Somashekhar EDQ Manuscript 2022 Pre-Print.pdf (439.17 kB)
How Do Employers Belonging to Marginalized Communities Respond to Minimum Wage Increases? The Case of Immigrant-Owned Businesses in Seattle
preprintposted on 2022-01-07, 16:37 authored by Mahesh SomashekharMahesh Somashekhar, James Buszkiewicz, Scott Allard, Jennifer Romich
Minimum wage opponents often argue that businesses owned by marginalized communities—which include woman-owned, Black-owned, and immigrant-owned businesses—are exceptionally vulnerable to minimum wage increases. Little research has investigated this claim. Using a unique survey of Seattle businesses that includes owners’ nativity status and was administered while the city began to phase in its $15 minimum wage ordinance, we find that immigrant-owned businesses responded to the higher minimum wage in ways that largely conformed to the responses of other businesses. Nevertheless, immigrant-owned franchises were less likely than other franchises to fire employees, reduce employees’ hours, or lower the wages of employees earning more than $15 per hour. Evidence suggests that immigrant franchisees had a lower likelihood of passing the increased labor costs onto employees because they used fewer employees and relied more heavily on family labor compared to other franchisees. Overall, findings suggest that firms owned by marginalized and non-marginalized groups respond to municipal-level minimum wage increases in comparable ways. Nevertheless, marginalized status may matter more in certain sectors of the economy than in others.
Publisher StatementPreprint of article forthcoming in Economic Development Quarterly
PublisherEconomic Development Quarterly