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Minimum Wages, Wages, and Price Pass-Through: The Case of McDonald’s Restaurants

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  • Orley Ashenfelter
  • Štěpán Jurajda

Abstract

Based on 2016–20 hourly wage rates of McDonald’s basic crew and Big Mac prices collected simultaneously from almost all US McDonald’s, we find that in 25% of instances of minimum wage increases, restaurants keep constant their wage premium above the increasing minimum wage. Higher minimum wages are not associated with faster adoption of touch-screen ordering, and there is near-full price pass-through of minimum wages. Minimum wage hikes lead to increases in real wages (expressed as how many Big Macs 1 hour of basic crew work can buy) that are one-fifth lower than the corresponding increases in nominal wages.

Suggested Citation

  • Orley Ashenfelter & Štěpán Jurajda, 2022. "Minimum Wages, Wages, and Price Pass-Through: The Case of McDonald’s Restaurants," Journal of Labor Economics, University of Chicago Press, vol. 40(S1), pages 179-201.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/718190
    DOI: 10.1086/718190
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    Citations

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    Cited by:

    1. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    2. Brown, Jessica H. & Herbst, Chris M., 2023. "Minimum Wage, Worker Quality, and Consumer Well-Being: Evidence from the Child Care Market," IZA Discussion Papers 16257, Institute of Labor Economics (IZA).
    3. Kunaschk, Max, 2024. "The effects of minimum wages on employment and prices—Evidence from the hairdressing sector," Labour Economics, Elsevier, vol. 88(C).
    4. Arindrajit Dube & Attila S. Lindner, 2024. "Minimum Wages in the 21st Century," NBER Working Papers 32878, National Bureau of Economic Research, Inc.
    5. Ashenfelter, Orley & Jurajda, Štepán, 2024. "The U.S. Low-Wage Structure: A McWage Comparison," IZA Discussion Papers 17142, Institute of Labor Economics (IZA).
    6. Abrahams, Scott, 2024. "Downward minimum wage rigidity: Evidence from a temporary four-month increase in St. Louis," Journal of Economic Behavior & Organization, Elsevier, vol. 218(C), pages 30-47.
    7. Adam Ayaita, 2022. "Does Money Change Who You Are? Quasi-Experimental Evidence on the Effects of Wage Increases on Personality," SOEPpapers on Multidisciplinary Panel Data Research 1170, DIW Berlin, The German Socio-Economic Panel (SOEP).

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