Assessing the Main and Spillover Effects of Seattle’s Minimum Wage on Establishment Decisions

We use the introduction of Seattle's local minimum wage to investigate the geographic effects of highly-targeted, city-level minimum wages on establishment entry and exit decisions. Ours is among the first papers to explicitly consider the spillover effects of city minimum wages on businesses in the surrounding areas, in addition to the main effect. We use an event study framework to estimate these effects on two low-wage industries: hospitality and retail. We find strong, statistically significant spillover effects on establishment entries at the census block level in the hospitality and retail sectors 1-2 years after Seattle's minimum wage is announced relative to establishment churn before the minimum wage announcement. There is a corresponding decline in entries for both sectors in Seattle itself. Our findings on exits are inconclusive. Both, spillover and main effects are more concentrated in retail. We estimate our effects using a novel data set containing a full census of establishments with precise locations for businesses in the state of Washington. Our findings suggest that spillover effects on neighboring areas should be considered to holistically assess the impacts of city-level minimum wages