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

Orley Ashenfelter and Stepan Jurajda

Journal of Labor Economics, 2022, vol. 40, issue S1, S179 - S201

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.

Date: 2022
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