Minimum wage increases and the business failure rate.

Summary

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Business groups especially those representing small business groups that argue against minimum wage increases typically say that such increases will force them to close shop. The link between minimum wage increases and business failures was studied using Dunn & Bradstreet data on business failure rates from 1926 to 1983. Results indicate that there appears to be no significant relation between minimum wage increases and an increase in business failures.

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Extract

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Minimum wage increases and the business failure rate.

One of the staple arguments that business groups, especially those representing small businesses, use against minimum wage increases is that they will drive a number of firms out of business entirely. The logic is simple and straightforward. Since business firms are presumably employing resources at maximum ef...

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