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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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Author Info
David Card
Alan B. Krueger

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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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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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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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References listed on IDEAS
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. repec:fth:prinin:300 is not listed on IDEAS
  2. Daniel Sullivan, 1989. "Monopsony Power in the Market for Nurses," NBER Working Papers 3031, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  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.. [Downloadable!]
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  6. repec:fth:prinin:298 is not listed on IDEAS
  7. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law & Economics, University of Chicago Press, vol. 32(2), pages S135-78, October.
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