IRLE WORKING PAPER #105-23 September 2023 - Minimum Wage Effects and Monopsony Explanations*

To further examine the representativeness of these counties, we show the share of all workers in fast food in each of the counties in Figure A.1. [...] The Range of these Policies Among Exposed Groups and Areas To provide further context for the substantial scope of these policies, we deploy two commonly- applied minimum wage metrics: the ratio of the minimum wage to the median wage, and the fraction of workers earning less than the upcoming minimum wage (the ”bite”). [...] Binding minimum wage increases overcome the low-wage option by forcing the firm to pay the higher wage to all its employees: workers then face higher wages and accordingly supply greater quantities of labor, while the minimum wage becomes the new (flat) marginal cost of labor to the firm, inducing higher quantities of labor demanded. [...] And Wursten and Reich (2023) find a minimum wage separation elasticity of -0.23 for fast food, implying a labor supply elasticity of +0.46, consistent with the mechanism in the dynamic monopsony model.11 However, invoking the presence of dynamic monopsony power to explain the puzzle of absent disemployment effects raises another puzzle: Binding minimum wage increases should, at least up to the com. [...] Note that our outcome values are levels expressed as a percentage of the local value in the final pre-treatment quarter for each treated unit, making our estimated effects the percent change in the outcome value relative to the final pre-treatment quarter (net of the change seen in the synthetic control).