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

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  • Krista Ruffini

    (Georgetown University)

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.

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  • Krista Ruffini, 2024. "Worker Earnings, Service Quality, and Firm Profitability: Evidence from Nursing Homes and Minimum Wage Reforms," The Review of Economics and Statistics, MIT Press, vol. 106(6), pages 1477-1494, November.
    • Handle: RePEc:tpr:restat:v:106:y:2024:i:6:p:1477-1494
    DOI: 10.1162/rest_a_01271
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