Via Greg Mankiw, here is a new working paper by David O. Meltzer and Zhuo Chen: “The Impact of Minimum Wage Rates on Body Weight in the United States“. The abstract:
Growing consumption of increasingly less expensive food, and especially “fast food”, has been cited as a potential cause of increasing rate of obesity in the United States over the past several decades. Because the real minimum wage in the United States has declined by as much as half over 1968-2007 and because minimum wage labor is a major contributor to the cost of food away from home we hypothesized that changes in the minimum wage would be associated with changes in bodyweight over this period. To examine this, we use data from the Behavioral Risk Factor Surveillance System from 1984-2006 to test whether variation in the real minimum wage was associated with changes in body mass index (BMI). We also examine whether this association varied by gender, education and income, and used quantile regression to test whether the association varied over the BMI distribution. We also estimate the fraction of the increase in BMI since 1970 attributable to minimum wage declines. We find that a $1 decrease in the real minimum wage was associated with a 0.06 increase in BMI. This relationship was significant across gender and income groups and largest among the highest percentiles of the BMI distribution. Real minimum wage decreases can explain 10% of the change in BMI since 1970. We conclude that the declining real minimum wage rates has contributed to the increasing rate of overweight and obesity in the United States. Studies to clarify the mechanism by which minimum wages may affect obesity might help determine appropriate policy responses.
Emphasis is mine. There is an obvious candidate for the mechanism:
- Minimum wages, in real terms, have been falling in the USA over the last 40 years.
- Minimum-wage labour is a significant proportion of the cost of “food away from home” (often, but not just including, fast-food).
- Therefore the real cost of producing “food away from home” has fallen.
- Therefore the relative price of “food away from home” has fallen.
- Therefore people eat “food away from home” more frequently and “food at home” less frequently.
- Typical “food away from home” has, at the least, more calories than “food at home”.
- Therefore, holding the amount of exercise constant, obesity rates increased.
Update: The magnitude of the effect for items 2) – 7) will probably be greater for fast-food versus regular restaurant food, because minimum-wage labour will almost certainly comprise a larger fraction of costs for a fast-food outlet than it will for a fancy restaurant.
Are you sure about point 2? Nothing proves that the share of minimum-wage workers is higher in the food-away sector than in, say, the agricultural sector or the food-processing industry, which can also be quite labour-intensive. I’m pretty those Mexican apple-pickers aren’t paid much more than the minimum wage.
If that were the case, then the cost of food-away wouldn’t necessarily fall more than the cost of home food, i.e. point 4 would be wrong.
UNLESS you assume that the home-food sector is not competitive (because managed by a small number of huge companies), such that labour-cost don’t translate into falling prices; as opposed to the “home-away” sector which is arguably EXTREMELY competitive, in which case your mechanism is reinstated.
Mmm, just food for thought.
Raw ingredients (groceries) are intermediate inputs in the production of both away-from-home-food and home-food. A declining real wage for apple-pickers in California will lower the price of an apple, but it lowers it for both the restaurant and the home.
I imagine there are (were?) two effects.
The first and most direct effect will be through the relative price between away-from-home-food and home-food. Since they both share similar intermediate goods, it will hinge on the relative cost between the two in labour for preparation/serving. We know that the average real wage has been rising, the median real wage hasn’t changed and the minimum real wage has been falling. Therefore for the average household and a clear majority of households, the value of their time has risen relative to the cost of away-from-home-food, instigating a substitution effect towards away-from-home-food.
The second effect will be between food-away-from-home and non-food-final-goods. So long as minimum-wage labour comprises a larger share of the total cost of production in food-away-from-home than it does in non-food-final-goods, then there will also have been a shift away from non-food-final-goods and towards away-from-home-food. (I’m implicitly assuming a low degree of substitutability in production here)
I’m not sure I understand your last thought (the paragraph starting with “UNLESS you assume …”). If an industry is not competitive, prices will still be a markup over marginal cost, so a change in costs will come through to a change in prices.
Interesting, and contra other work (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1079584&rec=1&srcabs=989363) which suggested that the availability of fast food had little effect on obesity (because people eat less at other times).
However, an increase in the minimum wage will also increase consumer income, and can potentially drive a substitution towards healthier food or exercise.
Gas prices are also linked to obesity (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=982466&rec=1&srcabs=989363).