Does the Minimum Wage Bite into Fast-Food Prices?

We study the effect of increases in effective minimum wages on the prices of several fast-food items using quarterly city-level data from 1993-2014, a period during much of which the federal minimum wage declined in real value while state-level legislation flourished. For one product, a burger, we find a robust price elasticity of 9% with respect to the minimum wage. This estimate indicates substantial cost pass-through when contextualized by the effect of minimum-wage increases on restaurant wage bills. Our estimate for pizza is suggestive of a similarly large pass-through rate but is less precisely estimated, and our estimate for fried chicken is near zero, but estimated even less precisely. Taken as a whole, our estimates point toward sizable cost pass-through of minimum wage increases to consumer prices. These results contribute to a mixed literature on the consumer burden of minimum wage increases