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1
FEB-21-95 TUE 18:49
W&M PUBLIC POLICY PROGRM FAX NO. 8042212390
P.02/05
Statement of William M. Rodgers III
Assistant Professor of Economics
Department of Economics
The College of William and Mary
Before the Joint Economic Committee
February 22, 1995
Mr. Chairman and Distinguished Members of the Joint Economic Committee:
Thank you for the opportunity to appear before you and discuss the issue of
raising the federal minimum wage. The minimum wage is a topic of active
academic debate. The major argument against an increase is the belief that the a
minimum wage increase generates huge job losses. The basis for this view comes
from outdated research. Academic researchers have never predicted huge job
losses for the adult population. The only job losses that are predicted are for
teenagers. Yet, even for teenagers, reviewers of this literature conclude that a 10
percent increase in the minimum wage leads to a zero to 3 percentage point
increase in the teenage unemployment rate, and Brown, Gilroy, and Kohen's
review of the literature favors the bottom end of this range.
These estimates yield an increase in the income of low-wage workers. For
example, suppose that each 10 percent increase in the minimum wage produced
job losses of 1 percent for minimum wage workers. Using this estimate, a simple
back of the envelope calculation shows that with a 90 cent increase in the
minimum wage 98 percent of the 11 million workers between 4.25 and 5.15 get a
raise, and only 2 percent had to look for new jobs. Given the high turnover rates
in these jobs, spells of unemployment should be quite short. Furthermore, the net
gain for the economy will be even greater if effort is tied to wages, because
FEB-21-95 TUE 18:50
W&M PUBLIC POLICY PROGRM FAX NO. 8042212390
P.03/05
productivity will improve.
The majority of recent research on the effects of minimum wage increases
shows that the estimated job losses are small or negligible. These studies appear
in prestigious journals where results are scrutinized by economists prior to
publication: three such publications are The American Economic Review, Journal
of Human Resources, and Industrial Labor and Relations Review.
As a result, many distinguished economists are changing their views. In a
recent New York Times article, Nobel Laureate Robert Solow stated that, "The
main thing about this research is that the evidence of job loss is weak."
Elsewhere, distinguished labor economist, Richard Freeman stated, "Most
studies, however, reject the notion that the late 1980's/early 1990's increases had
adverse employment effects, and the studies that find adverse effects prior to
those increases obtain small [employment effects]..." "
Let me now talk briefly about who would benefit from the minimum wage
increases. The debate has focused on teenagers. Again, this is based on outdated
literature. If one looks at the current data for workers who say that they are paid
an hourly wage, you find that (1) most minimum wage workers are adults over 20
years of age; among full-time workers who earn the minimum, over 80 percent are
adults; and (2) more than one in five minimum wage workers lives in a family
below the official poverty line.
Some have also argued that an increase in the minimum wage would have a
differential impact on the employment of black teenagers. However, my recent
analysis of the 1980 and 1981 minimum wage increases (which will be submitted
8042212392
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FEB-21-95 TUE 18:50
W&M PUBLIC POLICY PROGRM FAX NO. 8042212390
P.O
for the record) that uses data from the National Longitudinal Survey of Youth
strongly suggests that teenage employment was not adversely effected by the
increases, and black unemployment was not adversely effected. The employment
rate of teenagers who were affected by the minimum wage is the same as the
employment rate of teenagere who were employed in industries that were exempt
from the minimum wage increase, and the unemployment of black teenagers did
not increase. After the 1980 Increase, it actually went down.
Finally, let me talk about wage differences across racial groups. During the
1980's, the relative earnings of new entrant black workers fell. The relative
earnings of blacks in the most recent cohort that entered the labor market also fell.
Some of my earlier work finds that the decline in the real value of the minimum
wage plays a key role in explaining this erosion in earnings among less-skilled high
school dropouts and high school graduates. These results are consistent with the
findings of Professors John Bound and Richard Freeman. The puzzle is that the
1980's was a period in which racial differences in educational attainment and other
ability measures continued to narrow.
In summary, I think that current research on the minimum wage provides an
excellent foundation on which to base a modest increase in the minimum wage.
Finally, I find it ironic that one of the opposition's major arguments against
increasing the minimum wage is that it would have a differential impact on the
employment of teenage black males. To the people who have this concern, I
applaud you for your caring in this complex issue; however, you are focusing on
the wrong set of statistics.
8042212390
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W&M PUBLIC POLICY PROGRM
FAX NO. 8042212390
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During my adult life, the labor force participation for African American
teenagers has remained under 40 percent. Allowing the real value of the minimum
wage to fall, while transportation and clothing prices increase, will not help
encourage labor force participation by these teenagers. Further, the decline will
lead to greater wage erosion among black high school graduates and dropouts.
So, while there are many policies that need to be pursued to lower black
unemployment rates and raise their relative wages, making African American
teenagers even cheaper to employ is not likely to help.
cant differences in state cost of living and wage levels, 5 governors and state leg-
islators committed to the notion of a minimum wage are in a better position than
Congress to determine what is appropriate for their areas. State legislators better
understand the living and working conditions of workers in their state and how
business conditions and jobs would be affected by a certain minimum wage level.
Enact significant regulatory reform to reduce the cost of labor. The explo-
sion of new regulations since 1988 has raised the cost of labor and capital, cre-
ated barriers to the formation of new companies and jobs, and placed a greater
burden on Americans trying to compete in the global economy. There are at least
three million fewer jobs in the American economy today because of the growth
of regulation over the last 20 years. 6 The regulatory bureaucracy needs to be
rolled back and job-killing labor regulations eliminated.
Promote school choice legislation and other real education reforms to im-
prove skills. Despite record spending of taxpayers' dollars, America's public
schools continue to turn out far too many high school graduates who lack not
only basic skills, but also the communication skills and work attitudes that em-
ployers are demanding. One of the best ways to ensure a more productive and
better-paid workforce in the long run would be to enact school choice legislation
to provide the incentive for schools to improve.
Cut the capital gains tax. Cutting the capital gains tax would reduce investment
disincentives, increase wages by raising productivity, and increase small business
formation and associated job opportunities.
