Abstract
This paper provides a first set of results on the impact of minimum wage regulation in Switzerland. We study the effects of an unexpected Supreme Court ruling mandating the Swiss canton of Neuchâtel to enforce a minimum hourly wage of around CHF 20 previously accepted via popular ballot. Given policy discontinuity at cantonal borders, we design a two-wave survey of restaurants to measure wages, employment, workers’ characteristics, and prices and administer it in Neuchâtel as well as in geographically proximate districts of neighboring cantons. Our data covers pre- and post-enforcement outcomes for around 100 restaurants, with information for more than 800 employees distributed over two-survey waves. Our data suggest that the proportion of workers paid below minimum wage went down from 19% to 5% after the introduction of the policy. This decline is compensated by a significant increase of the workforce paid just above minimum wage, and our results suggest that restaurants did not use employment as a margin of adjustment. We also find evidence that the policy affected the distribution of hourly wages up to CHF 6 above the minimum wage, with some workers initially paid above minimum wage experiencing a wage increase.
Highlights
Given peculiarities associated with the Swiss context, such as relatively low unemployment and a history of self-regulation including collective labor agreements (CLA) negotiated between employers and employees, evidence on how firms adjust to minimum wage regulation in Switzerland is important
6 Concluding comments In this paper, we have provided a first set of quantitative results on how restaurants in the Swiss canton of Neuchâtel are affected by the introduction of minimum wage regulation
We have quantified the bite of minimum wage regulation for the restaurant industry in Neuchâtel, one of the most exposed sector in this canton, and documented how wages, employment, workforce composition, and prices changed after enforcement of minimum wage regulation
Summary
Following a large literature on the topic (see, e.g., Allegretto et al 2011; AAronson et al 2018; Addison et al 2009; Card and Krueger 1994; Dube et al 2010), we exploit policy discontinuity at jurisdictional borders and administer our two-wave survey in restaurants located in geographically proximate districts of neighboring cantons not subject to minimum wage regulation Restaurants in these control districts can be expected to face labor and product market conditions that are comparable to those prevailing in the canton of Neuchâtel, except from the introduction of minimum wage regulation (see Allegretto et al 2017 for empirical evidence supporting this approach).
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