Do Minimum Wage Increases Affect Organizational Performance? The Case of Skilled Nursing Facilities in the United States

Abstract

Minimum wage increases have been a widely-debated topic over the past decades by scholars and policy-makers alike. While most research on minimum wage increases has focused on their consequences for labor market dynamics, this paper explores the impact of minimum wage increases on organizational performance in a healthcare setting. Namely, I argue that increases in income associated with minimum wage increases enhance employees’ ability and motivation to perform at work, and in aggregate, promote organizational performance. To examine the relationship between minimum wages and organizational performance, I use data from the Center for Medicaid and Medicare of over 13,000 skilled nursing facilities (i.e., nursing homes) in the United States and use 2015-2016 increases in the state-level minimum wage as a naturally-occurring quasi-experimental intervention. The findings demonstrate that state-level minimum wage increases between 2015 and 2016 significantly reduced the percentage of long-stay residents with pressure ulcers and urinary tract infections. Furthermore, minimum wage increases only benefitted facilities that increased or maintained the staffing hours of their certified nursing assistants, but not those that responded to minimum wage increases by reducing their staffing over the studied period. Overall, this paper offers a framework for expanding labor-related research on minimum wage increases in organizations.