Worker Earnings, Service Quality, and Firm Profitability: Evidence from Nursing Homes and Minimum Wage Reforms

Krista Ruffini

The Review of Economics and Statistics, 2024, vol. 106, issue 6, 1477-1494

Abstract: This paper examines whether higher earnings for frontline workers affects the quality of employees’ output. I leverage increases in the statutory minimum wage, combined with worker, consumer, and firm outcomes in the nursing home sector. I find that higher minimum wages increase income and retention among low-wage employees and improve consumer outcomes, measured by fewer inspection violations; lower rates of adverse, preventable health conditions; and lower resident mortality. Firms maintain profitability by attracting consumers with a greater ability to pay and increasing prices for these individuals.

Date: 2024
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