Working Papers

High Minimum Wages and the Monopsony Puzzle


We present the first causal analysis of recent large minimum wage increases, focusing on 47 larger U.S. counties that reached $15 or more by 2022q1. Using stacked county-level synthetic control estimators, we find substantial pay growth, no disemployment effects and reduced wage inequality. Our novel procedure ameliorates pandemic-related bias. We pose and address a monopsony puzzle: Researchers often invoke monopsony to explain absent negative employment effects, yet the model generally predicts positive employment effects. When we reduce selection and attenuation biases—by excluding areas with local minimum wages and high-wage counties—we find large, significant positive employment effects.

JEL codes: B41, J23, J24, J31, J38, J42

Keywords: synthetic controls, labor markets, minimum wages, monopsony, employer power