Limit benefits to decrease the incentive to remain on welfare. The com-
bined state and federal efforts to reduce welfare dependency are an important
component of the minimum wage debate. Welfare was never supposed to be
more attractive 7 than an entry-level job; nor was it to be a permanent alternative to
employment.
PROPOSALS FROM THE ADMINISTRATION AND CONGRESS
A number of bills to raise the minimum wage have been introduced in both houses of
Congress this year. They range from the "modest" 90 cents per hour increase over two
years proposed by the President to a one-time increase of $2.25 (to $6.50) proposed by
Representative Martin Sabo (D-MN). The Joint Economic Committee held a hearing on
the President's proposal in February. Further hearings on raising the minimum wage are
likely, as are hearings on alternatives for promoting job creation and increasing wages.
5 Randall W. Eberts and Mark E. Schweitzer. "Regional Wage Convergence and Divergence: Adjusting Wages for
Cost-of-Living Differences," Economic Review (FRB-Cleveland). Vol. 30. No. 2 (July 1994), pp. 26-37.
6 William G. Laffer III. "How Regulation is Destroying American Jobs," Heritage Foundation Backgrounder No. 926,
February 1993.
7 Robert Rector. "Combatting Family Disintegration. Crime, and Dependence: Welfare Reform and Beyond." Heritage
Foundation Backgrounder No. 983. updated March 17, 1995.
3
The President's Bill. The Administration's proposal was introduced in both the House
and Senate on February 14, 1995. The White House legislation. the Working Wage
Increase Act of 1995, was introduced in the Senate (S. 413) by Senator Thomas
Daschle (D-SD) and in the House (H.R. 940) by Representative Richard Gephardt
(D-MO). This legislation would raise the minimum wage to $4.70 on July 3, 1995, and
to $5.15 on July 3, 1996.
The Kennedy Bill. Another bill to raise the federal minimum wage and amend the Fair
Labor Standards Act of 1938 (FLSA) has been introduced in the Senate by Senator
Edward Kennedy (D-MA). The American Family Fair Minimum Wage Act of 1995
(S. 203) would increase the minimum wage from $4.25 to $5.75 in 50 cent increments
over three years, beginning September 1, 1995. S. 203 also would establish another
Commission on the Minimum Wage. 8 The Commission would conduct a study and
make recommendations to Congress on how to restore the minimum wage to the level
relative to the average hourly wage that existed during the period 1950 to 1980. The
legislation also requires the Commission to suggest the means by which to maintain
such a level with minimum disruption to the general economy through regular and peri-
odic adjustments (indexing).
In the House, a number of bills have been introduced.
The Sanders Bill. The Livable Wage Act of 1995 (H.R. 363). introduced by Repre-
sentative Bernard Sanders (I-VT), would increase the minimum wage to $5.50 in one
step on December 30, 1995, and index it to the Consumer Price Index.
The Sabo Bills. The Minimum Wage Amendments of 1995 (H.R. 619), introduced by
Representative Sabo, would increase the minimum wage to $6.50 in one step, effective
90 days after enactment. The Income Equity Act of 1995 (H.R. 620). also introduced
by Representative Sabo, provides for the same increase but also would amend Section
162 of the Internal Revenue Code of 1986 to limit the deduction for payments of
"excessive" compensation. Excessive compensation is defined in H.R. 620 as 25 times
what the lowest paid employee earns. 9
The Wynn Bill. The Fair Labor Standards Amendments of 1995 (H.R. 764), introduced
by Representative Albert Wynn (D-MD), would increase the minimum wage to $5.25
in 25 cent increments over four years, beginning six months after enactment.
The Gutierrez Bill. The No Maximum Wage for Congress Without a New Minimum
Wage for America Act of 1995 (H.R. 876), introduced by Representative Luis Gutier-
rez (D-IL), would reduce the pay rate for Members of Congress by 2.6 percent per year
until the minimum wage is raised to $5.15.
8 The 1977 amendments to the Fair Labor Standards Act of 1938 established the first Minimum Wage Commission. The
Commission completed its three-year study of the minimum wage in 1981. concluding that increases in the minimum wage
have a negative effect on employment.
9 The calculation also would include part-year employees (computed on an annualized basis).
4
WHY PROPONENTS WANT TO INCREASE THE MINIMUM WAGE.
Congress enacted the Fair Labor Standards Act of 1938 (FLSA), which established the
minimum wage, in part to prevent a repetition of the deflationary wage spiral that
occurred in the 1930s as workers bid down wages in an effort to find gainful employ-
10
ment.
The trauma of the Great Depression strengthened the view that government had
a responsibility to develop policies and programs to stabilize the economy by maintain-
ing income flows. The minimum wage was to serve as one part of the New Deal safety
net. However, since 1940, unemployment insurance, monetary policy, and state
minimum wage laws have undercut the justification for a federal minimum wage.
Today's proponents of a higher minimum wage generally center their arguments on
the need to set "a decent living wage" and address income inequality. 11 For example, the
Administration argues for an increase in the minimum wage to:
Maintain the historic value of work;
Help adult workers, most of whom rely on their jobs to support their fami-
lies;
Ensure that there is a strong incentive to choose work over welfare; and
Help fight poverty by combining a higher minimum wage with the Earned
Income Tax Credit.
The Administration maintains that increasing the minimum wage by a moderate
amount will not cost jobs. It also points out that the last minimum wage increase passed
12
with strong bipartisan support.
Other proponents point out that some 80 percent of Americans agree that a higher mini-
mum wage increase is warranted. 13 They also observe that the real value of the minimum
wage is 27 percent lower than it was in 1979. while corporate profits have risen by 155
percent and executive pay by 514 percent. 14 Some proponents further claim that the free
market does not work for women and ethnic minorities as 15 it does for men and that
government has a role in establishing a floor for wages.
10 One of Congress's stated intentions in enacting the FLSA and minimum wage was to eliminate the spreading and
perpetuation of detrimental labor conditions among the workers of several states.
11 Another reason why Congress enacted the FLSA and minimum wage was to correct, and as rapidly as practical to
eliminate, labor conditions detrimental to the maintenance of the minimum standard of living necessary for health.
efficiency, and the general well-being of workers.
