Card, D., and A.B. To examine the effect of the New Jersey minimum-wage increase using rep- Princeton Asia (Beijing) Consulting Co., Ltd. Here they present a powerful new challenge to the conventional view that higher . “Commentary on the Minimum Wage.” Wall Street Journal, April 25, A20. “Minimum Wages and Employment: A Case Study of the Fast-food Industry in New Jersey and Pennsylvania: Reply.” American Economic Review, 90(5), 1,397–1,420. Addison, J., M. Blackburn, and C. Cotti. Why give to EPI One possible answer is that unlike many of the programs studied in the evaluation literature, everyone is subject to the minimum wage. This elasticity is estimated as the ratio of the minimum-wage coefficients in the employment and earnings regressions in Dube, Lester, and Reich (2010). 2013. 2003. He argues that there is a contradiction between two . However, because this result is statistically insignificant it cannot be statistically distinguished from a finding that the minimum wage has no effect on employment. However, the local labor estimates also show a nontrivial probability of having a considerably more positive or negative employment effect. Just as a monopoly will not reduce its output in response to an imposed price reduction, a monopsonist can absorb a price increase (such as a minimum-wage increase) without reducing demand for workers. . The paper benefited from comments and review by Josh Bivens, David Cooper, J. Bradford DeLong, Arindrajit Dube, Doug Hall, Robert Murphy, Ryan Murphy, Michael Reich, Heidi Shierholz, and David Wynn. “Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis.” Industrial and Labor Relations Review, 57(2), 223–248. Daniel Kuehn is a doctoral student in American University’s Department of Economics with field specializations in labor economics and gender economics. "—Richard B. Freeman, Industrial and Labor Relations Review, "Although this book raises very sharp questions about the practice of labor economics, the book itself is terrific. Board of Directors Until the Card-Krueger study, most economists, myself included, assumed that raising the minimum wage would have a clear negative effect on employment. (1954), was also used by Card, Katz and Krueger (1993) in . Myth and Measurement should be a very important book. The book already has assumed an important position within the field of labor economics, and significant research in years to come is likely to revolve around its principle thesis."—K. Card, D., and A.B. There are many criteria that could be used to make sense of the empirical literature on the employment effects of the minimum wage. The net effect of a minimum-wage increase is therefore likely to be quite positive, even if concerns remain about a small population hurt by the minimum wage and in need of other assistance. One possible critique is that by over-parameterizing (i.e., adding too many controls to) their models, Dube, Lester, and Reich (2010) are mistakenly attributing true employment-discouraging effects of minimum-wage increases to other variables in their model, or that statistical significance is lost due to the difficulty of estimating such a complex model.6 However, the authors point out that these fears can be easily dismissed by comparing estimates of the impact of the minimum wage on employment with estimates of the impact on earnings. 2009. 5. Many of our ebooks are available for purchase from these The book will interest everyone involved in the minimum wage debates, and it will cause economists to question seriously the models they use and how they do empirical research. In fact, even before using county pairs, as Dube, Lester, and Reich (2010) add increasingly more precise geographic matching into their models, the negative impact of the minimum-wage increase identified in the nonmatching literature (discussed in more detail below) gradually evaporates. Small Differences that Matter: Labor Markets and Income Maintenance in Canada and the United States. © 2021 Economic Policy Institute Free shipping for many products! Application of these findings to any particular minimum-wage proposal requires careful consideration of whether the proposal is similar to other minimum-wage policies that have been studied. Card, David A. This paper also used a matching strategy, even before the celebrated 1994 paper. His research interests include inequality, racial disparities, education, and immigration. Here they present a powerful new challenge to the conventional view that higher . The New Minimum Wage Research Dale Belman Michigan State University Paul J. Wolfson Tuck School of Business at Dartmouth . Some localities have implemented “living wages” that are higher than minimum wages and therefore may be associated with greater percentage changes in the minimum wage at the time of their implementation. Sabia, J. J., R.V. In a separate paper, Dube and Zipperer (2013) argue that Neumark, Salas, and Wascher (2013) fail to properly implement the synthetic control method, using an approach that is quite different from the earlier literature in that tradition and much less defensible. Card and Krueger (2000) confirmed the original finding that the minimum-wage increase in New Jersey had no discernable employment effect.3. The problem with such minimum wage "studies" [the 1994 Card and Krueger article] that purport to demonstrate only positive and no negative effects from a rising minimum wage is that it is . "Do Minimum Wages Reduce Employment? In this application, minimum wages cause unemployment. “Are the Effects of Minimum Wage Increases Always Small? Myth and Measurement: The New Economics of the Minimum Wage - Twentieth-Anniversary Edition. Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage David Card Industrial and Labor Relations Review, Vol. Myth and Measurement: The New Economics of the Minimum Wage - Twentieth-Anniversary Edition - Ebook written by David Card, Alan B. Krueger. David Card is the Class of 1950 Professor of Economics at the University of California, Berkeley and Director of the Labor Studies Program at the National Bureau of Economic Research. Minimum-wage laws are not imposed under experimental conditions. The term “matching” is used here in a relatively broad way, to describe a family of methods that identify a comparison group as an appropriate match for a treatment group, thus mimicking a randomized experiment.1 A matching design is strongly preferred by economists working on a variety of applications because it is often the closest study design to randomized experiments available. These communities are quite different and they are experiencing different types of economic change. “Minimum Wages and Employment: A Case Study of the Fast-food Industry in New Jersey and Pennsylvania.” American Economic Review, 84(4), 772–793. The study continues to receive attention, even today, and gets credit among liberal economists for challenging the previous consensus that minimum wage hikes lead to reduced employment. 1225 Eye St. NW, Suite 600 Criticisms of the quality of the study’s phone survey data were raised at the time, which led the authors to analyze more reliable administrative payroll data from New Jersey and Pennsylvania. To evaluate the impact of the new law we surveyed over 400 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. The strongest designs seem to consistently find little or no evidence of disemployment effects associated with increases in the minimum wage. California's state minimum wage and Katz and Krueger's (1992) study of the impact of the 1990 and 1991 increases in the federal minimum wage. 6 Card and Krueger (1994), p. 792. . It will rank with seminal works in labor economics, including Gary Becker's Human Capital, Jacob Mincer's Schooling, Earnings, and Experience, Richard Freeman and James Medoff's What Do Unions Do?, and Edmund Phelp's (ed.) 65(2). The studies using the most rigorous research designs generally find that minimum-wage increases have little or no effect on employment. . We also thank David Lee for providing data on minimum wage laws by state. This sort of bias is very plausible in practice. 2A Jiangtai Road, Chaoyang District A detailed discussion of all of Dube’s work on the minimum wage is excluded in the interest of briefly outlining the differences between matching and nonmatching studies. Princeton economists David Card and Alan Krueger were watching the discussion unfold, and set out to understand exactly how the wage hike would affect New Jersey jobs. MINIMUM WAGES AND EMPLOYMENT par David Card & Alan B.Krueger Critique Bilan A. Données peu fiables 1996 : Employment Policies Institute NJ : Burger King 0 à 29 FTE PA : Wendy's 30 à 0 FTE Interprétations et conclusions A. Données peu fiables National Bureau of Economic Research Holzer, Harry. It organizes the most prominent studies in this literature by their use of two different empirical approaches: studies that match labor markets experiencing a minimum-wage increase with an appropriate comparison labor market, and studies that do not. 45(1), 40–55. Program on Race, Ethnicity, and the Economy, Economic Analysis and Research Network (EARN), Program on Race, Ethnicity, and the Economy • PREE, Economic Analysis and Research Network • EARN. This distinction is only one of many possible ways of thinking about the empirical literature, but it is critical for answering the question of who is right about the employment effects of the minimum wage. The author found no evidence of a decline in teenage employment or employment in retail. Labor market policy analysts strongly prefer studies that match “treatment” with “comparison” cases in a defensible way over studies that simply include controls and fixed effects in a regression model. . While Dube, Lester, and Reich (2010) used counties immediately across a state border as comparison cases, the fixed-effects models implicitly treat every state not experiencing a minimum-wage increase as a coequal comparison case to every state that does have a minimum-wage increase. . The current federal minimum wage is $7.25 an hour, with some exceptions for seasonal workers, apprentices, and tipped employees. See Card and Krueger (2000). The effect of the minimum wage on earnings stays consistent across these models. Find many great new & used options and get the best deals for Myth and Measurement : The New Economics of the Minimum Wage by Alan B. Krueger and David Card (1997, Trade Paperback) at the best online prices at eBay! It is difficult to overstate how uncontroversial it is in the field of labor market policy evaluation to assert the superiority of matching methods to the nonmatching approaches described above.9 The seminal evaluations of the effects of job training programs, work-sharing arrangements, employment tax credits, educational interventions, and housing vouchers all use at least some sort of matching method, if not an actual randomized experiment. 