IDEAS home Printed from https://ideas.repec.org/p/pri/indrel/298.html
   My bibliography  Save this paper

The Effect of the Minimum Wage on the Fast Food Industry

Author

Listed:
  • Lawrence F. Katz

    (Harvard University and NBER)

  • Alan B. Krueger

    (Princeton University and NBER)

Abstract

Using data from a longitudinal survey of fast food restaurants in Texas, the authors examine the impact of recent changes in the federal minimum wage on a low-wage labor market. The authors draw three main conclusions - first - the survey results indicate that less than 5 percent of fast food restaurants use the new youth subminimum wage even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it went into effect. Second, although some restaurants increased wages by an amount exceeding that necessary to comply with higher minimum wages in both 1990 and 1991, recent increases in the federal minimum wage have greatly compressed the distribution of starting wages in the Texas fast food industry. Third, employment increased relatively in those firms likely to have been most affected by the 1991 minimum wage increase, while price changes appear to be unrelated to mandated wage changes. These employment and price changes do not seem consistent with conventional views of the effects of increases in a binding minimum wage.

Suggested Citation

  • Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:298
    as

    Download full text from publisher

    File URL: https://dataspace.princeton.edu/bitstream/88435/dsp013x816m62z/1/298.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    2. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
    3. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 135-178, October.
    4. 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.
    5. 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..
    6. repec:fth:prinin:300 is not listed on IDEAS
    7. Charles Brown & Curtis Gilroy & Andrew Kohen, 1983. "Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment," Journal of Human Resources, University of Wisconsin Press, vol. 18(1), pages 3-31.
    8. Alan B. Krueger, 1991. "Ownership, Agency, and Wages: An Examination of Franchising in the Fast Food Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 75-101.
    9. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    2. David Card, 2022. "Design-Based Research in Empirical Microeconomics," Working Papers 654, Princeton University, Department of Economics, Industrial Relations Section..
    3. Alan B. Krueger, 1994. "The Effect of the Minimum Wage When It Really Bites: A Reexamination of the Evidence from Puerto Rico," Working Papers 709, Princeton University, Department of Economics, Industrial Relations Section..
    4. Sara Lemos, 2004. "A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil," Discussion Papers in Economics 04/3, Division of Economics, School of Business, University of Leicester.
    5. Bussolo, Maurizio & Mizala, Alejandra & Romaguera, Pilar, 2002. "Beyond Heckscher-Ohlin: trade and labour market interactions in a case study for Chile," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 639-666, November.
    6. Alan B. Krueger, 2001. "Teaching the Minimum Wage in Econ 101 in Light of the New Economics of the Minimum Wage," The Journal of Economic Education, Taylor & Francis Journals, vol. 32(3), pages 243-258, January.
    7. Richard Dickens & Paul Gregg & Stephen Machin & Alan Manning & Jonathan Wadsworth, 1993. "Wages Councils: Was There a Case for Abolition?," British Journal of Industrial Relations, London School of Economics, vol. 31(4), pages 515-529, December.
    8. Katz, L.F. & Krueger, A.B, 1991. "The Effect Of The New Minimum Wage Law In A Low-Wage Labor Market," Harvard Institute of Economic Research Working Papers 1544, Harvard - Institute of Economic Research.
    9. David Neumark & Mark Schweitzer & William Wascher, 2005. "The Effects of Minimum Wages on the Distribution of Family Incomes: A Nonparametric Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 867-894.
    10. Brewer, Mike & Crossley, Thomas F. & Zilio, Federico, 2019. "What Do We Really Know about the Employment Effects of the UK's National Minimum Wage?," IZA Discussion Papers 12369, Institute of Labor Economics (IZA).
    11. Marianne E. Page & Joanne Spetz & Jane Millar, 2005. "Does the minimum wage affect welfare caseloads?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(2), pages 273-295.
    12. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, University Library of Munich, Germany.
    13. David Neumark & William Wascher, 2002. "Do Minimum Wages Fight Poverty?," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 315-333, July.
    14. John Horton, 2017. "Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment," CESifo Working Paper Series 6548, CESifo.
    15. Tor Eriksson & Mariola Pytlikova, 2004. "Firm‐level Consequences of Large Minimum‐wage Increases in the Czech and Slovak Republics," LABOUR, CEIS, vol. 18(1), pages 75-103, March.
    16. Juan A. Correa & Francisco Parro, 2020. "On the heterogeneous short‐term effects of minimum wages on labor demand," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(2), pages 184-195, June.
    17. Stephen Bazen & Velayoudom Marimoutou, 2018. "Federal Minimum Wage Hikes Do Reduce Teenage Employment," Working Papers halshs-01945777, HAL.
    18. Gilbert Cette & Philippe Cuneo & Didier Eyssartier & Jérôme Gautié, 1996. "Coût du travail et emploi des jeunes," Revue de l'OFCE, Programme National Persée, vol. 56(1), pages 45-72.
    19. David Neumark, 2017. "The Employment Effects of Minimum Wages: Some Questions We Need to Answer," NBER Working Papers 23584, National Bureau of Economic Research, Inc.
    20. Hirsch, Barry T. & Schumacher, Edward J., 1995. "Monopsony power and relative wages in the labor market for nurses," Journal of Health Economics, Elsevier, vol. 14(4), pages 443-476, October.
    21. Deltas, George, 2007. "Can a minimum wage increase employment and reduce prices in a neoclassical perfect information economy?," Journal of Mathematical Economics, Elsevier, vol. 43(6), pages 657-674, August.

    More about this item

    Keywords

    minimum wage; prices; employment; subminimum wage;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:indrel:298. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/irprius.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/irprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.