justbehappy
Active Member
Price Responses to Minimum Wage Increases
Using a variety of government and private datasets, Aaronson and French show that prices do in fact rise in response to a minimum wage increase. Aaronson (2001) finds that minimum wage increases tend to raise prices. The magnitude and timing of these price increases is striking. Within three months of a wage hike, Aaronson finds that a 10 percent increase in the minimum wage resulted in a 0.40.7 percent increase in restaurant prices. Much of the increase occurred within the first month of the wage hike. In the fast food sector, prices rise 1.5 percent in response to a 10 percent increase.
Aaronson, French, and MacDonald (2004) utilize store-level Consumer Price Index (CPI) data generated by the United States Bureau of Labor Statistics (BLS) to separate firms by their relative use of low-skill, entry-level employment. A wage hike will particularly affect those firms employing a higher percentage of teenagers and other low-skilled employees. Using this new data, the authors find further evidence that prices rise following a wage hike. Tellingly, they also find that in areas where a greater number of employees earned the minimum wage, the price increases are larger than the overall results....
Output Prices and the Minimum Wage | EPI Study
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