12 See U.S. Department of Labor. Minimum Wage Press Release Package. February 1995.
13 From statement of Representative Major Owens (D-NY) before the Joint Economic Committee. February 22. 1995.
14 From statement of Senator Edward Kennedy (D-MA) before the Joint Economic Committee. February 22, 1995.
15 From statement of Audrey Haynes, Executive Director, Business and Professional Women/USA, before the Joint
Economic Committee, February 22. 1995.
5
RECENT STUDIES ON THE MINIMUM WAGE
Raising the minimum wage, like mandating universal health insurance coverage. does
not come without cost. The question is: Where are the costs incurred. and do they out-
weigh the benefits?
Recent academic economic research on the employment effects of raising the mini-
mum wage has produced seemingly confusing results. Proponents of a higher minimum
wage point to a few recent studies that suggest moderate increases may not have an
16
overall negative employment effect and might very well increase total employment.
Meanwhile, opponents cite the preponderance of previous academic studies that con-
clude there is a negative employment effect and observe that other recent studies
continue to find that raising the minimum wage results in lost jobs. 17 The best conclu-
sion that a layman or policymaker can draw is that although further research is needed,
the evidence continues to support the conventional view that increasing the minimum
wage means employment losses for low-skilled workers. More recently. one of the key
studies used by the Clinton Administration to bolster its claim that a higher 18 minimum
wage does not cause job losses has been found to contain serious flaws.
Even though a few recent studies disagree on the employment effects of increasing the
minimum wage, most economists do agree on several key points.
Raising the minimum wage will reduce entry-level job opportunities, particu-
larly for low-skilled Americans. Some of the entry-level jobs that would be
created in a growing economy will not be created.
There may be a labor supply effect that results in a measured increase in total
employment, but labor demand certainly will be altered. Americans may ap-
ply for minimum wage jobs in greater numbers, but employers will hire only
the most skilled among them.
Raising the minimum 19 wage may reduce poverty slightly for workers who
keep
their
jobs,
but it will do nothing for the vast majority of poor who do
not work.
16 David Card and Alan Krueger, Myth and Measurement: The New Economics of the Minimum Wage, Princeton University
Press, forthcoming: Allison Wellington. "Effects of the Minimum Wage on the Employment Status of Youths: An
Update," Journal of Human Resources, Winter 1991: Richard Freeman, "Minimum Wages-Again!," paper presented at
the Conference on Economic Analysis of Base Salaries and Effects of Minimum Wages, September 1993; and others.
17 Card and Krueger, Myth and Measurement: The New Economics of the Minimum Wage, Chapter 6, Evaluation of
Time-Series Evidence; David Neumark and William Wascher, "Employment Effects of Minimum and Subminimum
Wages: Panel Data on State Minimum Wage Laws." Industrial and Labor Relations Review, Vol. XLVI. No. 1 (October
1992): Finis Welch. Donald Decre. and Kevin Murphy. "Employment and the 1990/91 Minimum Wage Hike." Annual
Proceeding of the American Economic Review, forthcoming: Janet Currie and Bruce Fallick, "A Note on the New
Minimum Wage Research." NBER Working Paper No. 4348. April 1993; and others.
18 The telephone survey data used in the study cited most often by the Administration have been shown to contain
catastrophic flaws. Redoing the analysis using accurate payroll records completely reverses the results of the
Administration-cited study and finds a negative effect on employment when the minimum wage is raised. See David
Neumark and William Wascher, "The Effects of New Jersey's Minimum Wage Increase on Fast Food Employment."
unpublished study presented to the Joint Economic Committee, March 1995.
6
The Overlap Between Poverty And Minimum Wage Workers
Minimum Wage
Workers: 2.7 Million
Total Population of Poor
- 50% 21 yrs. or less
16 Years and Older: 23.5 Million
- 73% Single
- 45% Children
526,000 Minimum Wage
Workers Living in Poverty
- 43% Family Householders
Source: Heritage Foundation calculations from the Census Bureau's March 1993 Annual Demographic File
Almost 40 percent of the sole breadwinners earning the minimum wage are volun-
tary part-time workers, while only 18.8 percent of all minimum wage workers are
33
family heads or spouses working full-time.
ALTERNATIVES TO RAISING THE MINIMUM WAGE
Contrary to assertions by practitioners of class warfare, employers do not-indeed can-
not-unfairly keep down the wages of their lower-skilled and entry-level employees.
Employers, as well as employees, operate within a competitive labor market in which
wage rates broadly reflect the productivity of workers-less the costs of government-im-
posed mandates and taxes associated with employing a worker. Raising prices and de-
stroying entry-level job opportunities is not the sensible way to increase real wages. In-
stead of raising the minimum wage, Congress and the Administration should focus on
policies that will increase wages and job opportunities for Americans by improving labor
productivity and reducing the cost of employing workers. Specifically:
32 Heritage Foundation tabulations from the March 1994 Current Population Survey.
33 Heritage Foundation tabulations.
11
States Vulnerable to Employment Losses by
Increasing the Minimum Wage
Most Vulnerable
Vulnerable
Name 6 method a the não of the name's NETR novely up and MIS - new
Least Vulnerable
source Brea of Labor sureen
To the extent that government continues to set minimum wages, responsi-
bility for setting minimum wage levels and enforcing the other provisions
of the Fair Labor Standards Act (FLSA) should be turned over to the states.
Minimum wage laws presume that politicians are morally justified in destroying
some people's jobs in order to inflate other people's wages. The current minimum
wage effectively prohibits people from working unless their labor is worth at least
$4.25 an hour. On this basis alone, the minimum wage should be abolished. How-
ever, if there is a minimum wage, it should at least reflect the real labor cost and
market differences in different regions of the country.
