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Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania

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  • David Card
  • Alan B. Krueger

Abstract

On April 1, 1992 New Jersey's minimum wage increased from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. Comparisons of the changes in wages, employment, and prices at stores in New Jersey relative to stores in Pennsylvania (where the minimum wage remained fixed at $4.25 per hour) yield simple estimates of the effect of the higher minimum wage. Our empirical findings challenge the prediction that a rise in the minimum reduces employment. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent. We also compare employment growth at stores in New Jersey that were initially paying high wages (and were unaffected by the new law) to employment changes at lower-wage stores. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4509.

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Date of creation: Oct 1993
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Handle: RePEc:nbr:nberwo:4509

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  1. Alison J. Wellington, 1991. "Effects of the Minimum Wage on the Employment Status of Youths: An Update," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 27-46.
  2. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," NBER Working Papers 3997, National Bureau of Economic Research, Inc.
  3. 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..
  4. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  5. repec:fth:prinin:300 is not listed on IDEAS
  6. Ransom, Michael R, 1993. "Seniority and Monopsony in the Academic Labor Market," American Economic Review, American Economic Association, vol. 83(1), pages 221-33, March.
  7. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages S135-78, October.
  8. repec:fth:prinin:298 is not listed on IDEAS
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. La (ir)relevancia del salario mínimo en Chile
    by Dany Jaimovich - Bakary Baludin in Development Therapy on 2012-07-18 12:40:00
  2. Does the minimum wage raise employment?
    by Economic Logician in Economic Logic on 2010-05-21 14:28:00
  3. Along the Minimum-Wage Battle Front
    by Nancy Folbre in Economix on 2010-11-01 08:00:00
  4. Human Rights Maps (73): Minimum Wages in the U.S.
    by Filip Spagnoli in P.A.P.-Blog on 2009-12-01 09:01:41
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