A new paper by Lev Drucker and Katya Mazirov of Israel’s Ministry of Finance, and David Neumark of the University of California, Irvine, examines increases in Israel’s minimum wage in 2006-08 in search of an answer. The more low-wage workers a company employed, the more its profits declined. Companies with 60-80% of staff earning the minimum wage saw their profits cut by almost half. The researchers’ central insight is that firms with relatively low profits disproportionately employed minimum-wage workers, meaning those firms ultimately bore the greatest burden of mandated higher wages.

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