There are significant differences in the cost of living and general wage levels be-
tween states and even within states. To date, nine states and the District of Columbia
have recognized this fact and have enacted minimum wages that are higher than the
federal minimum, while ten states have a lower minimum wage for small employers
and employees not covered by the FLSA. Significantly, the federal government
officially recognizes regional differences in costs and general wage rates when pay-
ing its own employees. 34
Recent studies have found significant variations in regional wage distributions and
cost of living levels and trends. 35 Raising the federal minimum wage thus would
have different negative impacts on individual state employment opportunities and
price levels. In areas where the labor market is tight and implicit regional "wage
floors" effectively have raised the minimum wage already, there would be little or
34 Federal locality pay differentials have been in place since 1993.
35 Eberts and Schweitzer. "Regional Wage Convergence and Divergence: Adjusting Wages for Cost-of-Living Differences."
36 Wage levels below which employers find it very difficult to attract qualified entry-level workers.
12
JUN-07-1995 09:27
no effect. However, in other areas of the country, there would be significant negative
effects.
Almost 44 percent of minimum wage workers live in the South. while only 10.4
percent live in the Northeast. Over 40 percent of the workers who would be affected
directly by the Administration's proposal live in the South.
Abolishing the federal minimum wage would allow governors and state legislators
to determine the minimums for their own states if they believe such action to be help-
ful. 37 This would allow proponents to set minimum wages according to local labor
market conditions and living costs while taking into account how business and em-
ployment conditions would be affected. Having a national minimum wage makes as
much sense as requiring the federal government to pay the same wage for entry-level
jobs New York City and Fargo, North Dakota.
Enact significant regulatory reform.
The explosion of new regulations since 1988 has raised the cost of labor and capi-
tal, created barriers to the formation of new companies and jobs, and raised the cost
of employing Americans. This higher cost of employment in turn means that, in a
competitive economy, the return to labor in the form of wages is reduced. Some
government regulation is desirable and necessary, but the plethora of new regulations
has placed a significant burden on businesses' ability to create jobs for unskilled
workers. This burden needs to be rolled back,. not only to allow wages to rise, but
also to decrease the cost of hiring workers.
Although fixing the precise cost of federal regulations is difficult, estimates
indicate the cost of complying was at least $500 billion in 1993.³⁸
There are at least three million fewer jobs in the American economy today
because of the growth of regulation over the last 20 years. 39
A 1990 study estimated that environmental regulations alone had caused a na-
tional employment level that was 1.2 percent less in 1990 than it otherwise would
40
have been.
Promote education reforms that will raise the skills and productivity of
entry-level workers.
Employers cannot pay wages that exceed the revenue generated by a worker-at
least not if they intend to stay in business. Thus, one way to raise wages without job
losses and other costs is to raise the skills and productivity of workers, especially
entry-level workers, through radical reform of the nation's schools.
37 Sixteen states and the District of Columbia have minimum wages that are linked to the level in the federal Fair Labor
Standards Act. If the federal minimum wage was abolished, they would have to set their own minimum wage levels.
38 See Issues '94, The Candidate's Briefing Book (Washington. D.C.: The Heritage Foundation, 1994). Chapter 4, Regulation.
39 Laffer, "How Regulation Is Destroying American Jobs."
40 Michael Hazilla and Raymond J. Kopp, "Social Cost of Environmental Quality Regulations: A General Equilibrium
Analysis." Journal of Political Economy. Vol. 98, No. 4 (1990). P. 867.
13
Despite record spending of taxpayers' dollars, America's public schools continue
to turn out far too many high school graduates who lack not only basic skills. but also
the communication skills and work attitudes that employers need. This depresses the
wages these workers can earn. It is not unreasonable for employers to expect that
after 12 years of schooling individuals should have a reasonable competence in basic
core skills (verbal communication, reading, writing, arithmetic, and basic sciences).
Public schools routinely fail to prepare people for work, and then government mini-
mum wage laws prohibit them from working.
A strong core curriculum should be taught in all high schools, and real testing
should be instituted to indicate to parents whether or not their children's schools are
achieving acceptable standards. School choice legislation is needed to give schools
the financial incentive to respond to demands by parents that they meet these stand-
ards.
Reduce the Capital Gains Tax.
The United States taxes corporate income twice: first at the corporate level, then at
the personal level. Recognizing this, many other industrial nations have eliminated or
reduced the taxation of these gains. The capital gains tax affects wages because it
reduces capital spending, technological innovation, and new ventures. This hurts
labor productivity and wages in the long run.
Although reducing capital gains taxes is portrayed by the practitioners of class war-
fare as benefiting only the rich, the benefits flow to all workers. Well over half of all
taxpayers with capital gains in 1992 had adjusted gross incomes of less than $50,000.
Over 73 percent had incomes of less than $75,000.⁴¹
Often overlooked benefits include:
On average, wage earners receive $12 after taxes for every $1 of after-tax in-
come received by investors. More than 90 percent of the benefits of new
investment would flow to wage earners, not to owners of capital.
Past reductions in the capital gains tax rate (1978 and 1981) stimulated the
start-up of new businesses and the expansion of job opportunities.
A lower capital gains tax would raise the expected rate of return on investment
in the U.S. and provide an incentive for both American and foreign firms to put
their capital to work here with American workers.
Enact Significant Welfare Reform.
An important component of the minimum wage debate is the issue of reducing
welfare dependency. Proponents of a higher minimum wage often argue that a higher
minimum wage is needed to make work more attractive by improving the monetary
incentive to choose work over welfare. They go on to argue that, to permit people to
41 John C. Goodman, National Center for Policy Analysis, "Capital Gains Tax Reform and Investment in Small Business."
testimony before the Committee on Small Business, U.S. House of Representatives. January 26,1995.
14
choose work over welfare, employers should be required to pay a "living wage" for
even their lowest-skilled entry-level job opportunities.
The problem with this line of reasoning is that it ignores basic economics-wages
for entry-level jobs reflect the skills and productivity of entry-level workers. Al-
though raising the minimum wage may narrow the incentive gap for the welfare
beneficiary in choosing work over welfare, it also reduces the willingness of employ-
ers to offer low-skill positions.
Rather than the phony "solution" of raising the minimum wage, a better approach
would be to decrease the incentive to remain on welfare by limiting the level and
duration of benefits. Welfare benefits are much higher than Americans generally as-
sume. In 1992, welfare
benefits and services
amounted to $11,470
The Minimum Wage When Combined With
for every "poor" house-
The EITC Nearly Lifts a Family of 3 Out of Poverty
hold.
