Even in small businesses, minimum wage hikes don't cause job losses, study finds

March 14, 2023

Restaurants, retail stores and other small businesses, long thought to be vulnerable to increases in the minimum wage, generally do not cut jobs and may actually benefit when governments raise minimum pay, according to a new study co-authored at UC Berkeley.

The prevailing wisdom among many business owners and policymakers is that when the minimum wage rises, smaller low-wage employers suffer more from higher labor costs and are more likely to cut jobs. But the groundbreaking new study, co-authored by Berkeley economist Michael Reich, found that small businesses can pass the costs on to consumers with little negative impact.

“A minimum wage increase doesn’t kill jobs,” said Reich, chair of UC Berkeley’s Center on Wage and Employment Dynamics (CWED). “It kills job vacancies, not jobs. The higher wage makes it easier to recruit workers and retain them. Turnover rates go down. Other research shows that those workers are likely to be a little more productive, as well.”

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Berkeley News