Business Churn, Labor Intensity, and the Minimum Wage

We study the effects of a large increase in Seattle’s minimum wage on business churn, hours, and revenue using Washington State administrative data. We find the minimum wage affected businesses both at the intensive and extensive margins. At the intensive margin, surviving businesses increased labor costs without decreasing hours and saw no reductions in revenue. At the extensive margin, businesses experienced higher rates of exit and newly opened businesses became less labor-intensive. We find the total effect of the minimum wage to low-wage employment, defined as jobs paying 130% of the minimum wage or less, came from changes to the composition of businesses.