Who Pays for Higher Wages? Evidence from Consumer Spending after California's Fast-Food Minimum Wage Increase

Hitanshu Pandit

No 1832, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: This paper estimates the consumer response to Califomia's 2024 fast-food m1mmum wage (AB-1228), which raised the sectoral wage floor to $20, and examines how that response varies across the income distribution of customers. Using monthly transaction data for ten national fast-food chains and a difference-in-differences design that compares Califomia outlets to the same chains in other states, the paper finds that customer visits and transactions at treated outlets fell by 6-7 percent, and total revenue at the representative establishment by about 5 percent, after the AB-1228 took effect. I find that revenue fell by less than visits, spending per visit rose, consistent with partial pass-through of higher labor costs to prices. Transaction records resolved by customer income show that the decline in visits was concentrated among higher-income customers, who reduced visits by about 4 to 5.5 percent, whereas lower-income customers show no detectable decline in visits; spending per visit rose across the income distribution. The product-market response to the minimum wage thus differs systematically by consumer income, a margin that studies of employment and prices do not observe.

Keywords: Minimum wage; consumer demand; income heterogeneity; price pass-through; fast-food restaurants (search for similar items in EconPapers)
JEL-codes: D12 J38 L83 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1832

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