
By NACS Online // December 18, 2019
CAMBRIDGE, Mass.—A study from the National Bureau of Economic Research found that higher minimum wages adversely impacted small businesses, the Wall Street Journal reports. “As the federal minimum wage rose from 1989-2013, small businesses in affected states suffered ‘lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate,’ the Journal’s editorial board wrote.
A trio of professors from the Georgia Institute of Technology analyzed data from states with a higher minimum wage than the federal standard against a variety of benchmarks. For example, for every $1 bump in the minimum wage above the federal level, loan amounts through the Small Business Administration fell 9% in those states. “Business entries fell 4% in the year the minimum wage went up. A year later, business exits rose 5%,” the Journal wrote.
The study also found that restaurants and retail businesses suffered more because of their reliance on low-skilled workers. The study authors concluded “that increases in the federal minimum wage worsen the financial health of small businesses in the affected states.”