Minimum wage effects and monopsony explanations

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This working paper was updated on March 5, 2024 with a new version and an additional author.

Justin Wiltshire, University of Victoria
Carl McPherson, University of California, Berkeley
Michael Reich, University of California, Berkeley
Denis Sosinskiy, University of California, Davis


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.


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