Beyond Labor Market Outcomes

Abstract

How effective is the minimum wage at raising nondurable household consumption through the redistribution of income towards low-wage workers? To address this question, I use novel data on retail sales by county and exploit variation in the minimum wage rate across the U.S. and over time. I find that a 10 percent increase in the minimum wage raises sales by 0.6 percent in nominal terms and 0.4 percent in real terms. These large effects are suggestive of high marginal propensities to spend on nondurables out of minimum wage hikes. The expenditure response emerges even when exploiting only within-state variation.