Spillover Effects from Voluntary Employer Minimum Wages

Abstract

Low unionization rates, a falling real federal minimum wage, and outsourcing have hampered wage growth in the low-wage sector in the US. In recent years, a number of private employers have opted to institute or raise company-wide minimum wages for their employees, sometimes in response to public pressure. To what extent do wage-setting changes at major employers spill over to other employers, and what are the broader labor market effects of these policies? In this paper, we study recent minimum wages by Amazon, Walmart, Target, CVS, and Costco using data from millions of online job ads and employee surveys. We document that these policies induced wage increases at low-wage jobs at other employers, where the modal response was to match the wage announced by the large retailer. In the case of Amazon’s $15 minimum wage in October 2018, our estimates imply that a 10% increase in Amazon’s advertised hourly wages led to an average increase of 2.3% among other employers in the same commuting zone. Using the CPS, we estimate wage increases in exposed jobs in line with our magnitudes from employee surveys and find that large employer minimum wage policies led to small but precisely estimated declines in employment, with employment elasticities ranging from -0.04 to -0.13. Large employer minimum wage announcements influenced wages more broadly. The magnitude of these wage spillovers cannot easily be explained by standard competitive pressures, suggesting a role for both market power and norms in wage determination.