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An Evaluation of Recent Evidence on the Employment Effects of Minimum and Subminimum Wages

Author

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  • David Card
  • Lawrence F. Katz
  • Alan B. Krueger

Abstract

We re-examine recent cross-state evidence on the employment effect of the minimum wage. A re-evaluation of the data used in Neumark and Wascher's (1992) study of the minimum wage provides no support for their conclusion that the minimum wage has an adverse effect on teenage employment. Neumark and Wascher's findings are shown to be due to an inadvertent mistake in the definition of their school enrollment variable. In addition, Neumark and Wascher's coverage-weighted relative minimum wage index is shown to be negatively correlated with average teenage wages. We also re-analyze the experiences of individual states following the April 1990 increase in the Federal minimum wage, allowing for a full year lag in the effect of the law and controlling for changes in (properly measured) enrollment rates. These changes actually strengthen Card's (1992a) conclusion that the 1990 increase in the Federal minimum had no adverse employment effect. Lastly, we find that subminimum wages are rarely used, casting doubt on the claim that subminimum wage provisions temper any employment losses attributable to the minimum wage.

Suggested Citation

  • David Card & Lawrence F. Katz & Alan B. Krueger, 1993. "An Evaluation of Recent Evidence on the Employment Effects of Minimum and Subminimum Wages," NBER Working Papers 4528, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4528
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    Citations

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    Cited by:

    1. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    2. Godoey, Anna & Reich, Michael, 2019. "Minimum Wage Effects in Low-Wage Areas. Working Paper #106-19," Institute for Research on Labor and Employment, Working Paper Series qt90k268p9, Institute of Industrial Relations, UC Berkeley.
    3. David Neumark & William Wascher, 1993. "Employment Effects of Minimum and Subminimum Wages: Reply to Card, Katz and Krueger," NBER Working Papers 4570, National Bureau of Economic Research, Inc.
    4. Anna Godoey & Michael Reich, 2021. "Are Minimum Wage Effects Greater in Low‐Wage Areas?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(1), pages 36-83, January.
    5. Frances Stewart, 2003. "Income distribution and development," Chapters, in: John Toye (ed.), Trade and Development, chapter 10, Edward Elgar Publishing.
    6. Donald P. Hirasuna & Susan B. Hansen, 2009. "Is Social Science Research Useful to State Legislators?," International Regional Science Review, , vol. 32(4), pages 429-444, October.
    7. Michael Christl & Monika Köppl‐Turyna & Dénes Kucsera, 2018. "Revisiting the Employment Effects of Minimum Wages in Europe," German Economic Review, Verein für Socialpolitik, vol. 19(4), pages 426-465, November.
    8. Godoey, Anna & Reich, Michael, 2020. "Are Minimum Wage Effects Greater in Low-Wage Areas?," Institute for Research on Labor and Employment, Working Paper Series qt5w13g5bm, Institute of Industrial Relations, UC Berkeley.
    9. Attakrit Leckcivilize, 2015. "Does the minimum wage reduce wage inequality? Evidence from Thailand," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-23, December.
    10. David Neumark & William Wascher, 1994. "Minimum Wage Effects and Low-Wage Labor Markets: A Disequilibrium Approach," NBER Working Papers 4617, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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