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Do State Minimum Wage Laws Reduce Employment? Mixed Messages from Fast Food Outlets in Illinois and Indiana

Author

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  • Persky, Joseph J.
  • Baiman, Ron

Abstract

In January 2004 and January 2005 the state of Illinois increased its minimum wage to $5.50 and then $6.50, well above the national minimum of $5.15. This study, comparing the impacts on Illinois fast food outlets to a control group of Indiana outlets, was conceived as a repetition of the Card-Krueger study of a similar situation in New Jersey. The central question is whether the Illinois outlets demonstrated a substantial reduction in employment in response to the higher legislated wage rates. We conclude that the Illinois-Indiana data lack the power to differentiate between a "zero employment effect" and a "small negative employ-ment effect." Furthermore, we question the welfare significance of such a determination even if it could be convincingly made.

Suggested Citation

  • Persky, Joseph J. & Baiman, Ron, 2010. "Do State Minimum Wage Laws Reduce Employment? Mixed Messages from Fast Food Outlets in Illinois and Indiana," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 40(2).
  • Handle: RePEc:ags:jrapmc:132449
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    References listed on IDEAS

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    1. 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 772-793, September.
    2. Joseph Persky & Daniel Felsenstein & Virginia Carlson, 2004. "Does "Trickle Down" Work? Economic Development and Job Chains in Local Labor Markets," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number dtdw, November.
    3. Elizabeth Powers, 2009. "The Impact of Minimum-Wage Increases: Evidence from Fast-food Establishments in Illinois and Indiana," Journal of Labor Research, Springer, vol. 30(4), pages 365-394, December.
    4. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
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