Association for Public Policy Analysis & Management

Decades of research on minimum wage increases (MWIs) have examined and debated their aggregate effects. However, little is known about how MWIs are implemented by businesses—a question that is of growing interest to the localities that have introduced these policies. This study uses qualitative methods to investigate how businesses responded to MWIs. Drawing on 90 in-depth interviews with restaurant owners, managers and workers, I present the micro-level outcomes of MWIs in Chicago and Oakland in 2015. I note three distinct findings. First, that concepts of fairness, status, and worth—which are part of the public debate around MWIs—are also applied as heuristics by owners in making decisions. I show that these justifications lead most restaurants to implement non-mandated raises to workers making up to 150% of the prior minimum wage. These raises acted to preserve wage structures within restaurants and reinforce status distinctions. Second, local differences in culture and institutions produced distinctive outcomes. Restaurants in Oakland more likely to raise prices or reduce total hours worked; Chicago restaurants relied more on managerial labor. Finally, I corroborate the literature’s conclusion that most businesses are able to adapt to minimum wage increases with little difficulty, albeit at lower levels of profitability. These findings yield the conclusion that workplace cultures, local institutions, and normative beliefs are more consequential than previously realized to minimum wage policy outcomes. I discuss implications for minimum wage policy and future research.