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Minimum Wages and Firm Value

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  • Brian Bell
  • Stephen Machin

Abstract

How does firm value change in response to a minimum wage hike? This paper exploits the announcement of a big change in the UK minimum wage that was both totally unanticipated and free of uncertainty. The stock market response to this is examined in an event study setting. The analysis uncovers significant falls in the stock market value of low-wage firms. In light of this finding, the paper concludes by discussing magnitudes of response, including longer-term modes of firm adjustment to the cost shock induced by the minimum wage hike.

Suggested Citation

  • Brian Bell & Stephen Machin, 2018. "Minimum Wages and Firm Value," Journal of Labor Economics, University of Chicago Press, vol. 36(1), pages 159-195.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/693870
    DOI: 10.1086/693870
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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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