Last week, tens of thousands of fast food workers went on strike to protest their current wages, bringing the debate over raising the minimum wage back into relief.
Opponents of doing so argue that it would by definition increase unemployment.
But Berkeley’s David Card and Princeton’s Alan Krueger, who also recently stepped down as chair of the White House Council on Economic Advisers, have twice shown that that is not necessarily the case.
In their 1994 study Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania, the pair surveyed whether an increase in New Jersey’s minimum wage reduced employment at fast food restaurants by comparing it with seven border counties in Pennsylvania.
The evidence showed New Jersey’s new $US5.05 wage floor, enacted in April of 1992, was actually correlated with an increase in employment, and at a minimum did not negatively affect it.
In 1998, they came back to the question in another study, this time using BLS data, as well as findings from a study that refuted that initial data. A total of 687 restaurants were examined.
They basically found the same thing again, writing:
The increase in New Jersey’s minimum wage probably had no effect on total employment in New Jersey’s fast-food industry, and possibly had a small positive effect.
Their initial telephone-based survey showed that between February and November of 1992, a rise of 2.4 workers per restaurant in New Jersey relative to Pennsylvania.
The newer BLS data showed a 1.1 worker-per-restaurant gain.
The researchers who refuted the initial study, they said, used data from a single Pennsylvania Burger King franchisee, which distorted their findings.
They also failed to smooth out the data for the frequency with which it was reported.
Card and Kreuger admit that there are likely to be “some specifications and data definitions” that show an adverse impact from an increase in the minimum wage.
But they conclude that at least within the NJ/PA data set, the overall impact is negligible, if that:
A comparison of fast-food employment growth in New Jersey and Pennsylvania over the period of our original study confirms the main findings in our 1994 paper, and calls into question the representativeness of the sample assembled by Berman, Neumark and Wascher.
Consistent with our original sample, the BLS fast-food data set indicates slightly faster employment growth in New Jersey than in the Pennsylvania border counties over the time period that we initially examined, although in most specifications the differences between New Jersey and Pennsylvania is small and statistically insignificant.
Time to revisit?
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