42
While not every
130.0%
poor household re-
ceived that level of non-
120.0%
Minimum Wage EITC
cash aid, welfare bribes
Food Stamps
110.0%
many individuals to
stay out of the labor
Poverty Level
force.
90.0%
Minemum Wage
EITC
Compared with these
generous benefits, the
80.0%
Minimum Wage
income from full-time
70.0%
work at the minimum
wage looks unattractive.
75
80
05
90
Nevertheless, the cur-
Source Hereing Foundston extrates
rent minimum wage
when combined with the 1992 expansion of the EITC nearly lifts a family of three
out of poverty. If the value of food stamps is included, the income of a family of
three rises above the poverty level. Moreover, it is incorrect to portray entry-level
minimum wage jobs as lifetime "dead-end jobs." They should be recognized as op-
portunities for most people to establish a track record of work and a springboard to
better paying jobs. More than 60 percent of all workers can point to a minimum wage
job as their first job experience. 43 Some 40 percent of workers starting a minimum
wage job will receive their first raise within 4 months, and 63 44 percent will be earning
20 percent more than the minimum wage within 12 months.
42 Robert Rector. "How The Poor Really Live: Lessons For Welfare Reform." Heritage Foundation Backgrounder No. 875,
January 31. 1992.
43 Card and Krueger, Myth and Measurement: The New Economics of the Minimum Wage.
44 Ralph E. Smith and Bruce Vavrichek, "The Wage Mobility of Minimum Wage Workers." Industrial Relations and Labor
Review, Vol. XLVI, No. 1 (October 1992), pp. 82-88.
15
The wise reform is to encourage welfare recipients to accept these minimum wage
jobs by limiting the availability of more generous welfare payments. Raising the
minimum wage, on the other hand, would be counterproductive (although, as noted
earlier, reducing other costs of living could allow entry-level wages to rise without
detrimental effects). A recent study has found that when other characteristics of wel-
fare mothers are held constant, the level of the minimum wage and increases in the
minimum wage may reduce the rate of exit from the AFDC program. 45
CONCLUSION
Raising the minimum wage appeals to the American sense of decency and compas-
sion. But it would be a mistake. Raising the minimum wage would impose significant
costs, primarily on those unskilled Americans a minimum wage hike is suppose to help.
It also would raise prices for both the poor and non-poor. It would destroy entry-level job
opportunities that otherwise would have been created: and although it could raise some
workers' family incomes above poverty, it would do so at the cost of denying jobs to
many more.
To raise the standard of living of minimum wage workers without imposing these
costs, Congress should focus on policies that raise worker productivity while reducing
government-imposed labor costs on employers.
Mark Wilson
Rebecca Lukens Fellow in Labor Policy
45 Peter D. Brandon, Jobs Taken by Mothers Moving from Welfare to Work and the Effects of Minimum Wages on This
Transition. Employment Policies Institute, January 1995. The study also suggests that the birth of additional children
during AFDC participation also influences AFDC exit rates.
16
TOTAL P. 17
JOINT ECONOMIC COMMITTEE
House Republican Members
CONGRESS OF THE UNITED STATES
Jim Sexton, NJ
Vice-Chairman
Thomas Ewing. IL
Jack Quinn, NY
ECONOMIC UPDATE
J.Saxton INSIDE MAIL
Donald Manzullo, IL
Marshall Senford, SC
Williams Thornberry. TX
1537 Longworth House Office Building, Washington, DC 20815 Phone: 202-226-3234
Monday, March 20, 1995
NOUVEAU REICH ECONOMIC THEORIES
specious, adj., plausible, apparently sound or
convincing, but in reality sophistical or
fallacious
Oxford English Dictionary
"But no sophism is too gross to delude minds distempered by party spirit."
Lord Macaulay, 1849
The view of economists concerning the mínimum wage is virtually unanimous:
The laws of supply and demand hold for the labor market just as for other markets.
If government artificially raises the minimum wage (the price of labor),
employers will demand fewer low-skilled employees. At the same time, the supply of
labor (job seekers) increases in
response to a higher minimum wage.
The net result is more workers seeking
Unanimous View of Economists
fewer jobs. Unemployment rises.
Minimum Wage increases, Unemployment Rises
This conventional result is depicted
graphically in Figure 1.
Minimum Wage
Economists also agree that a
higher minimum wage most adversely
affects the very workers it is designed
to help low-income workers with
the fewest skills. Raising the
minimum wage destroys jobs among
the young and the poor in particular.
Secretary of Labor Robert Reich
Unemployment
has presented some rather unorthodox
economic ideas to support an increase
Figure 1
in the minimum wage. His initial, unqualified remarks were that "raising the
minimum wage increases job growth." In other words, minimum wage increases create
more jobs - as the minimum wage rises, unemployment falls. This eccentric theory is
Page 2
JEC Economic Update "Nouvesu Reich Economic Theories"
Monday, March 20, 1995
depicted in Figure 2. Even the most untutored in the laws of economics must realize
the absurdity of this theory.
Recently, Secretary Reich has
downgraded his specious claim from
The Reich Curve
the status of a general law of
Minimum Wage increases, Unemployment Falls
economics to that of a special case
Minimum Wage
which holds some of the time in
certain special circumstances. Reich's
reformulated special law of demand
- the Nouveau Reich Law of Demand
(NRLD) - can be stated as follows:
"Small increases in prices raise
demand for a commodity while large
increases in prices lower demand."
Applied to the case of the minimum
wage, the NRLD would predict that
Unemployment
small increases in the minimum wage
Figure 2
lower unemployment while large
increases in the minimum wage raise
unemployment. See Figure 3.
As a corollary to his new law,
The "Nouveau" Reich Curve
Mr. Reich contends that somewhere
Economic Laws Work Part of the Time
between "small" and "large"
increases there exist a range of so-
called "moderate" minimum wage
Minimum Wage
increases that will have no effect on
the demand for low-wage labor. He
characterizes a 90-cent increase as
"moderate" and thereby asserts that
the President's proposal to increase
,
the minimum wage to $5.25 would
have no effect on employment.
