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Minimum Wage Hikes and Technology Adoption: Evidence from U.S. Establishments

Published online by Cambridge University Press:  23 May 2023

Xin Dai  and
Yue Qiu Open the ORCID record for Yue Qiu [Opens in a new window]
Xin Dai
Affiliation:
Drexel University LeBow College of Business [email protected]
Yue Qiu*
Affiliation:
Temple University Fox School of Business
*
[email protected] (corresponding author)
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Abstract

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This article studies the effects of state minimum wage increase on information technology (IT) adoption at the establishment level in the United States. Our results show that treatment establishments on average allocate between $10,328 and $66,808 more per year to their IT budgets during the first 3 years after experiencing significant state minimum wage increases. Additional evidence shows that state minimum wage increases on average lead to an economically small decrease in employment. The estimated employment effect is larger for establishments that have more incentives to automate labor. Our results suggest that establishments adopt technology to countervail increased labor costs.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 59 , Issue 4 , June 2024 , pp. 1620 - 1658
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

For helpful comments and discussions, we thank Ran Duchin (the editor), Anastassia Fedyk (discussant), Jason Kotter (the referee), Wenting Ma, Catherine Maclean, Katie Moon, Bryan Seegmiller (discussant), Aaron Sojourner, Weilong Zhang, and seminar and conference participants in the 2020 Philly Five Conference, 2021 FIRS, 2021 SOLE, 2022 MFA, IAB-LISER Seminar Series on Minimum Wages and Low Wage Policies, and Temple University. We alone are responsible for any errors.

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