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Minimum Wage and Real Wage Inequality: Evidence from Pass-Through to Retail Prices

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  • Justin H. Leung

    (National University of Singapore Business School)

Abstract

This paper considers the impact of the minimum wage on both labor and product markets using detailed store-level scanner data. I provide empirical evidence that a 10% increase in the minimum wage raises grocery store prices by 0.6% to 0.8% and suggest that the minimum wage not only raises labor costs but also affects product demand, especially in poorer regions. This points to novel channels of heterogeneity in pass-through that have distributional consequences, with key implications for real wage inequality. I also find that price rigidity within retail chains ameliorates these effects, reducing the pass-through elasticity for retail prices by about 60%.

Suggested Citation

  • Justin H. Leung, 2021. "Minimum Wage and Real Wage Inequality: Evidence from Pass-Through to Retail Prices," The Review of Economics and Statistics, MIT Press, vol. 103(4), pages 754-769, October.
    • Handle: RePEc:tpr:restat:v:103:y:2021:i:4:p:754-769
    DOI: 10.1162/rest_a_00915
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