On May 27, Michael Reich, Professor at UC Berkeley, will join the Program for Research on Inequality for a discussion. His presentation will cover “Effects of a $20 Minimum Wage: Evidence from Granular Data on Wages, Employment, and Prices.”
Abstract:
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. We use difference-in-differences (DiD) and triple difference (DDD) event study methods and granular data that permit distinguishing trends affecting the entire industry from those caused by the new minimum wage policy. Our granular pay data comes from Glassdoor job postings and Square payroll data, granular mobility-based employment data from Advan, and granular prices scraped from over 2,000 restaurants in California and control states. We find that the policy increased average weekly wages for covered fast food workers by about 11 percent and did not reduce employment. Compared to controls, prices increased by 1.5 percent, equivalent to 6 cents for a $4 item. Employers passed about 50 percent of the higher wage costs to consumers as higher prices, consistent with a monopsony model.