Minimum Wages and Nascent Entrepreneurship in the US

Abstract

Abstract The effect of minimum wages on employment is one of the most widely studied and most controversial topics in labor economics and public policy but its impact on early startups is poorly understood and under-researched. In this manuscript, we investigate whether minimum wage rates correlate with the probability that a nascent startup hires employees and achieves profitability, a topic that has never been addressed before. We found negative but not significant correlation between the minimum wage rates and a nascent venture’s probability of hiring employees. However, female entrepreneurs were significantly less likely than male entrepreneurs to hire when faced with higher minimum wage rates. For ventures with employees, higher minimum wage rates were correlated with lower probability of achieving profitability vs. quitting the startup process.