Authors: Natalia Emanuel and Emma Harrington
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Staff Reports
The Payoffs of Higher Pay: Labor Supply and Productivity Responses to a Voluntary Firm Minimum Wage
Number 1182
February 2026
February 2026
JEL classification: M52, J31, J42
What are the returns to firms of paying more? We study a Fortune 500 firm’s voluntary firm-wide $15/hour minimum wage, which affected some warehouses more than others. Using a continuous difference-in-differences design, we find that a $1/hour pay increase (5.5 percent) halves worker departures, reduces absenteeism by 18.6 percent, and increases productivity (boxes moved per hour) by 5.7 percent. These productivity gains fully defrayed increased labor costs, offsetting the firm’s incentive to mark down wages. We develop a simple model that connects efficiency-wage incentives and monopsony power, showing how these forces can counterbalance each other to keep wages closer to workers’ marginal revenues.
Author Disclosure Statement(s)
Natalia Emanuel
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Emma Harrington
I declare that I have no relevant or material financial interests that relate to the research described in this paper.
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Emma Harrington
I declare that I have no relevant or material financial interests that relate to the research described in this paper.
Suggested Citation:
Emanuel, Natalia, and Emma Harrington. 2026. “The Payoffs of Higher Pay: Labor Supply and Productivity Responses to a Voluntary Firm Minimum Wage.” Federal Reserve Bank of New York Staff Reports, no. 1182, February. https://doi.org/10.59576/sr.1182
Emanuel, Natalia, and Emma Harrington. 2026. “The Payoffs of Higher Pay: Labor Supply and Productivity Responses to a Voluntary Firm Minimum Wage.” Federal Reserve Bank of New York Staff Reports, no. 1182, February. https://doi.org/10.59576/sr.1182
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