$6.18
$4.95
There are three fundamental
problems with the NRLD and its
Unemployment
corollary: 1) They have no
Figure 3
foundation in microeconomic theory;
2) they are contradicted by the overwhelming weight of the empirical evidence; and 3)
they do not comport with common sense.
Page 3
JT:C Economic Update "Nouveau Reich Economic Theories"
Monday. March 20. 1995
The Labor Secretary has been unable to articulate with any rigor the distinctive
real-world conditions under which these new, special laws are supposedly valid. For
example, it is difficult even to conceive how at the level of the firm an employer would
decide to employ more workers because they have suddenly become more expensive.
Moreover, Secretary Reich has not presented credible empirical evidence that the 21
percent increase in the minimum wage proposed by the President, a so-called
"moderate" increase, would have no effect on unemployment.
When the Labor Secretary's logic is dissected, his fallacious reasoning is
revealed. First, he concedes that if the minimum wage were raised to ten dollars an
hour, the conventional law of demand would apply, and employment would suffer.
Second, however, he asserts that a one-cent increase would have no discernible effects
on employment. The "proof" of this assertion rests on the trivial fact that if small
enough changes are made in an economic variable, its consequences may go undetected
by available measuring techniques.
In other words, Secretary Reich would have us believe that if the disemployment
effects due to "small" changes in the minimum wage cannot be measured, they do not
exist for so-called "moderate" increases, which in this case he defines to be 90-times-
small. Unfortunately for policy makers, Secretary Reich has not found a painless way
to raise standards of living for American workers. He mistakes measurement error for
theoretical truth. His conclusion follows from the imprecision of the measuring device
rather than the veracity of his theory.
His theory is based on nothing more than the prosaic observation that for small
enough changes in prices, economists' measuring instruments cannot readily detect
changes in demand. It does not follow, however, that such changes in demand do not
actually occur.
Economics is not a natural science, and the statistical techniques employed by
economists are far from precision Instruments. The economist cannot perform "natural"
experiments like the chemist. He observes behavior through a fog. Though it is
impossible to observe behavioral changes due to infinitesimally small changes in causal
factors, this measurement problem doesnot imply that the law is invalid. Rather, it
implies that our measurement tools are inadequate. The weight of the evidence is clear.
The law of demand applies to labor markets just as it does to all other markets.
Clearly, economists will be able to observe the impact of a 21 percent increase in
the current minimum wage. It will create unemployment for low-skilled workers, the
poor, and the young. In 1981, the Congressionally-mandated. Minimum Wage Study
Commission (MWSC) concluded that a ten percent increase in the minimum wage
Page 4
JEC Economic Update "Nouvcan Reich Economic Theories"
Monday, March 20. 1995
reduces teenage employment by one to three percent. The President proposes raising
the minimum wage by a little more than 21 percent. Based upon the findings of the
Commission, the Clinton minimum wage increase can be expected to destroy between
130,000 and 400,000 jobs.
Furthermore, the findings of the MWSC demonstrate that Dr. Reich's apparently
convincing example of a one-cent increase in the minimum wage is itself empirically
unfounded. Even a one-cent increase could be expected to produce some minimal job
loss. Based on the MWSC methodology, at least 26,000 jobs would be destroyed by
such an increase, even though such a relatively small effect may well go undetected by
economists' conventional measuring techniques.
The old fashioned truth is that compassionate politicians and well-meaning
government programs like the minimum wage cannot repeal the laws of supply and
demand any more than they can repeal the law of gravity. In fact, House Majority
Leader and Chief Economist Dick Armey says without hesitation that it is the
Minimum Wage Law that ought to be repealed!
Reed Garfield
Senior Economist
LET ERS TO THE EDITOR
Raise the Minimum Wage, Lose Jobs
House Majority Leader Richard Ar-
minimum wage done by two Princeton
food employment "compelling." How-
mey likes to say, "Conservatives say,
economists, David Card and Alan
ever. we now know that their research
'T'll believe it when I see it,' while
Krueger. Mr. Krueger is now Labor
was based upon faulty data.
liberals say, 'I'll see it when 1 believe
Secretary Robert Reich's chief econo-
Mr. Pearlstein wrote that Mr. Card
it.' " The Post's coverage of the mini-
mist at the Department of Labor, and
and Mr. Krueger "did something un-
mum wage issue makes his point.
the Clinton administration has rested
usual in their profession-they talked
On Jan. 11, The Post's Business
its case for a 21 percent increase in the
to businesses." However, they talked
section carried a "news story" by Ste-
minimum wage on Mr. Card's and Mr.
to the wrong people and asked the
ven Pearlstein that gave highly compli-
Krueger's research. Mr. Pearlstein la-
wrong questions. Because their paper
mentary treatment to research on the
beled their study of New Jersey fast-
was published in the American Eco-
nomic Review, the data are available to
other researchers.
Economists from the Employment
Policies Institute (EPI) went back to
the restaurants Mr. Card and Mr.
Krueger surveyed by phone and asked
a better question. EPI asked for payroll
data. Mr. Card and Mr. Krueger agree
WASHINGTON POST
that payroll data will provide the cor-
rect information.
Having collected the correct data.
the EPI contacted David Neumark of
APR 1 7 1995
Michigan State University, whom Mr.
Pearlstein cites in the article. Mr. Neu-
mark and his coauthor, William Wasch-
er of the Federal Reserve, analyzed
the data using the same methodology
as Mr. Card and Mr. Krueger. They
found that using the correct data. we
cannot argue that higher minimum
wages will raise employment. Further.
they reconfirmed what the Commission
on Minimum Wages found in 1981.
Raising the minimum wage 10 percent
lowers low-skilled employment about 2
percent.
We held a press conference on
March 29 to present these findings. On
April 5. the Joint Economic Committee
held a hearing to consider EPI's and
Mr. Neumark's findings and to hear
from other economists on the difficul-
ties with Mr. Card's and Mr. Krueger
study. Therefore, on the day after the
hearing, I was puzzled that The Post's
"Findings" column did not carry an
account of the revelations about the
Card and Krueger studies nor did The
Post carry a news story reporting on
the previous day's hearing.
