Minimum wage regulation in Switzerland: Evidence from a direct-democracy experiment

This paper provides a first set of results on the impact of minimum wage regulation in Switzerland. We study the effects of an unexpected Supreme Court ruling mandating the Swiss canton Neuchâtel to enforce a minimum hourly wage of around CHF 20 previously accepted via popular ballot. Given policy discontinuity at cantonal borders, we design a two-wave survey of restaurants to measure wages, employment, workers characteristics, and prices, and administer it in Neuchâtel as well as in geographically proximate districts of neighboring cantons. Our data covers pre- and post-enforcement outcomes for 113 restaurants, with information on more than 800 employees distributed over two survey waves. Difference-in-differences estimation on restaurant-level outcomes and on the distribution of wages in our sample indicates small and statistically insignificant impacts on employment and prices, although we find evidence of disemployment effects as a function of regulatory exposure. Worker-level data further suggests that labor-labor substitution is at work, with negative employment spillovers for workers with wages above the regulatory minimum and some evidence that the share of less-qualified workers increases.