The exact same meal, two wildly different prices. $14.34 vs. $12.99.
That might not seem like much, but it’s more than a 10% difference.
I drove to Vegas recently and for “research” decided to get the same meal at a McDonald’s in California and one in Nevada.
California enacted a $20 fast food minimum wage law in 2024, and recent work by Clemens, Edwards, Meer, and Nguyen estimates it raised fast food prices by around 3%-4%.
So I thought, let’s test it.
I got more than triple that, a 10% difference between my meals.
Obviously N=2 isn’t research, but it’s still interesting, why such a huge effect?
I don’t think demand is doing most of the work here. Both McDonald’s were on the way to Vegas, serving broadly similar customers (people volunteering to lose money).
So costs probably are the main story: rent, regulations, and yes the minimum wage (Nevada’s ($12) is way lower than California’s ($20)). Which caused me to revisit the minimum wage literature, but first–
A Vegas aside: People love to crap on Vegas as a soulless city whose very existence is a middle finger to God and nature. To which I’d say, I agree! HOWEVER, I have had an absolute blast in Vegas all the recent times I’ve gone. Here’s the hack: go with kids, preferably a kid you enjoy being around. There’s a ton of kid stuff to do. We went to the pool, arcades, shows. Meow Wolf is amazing to do with a kid. Also, as solar and desalination become more viable, Vegas is less a middle finger to God and nature.
Economics and the Minimum Wage
The economic theory is clear on the minimum wage. It is a price floor set above the equilibrium which means the government is artificially pushing the price too high, so we will have more people who want these now higher paying jobs than firms want to hire, so it will create unemployment.
That’s the theory, but for a long time the evidence didn’t exist.
The famous paper is the 1994 Card Krueger paper which looked at fast food restaurants in New Jersey and Pennsylvania. They found no employment effects after New Jersey raised its minimum wage.
The standard reconciliation was that firms have wage-setting power in the labor market (technically called monopsony). A minimum wage pushes against that power and moves the market toward where it should be, so the dis-employment effects predicted by basic theory don’t show up.
But the literature has moved again. This Alex Tabarrok post is a good summary of what he calls the “new consensus.” Basically, the world is much more complicated than the initial theory or data indicated, in the following ways:
Small minimum wage increases may have small effects, but large ones (like California’s $20 fast food wage) do produce measurable disemployment.
Firms adjust on margins other than headcount:
Reducing employment of workers with disabilities and other marginal groups
So we’re not quite back to Econ 101. The new view is that Econ 101 effects are real but show up on more margins than just employment, and they’re heterogeneous (worse for the least-skilled) and nonlinear (worse the higher the minimum bites).
One caveat worth flagging: the minimum wage literature is famously contentious and can be downright nasty. The main protagonists have publicly feuded for decades. The field keeps evolving as new work comes out, so today’s consensus may not be tomorrow’s.
Works Cited
Brynjolfsson, Erik, et al. Minimum Wages and Rise of the Robots. No. w34895. National Bureau of Economic Research, 2026.
Card, David, and Alan B. Krueger. “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania” The American Economic Review 84.4 (1994): 772-793.
Clemens, Jeffrey, et al. The Effects of California’s $20 Fast Food Minimum Wage on Prices. No. w34990. National Bureau of Economic Research, 2026.
Clemens, Jeffrey, Melissa Gentry, and Jonathan Meer. “Divergent Paths: Differential Impacts of Minimum-Wage Increases on Individuals with Disabilities.” National Tax Journal 79.1 (2026): 000-000.
Liu, Qing, et al. “Unintended workplace safety consequences of minimum wages.” Journal of Public Economics 239 (2024): 105247.