With regard to the minimum wage.
we have come full circle to what econo-
mists have always known: A higher
minimum wage destroys jobs. This
country, faced with ever increasing
competition, can ill-afford to limit job
opportunities.
JIM SAXTON
U.S. Representative I
Washington
WASHINGTON TIMES
APR 06 1995
DONALD LAMBRO
recent analysis of the method-
A
ology and statistics used by
two Princeton economists
Dubious numbers
to defend President Clin-
ton's proposed minimum-wage
increase shows their study was
based on badly flawed data.
in the wage debate
The study on the effects of New
Jersey's minimum-wage increase
in 1992 has been heavily promoted
ignored these studies and steadfast-
calling it a "very exhaustive.
by Labor Secretary Robert Reich,
ly promoted a higher minimum
detailed study" that showed no job
Democratic leaders and major
wage, despite rising teen-age job-
losses occur from raising the min-
newspapers across the country.
lessness in America's inner cities.
imum wage. House Minority
Now along comes an indepen-
Let's face it, neither of them spend
Leader Richard Gephardt declared
dent statistical analysis of their
a lot of time in places like the South
that the study showed "that a min-
study by the Employment Policies
Bronx or in East Boston where they
imum-wage increase creates jobs."
Institution Foundation, which
would see poor, uneducated and
But last week's startling EPI
shows that the professors asked
untrained minorities without work,
review of their report concluded
overly broad questions, took down
in part because they have been
that "there is one catastrophic flaw
incomplete and erroneous data and
priced out of the job market by the
in the New Jersey study - it is
reached wrong conclusions.
government's minimum wage.
based on ludicrously flawed data.
There is a mountain of evidence,
So along came Princeton econo-
Among EPI's stunning findings:
based on many decades of govern-
mists David Card and Alan
The employment numbers in
ment and private studies, which
Krueger who, among other states,
the New Jersey data set used for the
shows that raising the minimum
studied the effects of New Jersey's
study are wrong. EPI gathered the
wage results in serious job losses
1992 minimum-wage increases on
actual payroll data from many of
among entry-level employment as
the state's fast-food business.
the fast-food outlets surveyed by
businesses find ways to cut their pay-
Incredibly, their study concluded
Messrs. Card and Krueger, says
rolls to reduce their overhead costs.
that minimum-wage jobs rose as a
EPI's Executive Director Richard
But liberals like Mr. Reich, who is
result.
Berman. "Surprisingly, there are
not an economist, and Massachu-
An unquestioning Mr. Reich
few instances where the payroll
setts Sen. Edward Kennedy have
leaped to embrace their findings,
data match the numbers reported
more
Lambro
by Card and Krueger."
payroll statistics are used. "one
claims that one-third of minimum-
o"In one-third of the observa-
finds job losses in New Jersey
wage workers are their families'
tions for which payroll data could
resulting from the minimum-wage
sole support, most minimum-
be compared, the Card-Krueger
hike, rather than the job gains
wagers are not poor. According to
data set fails to correctly report
reported" in the Card and Krueger
1992 U.S. Census data, only 198,500
even the direction of employment
study.
of the more than 4.7 million mini-
change- establishments that actu-
It is true that because of season-
mum-wage workers were adult
ally experienced job gains were
al factors overall employment did
householders.
reported as having job losses and
climb in New Jersey as well as in
More important. every study
vice versa!"
neighboring Pennsylvania, where
shows that raising employer costs
The chief reason for these
there was no minimum-wage
leads to job losses. "Teen-age unem-
errors: Messrs. Card and Krueger's
increase. But EPI's analysis points
ployment rose sharply when the
study "asked only one question
out that "employment grew 5 per-
minimum wage was increased in
about minimum-wage employment
cent less in New Jersey than in
1990 and 1991," says a recent study
in their surveys of fast-food restau-
Pennsylvania."
by the National Center for Policy
rants, and that question could not
Analysis.
have produced reliable data," says
T
hus, by using Mr. Card and
Meantime, EPI's explosive
Mr. Berman's report.
Mr. Krueger's own rationale
report, which is must reading for
That question was so broadly
that the only difference sepa-
every member of Congress. raises
worded that "responses were nec-
rating the two states' situations was
serious questions about Mr. Reich's
essarily built on managers' or assis-
the minimum wage, "one must con-
credibility and the people in his
tant managers' personal interpre-
clude the higher entry-level wage
department who are directing its
tations - - in effect, a rubber ruler
had a negative impact on employ-
economic numbers.
was used to measure employment."
ment in New Jersey," says the EPI
Notably, Princeton's Alan
Moreover, Mr. Card and Mr.
critique.
Krueger is now the Labor Depart-
Krueger only asked for the number
But the Card-Krueger study is
ment's chief economist.
of workers in each business estab-
only the latest of many efforts to
lishment, not how many hours each
promote raising the minimum wage
worked, a much more accurate eco-
with some very questionable sta-
Donald Lambro. chief political
nomic measurement.
tistics.
correspondent of The Washington
The EPI review found that when
For example: Despite Labor Sec-
Times. is a nationally syndicated
the actual instead of the erroneous
retary Reich's wildly exaggerated
columnist.
The Crippling Flaws in the New Jersey Fast Food Study
In September 1994, two Princeton economists published a study examining the fast food in-
dustry in New Jersey after the state raised its minimum wage in 1992. They concluded there
was no significant job loss. In fact, according to their analysis, "employment increased in New Jer-
sey relative to Pennsylvania" following the mandated wage hike.' These findings have rocked the
economics profession to its core. Advocates of a higher minimum wage have latched onto this "new
evidence" as a stunning refutation of conventional wisdom. The media has reported this unconven-
tional "man-bites-dog" story as fact.
But there is one catastrophic flaw in the New Jersey study - it is based on ludicrously
flawed data. Quite simply, the employment numbers in the data set used for the study are wrong.
As a result, policymakers, economists, and employers have been thoroughly misled in the national
minimum wage debate. Unfortunately, nobody bothered to examine the data - until now.
Why Is This Important?
