The Pass-Through of Minimum Wages into US Retail Prices: Evidence from Supermarket Scanner Data

This paper estimates the pass-through of minimum wage increases into the prices of U.S. grocery and drug stores. We use high-frequency scanner data and leverage a large number of state-level increases in minimum wages between 2001 and 2012. We find that a 10% minimum wage hike translates into a 0.36% increase in the prices of grocery products. This magnitude is consistent with a full pass-through of cost increases into consumer prices. We show that price adjustments occur mostly in the three months following the passage of minimum wage legislation rather than after implementation, suggesting that pricing of groceries is forward-looking.

Automated summary

This paper estimates the impact of minimum wage increases on the prices of grocery and drug stores in the US. Using high-frequency scanner data and state-level minimum wage increases between 2001 and 2012, the study finds that a 10% increase in minimum wage leads to a 0.36% increase in grocery product prices. The research also suggests that price adjustments occur predominantly in the three months following the passage of minimum wage legislation, indicating forward-looking pricing in the grocery industry.