An increasing number of cities and municipalities across the United States have raised, or are considering raising, their minimum wage with the intent of improving the well-being of low-wage workers and their families [1
]. Only a few studies have investigated the effects of minimum wage policies on food security, diet quality, and associated health outcomes, such as obesity and diabetes [3
]. In addition, potential mediating factors of the relationships between minimum wage and health, such as food prices, need to be explored in greater detail. This is a particularly salient issue for lower income households, including minimum wage workers, who have lower quality diets and are at higher risk for obesity and type 2 diabetes [9
The relationship between higher minimum wage and higher food prices could be significant. The U.S. food system is the largest employer of minimum wage workers, accounting for nearly one-third of the total share of low-wage workers in the nation [11
]. Policies that increase minimum wage will likely increase labor costs which may result in a higher cost of business. In turn, these increased costs may be passed through the system to consumer food prices [12
]. Given that lower income households spend a higher proportion of disposable income on food, they will be more vulnerable to any increase in food costs [13
]. Published studies have already shown those earning minimum or low wages struggle with purchasing diets of sufficient nutritional value for health [9
]. Of particular public health concern is the potential detrimental impact that added food costs could have on diet quality due to the typically higher price of healthier foods [16
The magnitude of such effects may also vary based on the size of a minimum wage increase and whether it is experienced at a federal or local level. One study, conducted in 2000, modeled a $0.50 increase, separately for the 1992 and 1997 federal minimum wage, on food prices and concluded that small increases in the federal minimum wage would exert a less than 1% increase in food prices, even when the full labor prices were passed through to food consumers [19
]. However, there was indication by study authors that larger minimum wage increases could result in greater food price increases [19
]. Another study, conducted in 2012, forecasted that a 33% increase to federal minimum wage would increase retail grocery store food prices, on average, by less than 0.5% per year [11
]. Both of these studies modeled a one-time increase on the federal minimum wage and used simulated rather than primary data. It is unknown whether wage increases that are larger, more localized, or phased-in incrementally over multiple consecutive years would produce different results.
In June 2014, the City of Seattle passed an ordinance mandating a $15 hourly minimum wage for businesses; it was enacted on 1 April 2015 [20
]. The implementation of this policy is occurring over several years, with wage increases annually, until $15/hour is reached—a level that will be achieved between 2019 and 2021, depending on the size of the business and whether they offer medical benefits to their employees. This local minimum wage policy is providing an opportunity to prospectively collect and examine data on local food prices in response to real-time and incremental increases in wages over multiple years as the policy is phased in.
The primary purpose of this study is to examine immediate and short-term effects of Seattle’s minimum wage policy on local supermarket food prices after enactment of the policy. Because the policy was only targeted for businesses based in the City of Seattle, we were able to include in our sample both supermarket chains affected by the policy in Seattle and nearby, same-chain supermarkets not directly affected by the policy in King County. To assess the public health implications of potential differential price changes on specific items, such as fruits and vegetables, we also conducted a secondary analysis of the data by food group.
This study examined the effect of Seattle’s minimum wage policy on supermarket food prices after initial phase-in of the policy to $11/hour and, one-year later, when the minimum wage was increased to $13/hour. Total cost of the market basket at key supermarket chains was examined, both overall and by food groups. To date, we have found no evidence of changes in chain supermarket food prices related to the implementation of Seattle’s ordinance. There was also no evidence of increases by food group category.
Our overall lack of observed food price changes may be due to a number of reasons. First, baseline data collection may be proximal enough in time to the 1 April 2015 ordinance enactment that supermarkets had already incorporated price changes in anticipation of wage increases. Second, it is possible that the initial increases to $11/hour and $13/hour for most large (≥500 employees nationally) and small businesses (<500 employees) may not yet be a large enough increase in payroll for these large chain national supermarkets to warrant a change in consumer prices. Alternately, the required increases might not have been as consequential in many grocery stores because wages were already at or above that level, whether because of union contracts or because the employer already had a corporate policy of having no wage below $11 as of 2014 [35
]. Using administrative earnings and hours data from over 500 grocery establishments provided by the Washington Employment Security Department, we find that 14.3% of jobs in grocery stores (NAICS Code 445110) in Seattle and 29.3% in the rest of King County earned less than $11 per hour in the year preceding the passage of the Minimum Wage Ordinance. Yet, these proportions are higher when compared to all low-wage wage jobs in all industry sectors, 7.2% and 9.9% respectively, and thus the effect of the Ordinance on prices should be greater in grocery stores than in other industries. Third, food prices may be more sensitive to national and global rather than local trends. A longitudinal time analysis of food prices between 2002 and 2014 at Seattle metropolitan grocery store chains has shown that changes in retail food prices tend to track closely with changes in the Consumer Price Index [36
]. In addition, localized wage increases might have more modest effects than broader wage increases because the pass-through effects may occur only at the end of the food supply chain versus more broadly throughout the supply chain. Fourth, it is possible that higher minimum wages reduced employee turnover, which, in turn, improved worker productivity, thereby negating any detrimental effects of minimum wage [37
