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Harvard ‘Shock’ Study: Each $1 Minimum Wage Hike Causes 4-10% Increase In Restaurant Failures

(So much for the magical ‘this won’t hurt management or the owners’ argument regarding State Socialism – Guffaw)

A ‘shocking’ discovery was made when a pair of researchers at Harvard Business School decided to analyze the impact of higher minimum wages in San Francisco on restaurant failures…hint:  they went up.

Entitled “Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit“, this latest study on the devastating consequences of minimum wage was conducted by Dara Lee Luca and Michael Luca and concluded that each $1 increase in the minimum wage results in a roughly 4-10% increase in the likelihood of a restaurant going out of business.

In this paper, we investigate the impact of the minimum wage on restaurant closures using data from the San Francisco Bay Area. We find suggestive evidence that an increase in the minimum wage leads to an overall increase in the rate of exit.

This paper presents several new findings. First, we provide suggestive evidence that higher minimum wage increases overall exit rates among restaurants, where a $1 increase in the minimum wage leads to approximately a 4 to 10 percent increase in the likelihood of exit, although statistical significance falls with the inclusion of time-varying county-level characteristics and city-specific time trends. This is qualitatively consistent but smaller than what Aaronson et al. (forthcoming) find; they show that a 10 percent raise in the minimum wage increases firm exit by approximately 24 percent from a base of 5.7 percent. Differences in sample and specifications may account for the differences between our study and theirs.  (from ZeroHedge, in part)

link to the whole article and graphs

…And while we enjoy the affirmation of a conclusion that we’ve presented multiple times from such a reputable organization as Harvard, one which pretty much anyone could deduce with the application of just a moderate amount of common sense, for some reason the following scene from “Good Will Hunting’ comes to mind.

“You dropped $150,000 on a fucking education you could’ve got for a $1.50 of late charges at the public library.”

h/t Facebook

About guffaw1952

I'm a child of the 50's. libertarian, now medically-retired. I've been a certified firearms trainer, a private investigator, and worked for a major credit card company for almost 22 years. I am a proud NRA Life Member. I am a limited-government, free-market capitalist, who believes in the U.S. Constitution and the Rule of Law.


6 thoughts on “Harvard ‘Shock’ Study: Each $1 Minimum Wage Hike Causes 4-10% Increase In Restaurant Failures

  1. The sheer ignorance displayed in this particular Progressive idea is staggering: the business owner has plenty of money, so taking more of it from him or her won’t hurt a thing. There’s no cause-and-effect, no knowledge of where the money comes from, none of the profit margin typically generated by a restaurant (about 3 per cent), no idea whatsoever that the owners traditionally pass such costs on to consumers … trying to track the individual failures of this attitude is wearisome. Apparently we’re to assume that business owners are fabulously wealthy, operating said businesses out of the goodness of their hearts while simultaneously being greedy & impoverishing their employees.

    And everyone thought Ayn Rand was nuts. The only problem with “going Galt” is that her solution was impractical. But simply shutting down the business, writing off the losses, and going fishing is increasingly attractive, n’est pas?

    Posted by Rev. Paul | May 30, 2017, 8:33 am
  2. Sadly.
    Here, more and more businesses are putting table kiosks (touch screens to place your order) on the tables. Then, someone brings you your order (for whom you are supposed to tip!)

    Posted by guffaw1952 | May 30, 2017, 8:36 am
  3. My nearby coffee place (I drive thru once a week – Dutch Bros.) raised their basic large coffee from $3.00 to $3.50 Jan 1, due to State mandated increases in minimum wage.

    Posted by guffaw1952 | May 30, 2017, 8:38 am
  4. I saw an article about this last week. The money quote was, “there’s only so much you can charge for a tamale”. They can only raise prices so much.

    The other side of this idiocy is that the absolute best outcome is that everyone is exactly where they were in society only carrying more paper. Let’s say nobody closes, but everyone raises prices to cover their higher expenses. Everything gets more expensive. Everyone makes a bigger number of dollars, and every one of those new dollars are taken up in higher costs.

    It’s not just restaurants. There’s a whole bunch of jobs that pay between current minimum wage and the $15/hr they want. All of those costs go up. The price of everything goes up. With the exception of not being arrested for it, it would be like everyone writing a different value on every piece of paper money they have.

    Posted by SiGraybeard | May 30, 2017, 11:46 am
    • The other side of this idiocy is that the absolute best outcome is that everyone is exactly where they were in society only carrying more paper.


      Posted by KM | May 30, 2017, 9:16 pm


  1. Pingback: About The Raising Of The Minimum Wage… | Guffaw in AZ - June 26, 2017

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