Here’s the abstract of Tobias Renkin’s, Claire Montialoux’s, and Michael Siegenthaler’s recent empirical study of the effects of minimum-wage legislation on the prices of groceries in the United States:
We study the impact of increases in local minimum wages on the dynamics of prices in local grocery stores in the US during the 2001-2012 period. We find a signifi cant impact of increasing minimum wages on prices in grocery stores. Our baseline estimate of the minimum wage elasticity of grocery prices is 0.02. This magnitude is consistent with a full pass-through of cost increases into prices. We show that price adjustments occur mostly in the months following the passage of minimum wage legislation rather than at the actual implementation of higher minimum wages. This forward-looking pattern of price adjustments is qualitatively consistent with pricing models that feature nominal rigidities. We fi nd no differential price effect for products consumed by poorer and richer households, and no evidence for demand effects. Our results suggest that consumers rather than firms bear the cost of minimum wage increases. Moreover, poor households are most negatively affected by the price response. Price increases in grocery stores alone offset at least 10% of the nominal income gains of the poorest households.
(And don’t forget that higher prices of groceries mean a lower quantity of groceries demanded by consumers – which, in turn, means fewer jobs in grocery stores – which, in turn, means that some workers will lose their jobs – which, in turn, means that some workers will have, not income gains, but income losses.) (HT Tyler Cowen) As a commenter at Marginal Revolution correctly said about these findings: tanstaafl.
Also on the tanstaafl front: In a letter (scroll down here) in the New York Times, Frayda Levy explains some of the onerous consequences of New York City’s diktats.
Phil Magness writes insightfully about school vouchers.
Russ Roberts ponders the differences between private and government enforcement of ethical standards.
Also from Russ is this new EconTalk with Rachel Laudan on food waste.
