CAMBRIDGE, Mass.—A study from the National Bureau of Economic Research found that higher minimum wages adversely impacted small businesses, the Wall Street Journal reports. “As the federal minimum wage rose from 1989-2013, small businesses in affected states suffered ‘lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate,’ the Journal’s editorial board wrote.
A trio of professors from the Georgia Institute of Technology analyzed data from states with a higher minimum wage than the federal standard against a variety of benchmarks. For example, for every $1 bump in the minimum wage above the federal level, loan amounts through the Small Business Administration fell 9% in those states. “Business entries fell 4% in the year the minimum wage went up. A year later, business exits rose 5%,” the Journal wrote.
The study also found that restaurants and retail businesses suffered more because of their reliance on low-skilled workers. The study authors concluded “that increases in the federal minimum wage worsen the financial health of small businesses in the affected states.”