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Minimum Wages, Wages, and Price Pass-Through: The Case of McDonald’s Restaurants

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  • Orley Ashenfelter
  • Štěpán Jurajda

Abstract

Based on 2016–20 hourly wage rates of McDonald’s basic crew and Big Mac prices collected simultaneously from almost all US McDonald’s, we find that in 25% of instances of minimum wage increases, restaurants keep constant their wage premium above the increasing minimum wage. Higher minimum wages are not associated with faster adoption of touch-screen ordering, and there is near-full price pass-through of minimum wages. Minimum wage hikes lead to increases in real wages (expressed as how many Big Macs 1 hour of basic crew work can buy) that are one-fifth lower than the corresponding increases in nominal wages.

Suggested Citation

  • Orley Ashenfelter & Štěpán Jurajda, 2022. "Minimum Wages, Wages, and Price Pass-Through: The Case of McDonald’s Restaurants," Journal of Labor Economics, University of Chicago Press, vol. 40(S1), pages 179-201.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/718190
    DOI: 10.1086/718190
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    Cited by:

    1. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    2. Brown, Jessica H. & Herbst, Chris M., 2023. "Minimum Wage, Worker Quality, and Consumer Well-Being: Evidence from the Child Care Market," IZA Discussion Papers 16257, Institute of Labor Economics (IZA).
    3. Adam Ayaita, 2022. "Does Money Change Who You Are? Quasi-Experimental Evidence on the Effects of Wage Increases on Personality," SOEPpapers on Multidisciplinary Panel Data Research 1170, DIW Berlin, The German Socio-Economic Panel (SOEP).

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