Research

Restaurant Employment, Minimum Wages, and Border Discontinuities  (with A. Dube, M. Reich, and  A. Bhatt)

Forthcoming in the Journal of Political Economy Microeconomics

Dube, Lester and Reich (2010, DLR), using state minimum wage discontinuities across bordering counties and Quarterly Census of Employment and Wages data, did not detect negative minimum wage effects on restaurant employment. Jha, Neumark and Rodriguez-Lopez (2024, JNR) claim that looking within multi-state commuting zones and using County Business Patterns data provides a superior approach to DLR and does find disemployment effects. We show that JNR’s results are confounded by parallel trends violations in the 1990s, when minimum wage events were rare and small in magnitude; JNR’s outmoded two-way-fixed-effects model amplifies the biases introduced by these violations. Our estimates using their specifications and data on only post-2000 data fail to detect disemployment effects. The same results hold using QCEW and ACS datasets. Our preferred event study difference-in-differences approach, which analyzes only data that fall clearly within an event’s window, also does not detect negative employment effects. This result holds whether we compare across all states, look within commuting zones or within border county pairs, and regardless of the data set or time period.

High Minimum Wages and the Monopsony Explanations (with J. Wiltshire, C. McPherson and M. Reich)

Forthcoming in the Journal of Labor Economics

We present the first causal analysis of a seven-year run-up of minimum wages to $15. Using a novel stacked county-level synthetic control estimator and data on fast-food restaurants, we find substantial pay growth and no disemployment. Our results hold among lower-wage counties and counties without local minimum wages. Minimum wage increases reduce separation rates and raise wages faster than prices at McDonald’s stores; both findings imply a monopsonistic labor market with declining rents. In the tight post-pandemic labor market, when labor supply becomes more elastic, we find positive employment effects. These become larger and statistically significant after addressing pandemic-response confounds.

A $20 Minimum Wage: Effects on Wages, Employment and Prices (with M. Reich)

IRLE Working Paper No. 104-24

On April 1, 2024, California implemented a $20 hourly wage floor for workers in large chains in fast-food restaurants and snack and non-alcoholic beverage bars. The new standard, which corresponds to 69 percent of the state’s median full-time wage, surpasses all prior benchmarks in minimum wage policies and research. Using survey and administrative data on wages and employment, pay data from Glassdoor, prices we scraped from over 2,000 restaurants in California and control states, and DiD and DDD event study methods, we find that the policy increased average weekly wages for covered fast food workers by 10 to 11 percent and did not reduce employment. Compared to controls, prices increased by 2.1 percent two quarters after the policy, equivalent to 8 cents for a $4 item. Employers passed about 63 percent of the higher wage costs to consumers as higher prices, consistent with a monopsony model.

The Structural Sources of Racial Inequality: Heterogeneous Labor Supply Elasticities and  Wage Markdowns (with Michael Reich)

Draft available upon request

Labor supply elasticities constitute a parsimonious summary of labor market power. We provide novel estimates of labor supply elasticities among multiple socio-demographic groups of U.S. workers, using survey and administrative datasets. Our survey data use randomized discrete choice  questions in the Federal Reserve’s Survey of Household Economic Decision-making from 2021 to 2025; these questions asked workers how they would respond to hypothetical wage cuts. Our administrative data are from the Quarterly Workforce Indicators for 2001 to 2019; these results are based on the effects of minimum wages on separation rates among restaurant workers. We find elasticities are higher among white workers than among black workers, but vary little by gender, age, education and household income. Using survey data from the New York Federal Reserve Bank, we also find racial differences in reservation wages. We consider why black workers’ labor supply is less elastic than that of white workers and then examine the wage markdown implications. Our baseline model contains only one type of worker– all workers are equally productive, are paid the same entry-level wage and have the same labor supply elasticity. Our model with two worker groups retains identical productivity and entry-level wage rates for each group, but allows their labor supply elasticities to differ. Compared to our baseline, in the model with two groups the less elastic labor supply of one group increases wage markdowns for all workers. The markdowns become larger when the labor supply is more diverse. Contrary to common belief, policies that improve the labor market power of black workers can also increase the pay of white workers.

Effects of Minimum Wages on Workplace Injuries in Low-Wage Industries (with Michael Reich)

Minimum Piece Rates and Congestion Pricing: Effects on Drivers, Firms and Passengers (with Dmitri Koustas, Michael Reich, James Parrott, and Xingxing Yang)

Minimum Wage And Demand For Soft Skills