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There is a lot of debate around the minimum wage. Some see it as a fairly straightforward way to help low-income workers. Others emphasize the negative effect it has on employment. Fewer employment opportunities are bad in their own right, but the harmful effects of minimum wage increases are likely spilling over to entire neighborhoods.
There are two parts to this idea. The first is that minimum wage increases make it more likely that some businesses close. A recent study from Dara Lee Luca and Michael Luca examines minimum wage increases and restaurant closings (exits) in the San Francisco Bay area. They use data from Yelp to get a measure of restaurant quality and find that a $1 dollar increase in the minimum wage increases the likelihood of a lower quality restaurant (e.g. 3.5 star rating) closing by 10%.
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