Cleanliness is next to godliness or minimum wage? Effects of changes in real minimum wage on food establishment health violation scores in Seattle
To inform the empirical model, we develop a theoretical model on profit-maximizing food establishments that optimize hygiene violations when faced with increase in minimum wage. Higher critical violation scores have significantly negative effects (e.g., risk of closure and decreased demand/reputation), and cutting back on some services like those with non-critical hygiene violation scores could save on costs without affecting sales or the risk of closure). The theoretical model indicates that food establishments would realize decreasing hygiene quality with rising minimum wages. As an identification strategy we use exogenous raises in real minimum wage in Seattle and use year-to-year difference as predictor. During 2010, 2011, 2012, and 2013 the State of Washington raised minimum wage to $8.55, $8.67, $9.04, and $9.19, respectively. We use the panel data of hygiene violation scores of 4,749 food establishments in Seattle because Washington state is one among four states that require all employers to pay their workers the state’s full minimum wage before tips.
Consistent with our theoretical model, and with first-difference and other fixed effects alternate specifications, we find that for $0.10 increase in real minimum wage, total hygiene violation score increases between 3.35 and 8.99 percent. We also find suggestive evidence of increase in red violation score (more severe violations) between 0.71 and 4.24 percent and a statistically significant increase in blue violations score (less severe violations) between 2.97 and 6.49 percent. Using a difference-in-difference model, with restaurants in Seattle as treated group and food establishments in New York City as the control group, we find that an increase in real minimum wage significantly increases the total violations. Increase in real minimum wage could have consequences for public health, and is an important criterion to consider for food establishment owners, its employees, and policy makers.