This year, half of the states in the U.S. raised the minimum wage. For a lot of lower-wage employees, this is welcome news!

But this week, we’ll discuss two interesting outcomes of raising the minimum wage that you might not have considered.

Wages go up—but so does worker productivity.

For many years, raising the minimum wage has been a hot-button topic debated vigorously by politicians, business owners, and economists, with strong disagreement over how an increased wage would affect employment and profits.

But there’s another area of disagreement that gets less attention: how raising the minimum wage might affect worker productivity. To investigate, Kellogg colleagues Nicola Persico and Erika Deserranno, along with Decio Coviello at HEC Montreal, secured a massive dataset for worker productivity from a major U.S. retailer. Importantly, the retailer has stores in areas both with and without higher mandated minimum wages, allowing the researchers to compare worker productivity between stores.

The study finds that a higher minimum wage improved individual-worker productivity. However, the effect was driven largely by lower-performance workers. For example, while a $1 increase in minimum wage improved low performers’ productivity by 22.6 percent, it had no observable effect on high performers.

Moreover, the link between wage and productivity is observed only in stores with more supervisors to monitor employees. “If you’re in a store where there is very little monitoring and where low effort doesn’t necessarily cause you to be fired, a higher minimum wage actually reduces productivity,” Deserranno says. After all, why hustle if nobody’s watching and you’re guaranteed a certain amount of pay? “But in stores where you can get caught, people work harder because they don’t want to lose the job.”

Another twist is that increased productivity doesn’t necessarily mean greater profits, especially in the short term. Across stores, a $1 increase in the minimum wage decreased profits per hour by 16 percent. That said, the researchers also found higher wages lead to lower turnover for lower-performing employees, with 19 percent fewer terminations in that group.

“It partially pays for itself because you get workers who are more productive and more attached to the firm,” Deserranno says.

Minimum-wage hikes hit women and men differently

Because women are often overrepresented in lower-wage work, they typically see larger financial gains than men do from minimum wage increases, despite the policies being overtly gender-neutral.

But another study by the same authors complicates this picture, showing that when overall welfare (or well-being) is considered, women may actually benefit less than men from a rise in minimum wage. Using data from the same large U.S. retailer, the research confirmed that, among sales associates in the same department, women saw less of a benefit to their welfare from minimum-wage increases than did men.

The discrepancies in welfare occurred because women responded to minimum-wage increases by working disproportionately harder at their job. This was true specifically in counties where market wages for most jobs were lower for women than men; in counties where market wages were the same, there were no gender discrepancies in welfare. This suggests that women were more incentivized than men to keep their jobs because they had fewer opportunities to earn similar wages at a different workplace, which compelled them to put forth more effort.

“Their managers are looking, and if they don’t produce, they’re going to lose their jobs,” Persico says.

Read more about both of these studies in Kellogg Insight.