Give a Little

Higher minimum wage brings business benefits

Paying higher wages might help companies that rely on low-paid workers hang on to their staff—and make their customers happier. That’s according to Arindrajit Dube, a visiting associate professor of markets, public policy & law, who has found that minimum wage hikes are lowering poverty rates at the state level and reducing staff turnover.

“Today, 29 states and more than two dozen cities have their own minimum wages,” Dube writes in a 2016 New York Times article. “The recent increases signal a growing success of the Fight for Fifteen movement,” a campaign by low-wage workers calling for a $15 minimum wage that has helped prompt voluntary minimum wage increases. At Walmart, which reportedly boosted wages in response to societal and market pressures, the hike has been said to reduce turnover and improve customer satisfaction.

There may be a broader benefit, too. “My own research, and my survey of past studies, also suggests that higher minimum wages raise family incomes for the bottom quartile of the family income distribution, and has a moderate-sized poverty-reducing effect,” writes Dube. “A 10 percent increase in the minimum wage can be expected to reduce poverty by around 2 percent.”

Dube’s evidence suggests that, to date, minimum wage increases have had a very modest effect on US employment and that any broader societal impact will take time. “New York and California have recently raised their minimums, which will eventually climb to $15/hour; the effects will be felt gradually,” he says.