As states and large cities consider policies and initiatives focused on wage and income supplementation in an attempt to improve the well-being of low income individuals and families, it is important to consider the effects of such efforts beyond immediate wage and income impacts, such as in public health outcomes. Currently, the evidence base regarding the effects of minimum wage on public health outcomes is limited and with little to no primary data collected on potential mediators, such as supermarket food price. Researchers have examined some diet-related outcomes, such as obesity and food security, in relation to minimum wage—hypothesizing that increases in the minimum wage could affect one’s ability to purchase additional goods or a higher quality of food, thus benefiting their health. This evidence is mixed. Two studies examining the effects of the declining value of the minimum wage on obesity rates at a population level found that a decrease in real minimum wage was associated with increased BMI (Body Mass Index ) and obesity rates [7
]. One study evaluating an increase in minimum wage found that an increased minimum wage was associated with a reduction in BMI and obesity rates; however, this trend was reversed when it accounted for state-level time trends in BMI and obesity [3
]. A third study found no association between minimum wage and BMI in low-income households [5
]. A recent USDA study, which examined increased SNAP benefits (by an average of 17%) on food spending and insecurity, found that after households received additional SNAP benefits their inflation-adjusted food spending increased and their food insecurity declined by 2.2% [8
The relationship between food prices and minimum wage is apparent. First, increased labor prices to businesses might be passed through to food prices [12
]. Second, increases in family and individual incomes might alter one’s ability to afford food, including higher quality food; and, the increased demand for food might drive up prices. In the related area of fast food prices, evidence is mixed. A 1992 study found no impact of federal minimum wage increases in 1990 (from $3.35 to $3.80) and 1991 (from $3.80 to $4.25) on the cost of a full meal (fries, soda, and main course) at 3 fast food chains in Texas [40
]. A more recent study looking at a federal minimum wage increase to $15/hour for food service workers in fast food restaurants found an estimated 4.3% increase in prices at those restaurants [41
]. Another study, which assessed an increase in federal minimum wages on three fast food products (i.e., burgers, fried chicken, and pizza), found that a 33% increase in the federal minimum wage (from $7.25 to $10.10) would be passed through to consumers via a small 3% increase in the price of these products (e.g., a $3.77 burger would increase in price by 10 cents) [42
]. Finally, a study examining San Jose, California’s 2013 wage increase from $8 to $10/hour on fast food prices found that the cost of the minimum wage increase was absorbed by price increases [43
]. Conversely, a 1994 Card and Krueger study found that increases in fast food meal prices were similar regardless of differing initial wage rates, concluding that price changes were not simply related to wage pass-through effects [44
]. Little is known about how an increase in minimum wage and thus labor wages will affect primary food shopping sources such as supermarkets, especially salient for low-income shoppers who spend a greater proportion of their income on food [16
]. Our study attempts to provide information on supermarket food prices and has relevance to researchers looking at the relationships between wage and health outcomes via food prices and decision makers considering the bigger picture of public health impacts of policies focused on wage and income supplementation.
This study contributes to the limited research on the effects of local policies on food prices. Strengths of the study include the use of primary and prospective data collection at a local level before and after enactment of the ordinance at major supermarket chains and the use of an established method. This study also has several limitations. First, food quality was not captured in this study because it is difficult to measure objectively. One person’s subjective evaluation of “fresh” fruit may be another’s assessment of “overly-ripe”. This may explain some of the differences in total market basket price across store brands. For example, supermarket chain 6 was observed to carry more items that are often considered higher quality, such as those labelled as organic, grass-fed, farmer friendly, hormone-free, and antibiotic-free [17
]. In addition, some stores may carry more locally sourced produce than others, which is shown to be less expensive and may be disproportionately impacted by changes in minimum wage due to upstream increases in labor prices [45
]. However, we hoped to minimize these differences at the store level by selecting same-chain supermarkets that may source and provide similar selections. Second, data on the variability in price due to sales, coupons, store specials, and/or membership discounts was not collected. In addition, data were collected on the lowest priced item available rather than tracking the same brand over time. It is possible that supermarkets could absorb some of the price associated with increases in payroll by reducing the frequency of sales or the size of discount or by increasing the price of their store brands, which would not have been captured by this study. Data collected on the lowest price item available rather than the same brand over time may have biased our findings towards the null. Third, this study’s primary focus was about economic access, as opposed to physical access, toward attaining food, particularly foods that comprise a healthy diet. While the supermarkets selected were near major highways and arterials, no assessment was made on the accessibility by public transportation or other physical barriers that pertain to food acquisition. In addition, the selection of supermarkets based on their proximity to low income neighborhoods is a highly crude measure of the socioeconomic status of the patrons who shop there as it has been shown through previous research that price, rather than proximity, is the major driver for where individuals purchase their groceries [23
]. To offset this, we oversampled supermarkets in the lower-price ranges. Finally, the study sample did not include bulk retailers, specialty stores, ethnic stores, convenience stores, farmers’ markets, online deliveries, and other food retailers. This was purposefully done in order to apply the market basket tool, with standardized sizes, for comparison across all stores.