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The effect of the minimum wage on the fast-food industry

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Author Info
Lawrence F. Katz
Alan B. Krueger

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Abstract

Using a longitudinal survey of fast-food restaurants in Texas, the authors examine the impact of recent increases in the federal minimum wage on a low-wage labor market. Less than 5% of fast-food restaurants were using the new youth subminimum wage in July/August 1991, even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective. Although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991, those federal minimum wage increases greatly compressed the distribution of starting wages in the Texas fast-food industry. Two findings at variance with conventional predictions are that (1) employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and (2) price changes were unrelated to mandated wage changes. (Abstract courtesy JSTOR.)

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Publisher Info
Article provided by ILR Review, ILR School, Cornell University in its journal ILR Review.

Volume (Year): 46 (1992)
Issue (Month): 1 (October)
Pages: 6-21
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Handle: RePEc:ilr:articl:v:46:y:1992:i:1:p:6-21

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Richard B. Freeman & Wayne B. Gray & Casey Ichniowski, 1981. "Low-Cost Student Labor: The Use and Effects of the Subminimum Wage Provisions for Full-time Students," NBER Working Papers 0765, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. repec:fth:prinin:300 is not listed on IDEAS
  3. Daniel Sullivan, 1989. "Monopsony Power in the Market for Nurses," NBER Working Papers 3031, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law & Economics, University of Chicago Press, vol. 32(2), pages S135-78, October.
  5. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," NBER Working Papers 4058, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May. [Downloadable!] (restricted)
  7. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  8. Krueger, Alan B, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 75-101, February. [Downloadable!] (restricted)
  9. David Card, 1992. "Using regional variation in wages to measure the effects of the federal minimum wage," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 46(1), pages 22-37, October.
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