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The Effect of New Jersey's Minimum Wage Increase on Fast-Food Employ- ment: A Re-Evaluation Using Payroll Records

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Author Info
David Neumark
William Wascher

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Abstract

We re-evaluate the evidence from Card and Krueger's (1994) New Jersey-Pennsylvania minimum wage experiment, using new data based on actual payroll records from 230 Burger King, KFC, Wendy's, and Roy Rogers restaurants in New Jersey and Pennsylvania. We compare results using these payroll data to those using CK's data, which were collected by telephone surveys. We have two findings to report. First, the data collected by CK appear to indicate greater employment variation over the eight-month period between their surveys than do the payroll data. For example, in the full sample the standard deviation of employment change in CK's data is three times as large as that in the payroll data. Second, estimates of the employment effect of the New Jersey minimum wage increase from the payroll data lead to the opposite conclusion from that reached by CK. For comparable sets of restaurants, differences-in-differences estimates using CK's data imply that the New Jersey minimum wage increase (of 18.8 percent) resulted in an employment increase of 17.6 percent relative to the Pennsylvania control group, an elasticity of 0.93. In contrast, estimates based on the payroll data suggest that the New Jersey minimum wage increase led to a 4.6 percent decrease in employment in New Jersey relative to the Pennsylvania control group. This decrease is statistically significant at the five-percent level and implies an elasticity of employment with respect to the minimum wage of -0.24.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5224.

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Date of creation: Aug 1995
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Handle: RePEc:nbr:nberwo:5224

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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  1. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June. [Downloadable!] (restricted)
  2. David Neumark & William Wascher, 1992. "Employment effects of minimum and subminimum wages: Panel data on state minimum wage laws," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 46(1), pages 55-81, October.
  3. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September. [Downloadable!] (restricted)
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(explanations, 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. Orazem, Peter F. & Mattila, J. Peter, 1999. "Minimum Wage Effects on Hours, Employment and Number of Firms: The Iowa Case," Staff General Research Papers 4053, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  2. Erzo F.P. Luttmer, 2007. "Does the Minimum Wage Cause Inefficient Rationing?," NBER Working Papers 13012, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. David Card & Alan B. Krueger, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December. [Downloadable!] (restricted)
  4. Asep Suryahadi, & Wenefrida Widyanti & Daniel Perwira & Sudarno Sumarto, 2001. "The Impact of Minimum Wage Policy on Wages and Employment in Developing Countries: The Case of Indonesia," Economics Study Area Working Papers 38, East-West Center, Economics Study Area. [Downloadable!]
  5. Thomas R. Michl, 1999. "Can Rescheduling Explain the New Jersey Minimum Wage Studies?," Macroeconomics 9908001, EconWPA. [Downloadable!]
  6. V. Bhaskar & Ted To, 1996. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Labor and Demography 9603001, EconWPA, revised 21 May 1996. [Downloadable!]
    Other versions:
  7. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2008. "New Estimates of the Effects of Minimum Wages in the U.S. Retail Trade Sector," IZA Discussion Papers 3597, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Thomas C. Leonard, 2002. "Reflection on rules in science: an invisible-hand perspective," Journal of Economic Methodology, Taylor and Francis Journals, vol. 9(2), pages 141-168, June. [Downloadable!] (restricted)
  9. Andreas Knabe & Ronnie Schöb, 2008. "Minimum Wage Incidence: The Case for Germany," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  10. Richard B. Freeman, 2000. "Single Peaked Vs. Diversified Capitalism: The Relation Between Economic Institutions and Outcomes," NBER Working Papers 7556, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2008. "The Effect of Minimum Wages on Wages and Employment: County-Level Estimates for the United States," IZA Discussion Papers 3300, Institute for the Study of Labor (IZA). [Downloadable!]
  12. repec:bep:eapcon:v:7:y:2007:i:1:p:1768-1768 is not listed on IDEAS
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