18 Card, David and Alan B. Krueger, 1998. . These models have a number of valuable features, most notably their ability to control for idiosyncratic differences between states or individuals that do not change over time. "—Joe Conason, The New York Observer, "Myth and Measurement . The Minimum Wage. Some of these trends may be controlled for in certain studies, but fixed-effects models are not structured to capture the more comprehensive set of state-specific trends that matching studies can account for. 2000. The critical advance has been that Neumark, Salas, and Wascher (2013) appear to concede that some sort of modern matching approaches are essential for evaluating the effect of minimum-wage increases in the absence of a randomized experiment. Then in 1993 the economists David Card and Alan Krueger looked at fast-food restaurants in New Jersey and Pennsylvania and found that raising the minimum wage gave people more income without . 6. Here's how to tilt it back. Meer and West (2013) use state fixed-effects models and numerical examples to argue that matching studies that include location-specific time trends (discussed in more detail in the next section) may provide inappropriate employment estimates if the principal impact of changes in the minimum wage is on employment growth rates. In any case, the stronger designs that use matching strategies clearly contradict the theory that minimum-wage increases reduce employment. Card, D. 1992. "—Voice Literary Supplement, "Card and Krueger have written a powerful book underpinned by hard facts. For example, Sabia, Burkhauser, and Hansen (2012) find negative effects on employment when they compare New York state with several comparison states, and Hoffman and Trace (2009) find that a minimum-wage increase in Pennsylvania reduced the employment prospects of “at-risk” workers relative to comparable workers in New Jersey. Oct 2020. Phone: +44 1993 814500 p. 121–144. Analyses of the minimum wage that use matching first received wide attention with David Card and Alan Krueger's 1994 paper on an increase in New Jersey's state minimum wage from $4.25 to $5.05.2 Card and Krueger were concerned with distinguishing changes in employment at fast food restaurants that would have happened anyway from changes . David Card and Alan B. Krueger have already made national news with their pathbreaking research on the minimum wage. In February and March of 1992, Card and Krueger surveyed fast-food chain restaurants (specifically, That finding shook what had become a broad consensus among economists that raising the minimum . In a work that has important implications for public policy as well as for the direction of economic research, the authors put standard economic theory to the test, using data from a series of recent episodes, including the 1992 increase in New Jersey’s minimum wage, the 1988 rise in California’s minimum wage, and the 1990-91 increases in the federal minimum wage. Table 1 reports Dube, Lester, and Reich’s (2010) estimates of the percentage change in employment resulting from a percentage change in earnings as a result of an increase in the minimum wage.5 The authors analyze two different samples of employment data: one that includes all counties (the first column), and one that includes pairs of neighboring counties (the second column), with county pair matching performed on the latter sample. Here they present a powerful new challenge to the conventional view that higher minimum wages reduce jobs for low-wage workers. David Card and Alan Krueger show through meticulously assembled data that increasing minimum pay in the fast-food industry has no discernable effect on the number of jobs, on consumer prices, or even on employee benefits like free meals. Couch and Wittenburg (2001) use a fixed-effects model to assess the impact of the minimum wage on hours worked, while Neumark and Wascher (2004) use these techniques to understand how labor market institutions are relevant for international differences in the effect of the minimum wage. 7674. Myth and Measurement: The New Economics of the Minimum Wage - Twentieth-Anniversary Edition - Kindle edition by Card, David, Krueger, Alan B., Card, David, Krueger, Alan B.. Download it once and read it on your Kindle device, PC, phones or tablets. 12. Here they present a powerful new challenge to the conventional view that higher minimum wages reduce jobs for low-wage workers. 46, No. In a work that has important implications for public. Twitter LinkedIn Email. . 2 David Neumark & Peter Shirley, Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the Unites States? 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