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

Author

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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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    Citations

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    Cited by:

    1. Paul Redmond & Seamus McGuinness, 2025. "The impact of a minimum wage increase on hours worked: heterogeneous effects by gender and sector," Economica, London School of Economics and Political Science, vol. 92(365), pages 84-106, January.
    2. Papps, Kerry L. & Strain, Michael R., 2025. "Menu Adjustment in Response to the Minimum Wage: A Return to the New Jersey-Pennsylvania Border," IZA Discussion Papers 17594, IZA Network @ LISER.
    3. 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, IZA Network @ LISER.
    4. Kunaschk, Max, 2024. "The effects of minimum wages on employment and prices—Evidence from the hairdressing sector," Labour Economics, Elsevier, vol. 88(C).
    5. Abrahams, Scott, 2024. "Downward minimum wage rigidity: Evidence from a temporary four-month increase in St. Louis," Journal of Economic Behavior & Organization, Elsevier, vol. 218(C), pages 30-47.
    6. Kunkler, Michael, 2025. "The Big Mac index: An exact multilateral clarification," The North American Journal of Economics and Finance, Elsevier, vol. 77(C).
    7. González, Ignacio & Sala, Hector & Trivín, Pedro, 2025. "Consumption Responses to a Major Minimum Wage Increase: Evidence from Spain," IZA Discussion Papers 17923, IZA Network @ LISER.
    8. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RFBerlin Discussion Paper Series 2425, ROCKWOOL Foundation Berlin (RFBerlin).
    9. Link, Sebastian, 2024. "The price and employment response of firms to the introduction of minimum wages," Journal of Public Economics, Elsevier, vol. 239(C).
    10. 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).
    11. Shira Buzaglo-Baris, 2024. "Wage and Price Inflation: An Industry-Level Study," Bank of Israel Working Papers 2024.09, Bank of Israel.
    12. Orley C. Ashenfelter & Štěpán Jurajda, 2024. "The U.S. Low-Wage Structure: A McWage Comparison," NBER Working Papers 32708, National Bureau of Economic Research, Inc.

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