Association for Public Policy Analysis & Management

Objective: In an economic environment marked by rising income inequality and stagnant poverty rates, voters and legislators in several states and cities have supported initiatives to increase the minimum wage. While the effects of these initiatives are intended to improve the well-being of low income workers and families, their effects may vary according to certain contextual factors. In particular, little is known about how a city-level minimum wage might impact food cost. This study aims to explore the effects of Seattle's minimum wage ordinance (enacted 4/1/15) on local supermarket food prices.

Methods: Using the UW Center for Public Health Nutrition market basket, supermarket food prices were collected at six large supermarket chain stores inside Seattle (the "intervention" group) and six same-chain supermarkets outside Seattle (the comparison group) at two time points: 1-month pre- and 1-month post-enactment (March and May, 2015, respectively). Individual stores were selected based on the locations of lower income neighborhoods. Past local area studies have linked these neighborhoods to lower socio-economic status, worse diet quality, and worse health outcomes. This market basket is based on the Consumer Price Index and the Thrifty Food Plan Market Baskets. It collects price information on both an assortment of commonly eaten foods, as well as nutrient-rich foods. Trained researchers recorded price information of 106 basket items on-site at grocery stores. Surveyors are instructed to record the price of the lowest cost version for each item, and to focus on “medium” sizes when products are differentiated along that dimension. Example items include a half-gallon of 2% milk, bananas, one dozen eggs, and 16 ounce jars of peanut butter. Data were analyzed across time points using a difference-in-difference methods.

Findings:  Grocery outlets in the City of Seattle had slightly higher prices at baseline. The entire basket of 106 goods had an average cost of $316.85 in the City as of March and $325.08 in May, compared to $314.09 elsewhere in King County as of March and $313.02 in May. This amounts to a net price differential of under 1%. Both inside and outside the city, the total market basket price declined very slightly. The difference-in-difference estimate for the change in the average cost of the market basket was -0.70. The difference-in-difference point estimate was -0.007 (SE: 19 cents), suggesting that the item-level price response to the minimum wage increase was less than a penny.

Conclusions:  There is no evidence of changes in food prices in response to early implementation of Seattle’s ordinance. It should be noted that our baseline price data collection in March may be close enough to the April 1 minimum wage increase that it already incorporates anticipatory responses to a policy change that had been announced several months before. Our price data collection efforts are ongoing, which will permit additional opportunities to examine effects associated with minimum wage increases in 2016 and 2017.

Implications for Policy:  While preliminary, evidence suggests that grocery store prices may not be significantly impacted by local-level minimum wage policies.