Minimum Wage Increases and Employer Performance: Role of Employer Heterogeneity.

This article investigates the impact of minimum wage increases on firm performance, prices, and quality within the U.S. hotel industry from 2000 to 2008, using comprehensive data on over 29,000 hotel properties. It finds that doubling the minimum wage would reduce average hotel revenues by about 6% annually and occupancy rates by 3.1%, with heterogeneous effects across hotel quality segments and organizational forms. Luxury hotels pass increased labor costs to customers without revenue loss, while upscale hotels reduce prices but suffer declines in occupancy, revenues, and quality downgrades; lower-end hotels raise prices but face significant occupancy and revenue declines. Additionally, higher minimum wages negatively affect hotel entry rates, particularly among upscale and midscale segments, though these effects are short-lived. The study also shows that states with right-to-work (RTW) laws mitigate the negative performance impacts of minimum wage hikes, suggesting that labor market regulations interact in shaping firm outcomes.