Minimum Wage Effects and Monopsony Explanations
(with Carl McPherson, Michael Reich, and Denis Sosinskiy)
Updated: December 2024
Abstract: 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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