Working Paper: NBER ID: w25761
Authors: Daniel Cooper; Mara Jos Luengo-Prado; Jonathan A. Parker
Abstract: Using variation in minimum wages across cities and controlling for differences in business-cycle factors and long-run local economic trends, we find that following minimum wage increases, both prices and nominal spending rise modestly. These gains are larger for certain sub-categories of goods such as food away from home and in locations where low-wage workers are a larger share of employment. Further, minimum wage increases are associated with reduced total debt among households with low credit scores, higher auto debt, and increased access to credit.
Keywords: Minimum Wage; Consumer Spending; Household Debt; Local Economic Conditions
JEL Codes: D14; E20; E31; J20; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Minimum Wage Increase (J38) | Nominal Consumer Spending Increase (D12) |
| Minimum Wage Increase (J38) | Changes in Household Debt Dynamics (G51) |
| Higher Share of Low-Wage Workers (J39) | More Pronounced Inflation Effect (E31) |
| Minimum Wage Increase (J38) | Local Aggregate CPI Increase (C43) |
| Minimum Wage Increase (J38) | Cumulative Local Aggregate CPI Increase (C43) |
| Minimum Wage Increase (J38) | Increased Prices (D49) |