Minimum wages cut investment

A Journal of Law and Economics paper finds that after state minimum‑wage increases, firms reduce their investment rate by about 3.08 percentage points. The effect is strongest at firms with many minimum‑wage workers, stronger employment protections, or high labor intensity, and appears to operate through aggravated debt overhang and higher operating leverage crowding out debt financing. — This reframes the minimum‑wage debate by adding a capital‑formation tradeoff, implying possible impacts on productivity and long‑run growth beyond near‑term employment effects.