We are excited to announce the next installment in our Stone Inequality seminar series, featuring Max Risch, an Assistant Professor at the Tepper School of Business, Carnegie Mellon University. Risch will present his paper titled, “Who’s Afraid of the Minimum Wage? Measuring the Impacts on Independent Businesses Using Matched U.S. Tax Returns.” This study delves into the effects of minimum wage increases on independent businesses, particularly how they manage cost changes and adjust in both product and labor markets.
Abstract
A common concern surrounding minimum wage policies is their impact on independent businesses, which are feared to be less able to either bear or pass-on cost increases. We examine how independent firms accommodate minimum wage increases along product and labor market margins using a new matched owner-firm-worker panel dataset drawn from the universe of U.S. tax records over a 10-year period. We find that independent businesses are largely able to accommodate minimum wage increases without substantial workforce changes. Instead, the new labor costs are fully financed through increased revenues such that owners see no reductions in profits on average. Yet, the higher wage floor affects the viability of some firms. The lost small businesses are less productive on average, changing the composition of active firms. Using a panel of low-earning and young workers, we find that their annual earnings increase on average, they are no less likely to be employed, and their turnover rates decline when minimum wages rise. Taken together, the minimum wage shapes the productivity distribution businesses in the exposed market while redistributing from consumers toward workers who now receive a larger share of firm revenues.
Event Details
Date: October 29, 2024
Time: 3:30 – 5:00 PM
Location: Iona 533, 6000 Iona Dr, Vancouver, BC
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Max Risch is an Assistant Professor at the Tepper School of Business, Carnegie Mellon University. His research addresses topics in public finance and labor economics by using novel administrative datasets to analyze the relationship between public policies and the distribution of income. One strand of research investigates how firm-worker relationships mediate responses to policy changes. Another strand of research analyzes the role of tax policy and tax enforcement for real and measured income inequality. He received his Ph.D. in Economics from the University of Michigan where he previously earned his B.A. in Political Science.