The Payoffs of Higher Pay: Labor Supply and Productivity Responses to a Voluntary Firm Minimum Wage

Natalia Emanuel and Emma Harrington

No 1182, Staff Reports from Federal Reserve Bank of New York

Abstract: What are the returns to firms of paying more? We study a Fortune 500 firm’s voluntary firm-wide $15/hour minimum wage, which affected some warehouses more than others. Using a continuous difference-in-differences design, we find that a $1/hour pay increase (5.5 percent) halves worker departures, reduces absenteeism by 18.6 percent, and increases productivity (boxes moved per hour) by 5.7 percent. These productivity gains fully defrayed increased labor costs, offsetting the firm’s incentive to mark down wages. We develop a simple model that connects efficiency-wage incentives and monopsony power, showing how these forces can counterbalance each other to keep wages closer to workers’ marginal revenues.

Keywords: voluntary firm minimum wage; Efficiency wages; monopsony; labor market frictions (search for similar items in EconPapers)
JEL-codes: J31 J42 M52 (search for similar items in EconPapers)
Pages: 78
Date: 2026-02-01
New Economics Papers: this item is included in nep-inv and nep-lma
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DOI: 10.59576/sr.1182

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