The New Jersey research has been cited repeatedly by Clinton Administration officials who
are pushing for an increase in the federal minimum wage. Secretary of Labor Robert Reich has de-
scribed this as a "very exhaustive detailed study" which proves job loss is not a concern in this de-
bate. Senior Clinton economic advisor Laura D' Andrea Tyson says this study is one which uses
"the most sophisticated techniques available to economists" to find that a minimum wage increase
will have "no noticeable, discernable significant effect" on employment.² Congressional leaders
have joined the bandwagon: Minority Leader Richard Gephardt (D-MO) says "[R]ecent research -
including a study by noted economists David Card and Alan Krueger - shows that a minimum
wage increase creates jobs.' And former New Jersey Governor Jim Florio has announced Card and
Krueger "concluded that no job loss occurred as a result" of the minimum wage hike in New Jersey.4
One of the study's authors, Alan Krueger, is now chief economist at the U.S. Department
of Labor, wielding significant influence over national wage policy. He recently testified before Con-
gress that his study showed "employment fared better in New Jersey than it did in Pennsylvania" af-
ter the minimum wage rose in New Jersey. As evidence of the study's impact on the economics
profession, the report's other author, David Card, was recently nominated for the John Bates Clark
Award (the second-highest award in economics), partly because of his work on the New Jersey
study. The two authors have used their study as the cornerstone for a new book on the minimum
wage.⁵ And the study was published in a leading journal of the economics profession - The Ameri-
can Economic Review.
Glowing articles have been written about the fast-food research in numerous publications.
The Washington Post reports that this is "the most compelling study" among recent work on the
minimum wage. The New York Times says the New Jersey study has "blown gaping holes in the
consensus" on minimum wages. Reports on this study have surfaced in Los Angeles, Chicago, Bos-
ton, Detroit, San Diego, Minneapolis, and other major cities.
Without a doubt, the New Jersey study has had a dramatic effect on the national debate
over raising the minimum wage. But the information below proves conclusively that the employ-
ment analysis in the New Jersey study is nothing more than an academic exercise in statistical evalu-
ation of a badly flawed data set which bears little relation to reality. Clinton officials, Congressional
leaders, the media, and many economists have come to accept this "new view" of the minimum
wage. But the study is wrong, and the record must now stand corrected.
What's Wrong with the Data?
To collect data for the New Jersey study, the report's authors conducted a series of tele-
phone interviews with managers and assistant managers of fast food restaurants in New Jersey
(which raised its minimum wage in 1992) and adjacent eastern Pennsylvania (where the minimum
wage was unchanged). Card and Krueger surveyed establishments from four fast-food restaurant
chains — Burger King, Wendy's, Kentucky Fried Chicken, and Roy Rogers. The resulting data set
is available from the authors.
Card and Krueger report the number of employees in each restaurant for two "waves" of
surveys - one in early 1992 (before the minimum wage hike took effect in New Jersey), the other
in November 1992, several months after the minimum wage rose. Serious flaws in the data are obvi-
ous at first glance. Even a cursory review of the data reveals numerous major anomalies which defy
reasonable explanation.
For instance, Card and Krueger report that a Burger King outlet in New Jersey had about
six full-time workers in February, but by November, it had added 23 more full-time workers — a
radical shift in the operations of this restaurant. According to Card and Krueger, a Burger King in
Pennsylvania went from 50 full-time workers in February to 15 in November, and from 35 part-
time employees in February to just 18 in November - a truly radical shift. A Wendy's in Pennsyl-
vania had 30 full-time people on staff in February, but by November all full-timers had apparently
been terminated — zero were reported in the Card-Krueger data. Another Wendy's — this one in
New Jersey - had zero full-timers in February, but by November had hired 35 full-time workers
without any change in the number of part-timers on staff. (See table below.)
Anomalies in Card-Krueger Data
Restaurant / Zip Code "Block"
Number of Employees
FEBRUARY '92
NOVEMBER '92
Full/Part Time
Full/Part Time
WENDY'S in 072XX
0 / 30
35 / 30
BURGER KING in 080XX
6.5 / 20
30 / 25
KENTUCKY FRIED CHICKEN in 082XX
0 / 11
22/4
WENDY'S in 185XX
30 / 10
0 / 30
ROY ROGERS in 189XX
27 / 12
0 / 30
BURGER KING in 190XX
50 / 35
15 / 18
KENTUCKY FRIED CHICKEN in 075XX
0/7
14/0
KENTUCKY FRIED CHICKEN in 070XX
0 / 22
25 / 15
2
It is difficult to imagine any rational explanation for such incredible shifts, even after ac-
counting for seasonal sales differences. Yet these anomalies are found throughout the data. These
extreme shifts alone raise serious doubts about the New Jersey study.
From the start, it was clear that the measurements upon which this
study is based were erratic at best. But there is more.
The results are
The publicly-available Card-Krueger data set was "sanitized"
astounding. The
insofar as it provides only the first three digits of the zip code for the
Card-Krueger data
establishments surveyed in the study. (Economists often sanitize data
set consistently
to protect confidentiality.) Thus, any analysis of the data set must be
reports employ-
based on the regions defined by these zip code "blocks" - the regions
ment losses where
in which all zip codes begin with the same three digits. Using actual
none actually took
payroll records from fast-food establishments surveyed for the New
place and employ-
Jersey study, the Employment Policies Institute recreated portions of
ment gains far in
the Card-Krueger data set. To ensure that each Card-Krueger unit be-
excess of their true
ing compared to payroll records was accurately matched, EPI re-
values.
searchers collected data on every similar unit in the appropriate zip
code block. (While it is impossible to "match" employment records on
a unit-by-unit basis due to the sanitization of the Card-Krueger data
set, it is easy to compare restaurants' employment on a "group-by-
group" basis.)
After identifying franchised restaurants within the zip code "blocks" found in the Card-
Krueger data, EPI researchers requested payroll records for the two time periods studied in the New
Jersey report - February and November 1992. Surprisingly, in one region of New Jersey, this com-
parison revealed no clear matches between the Card-Krueger numbers for franchised Burger King
establishments and the actual payroll records for those restaurants. A similar random comparison of
Wendy's units in New Jersey yielded the same result.
For a number of reasons, the bulk of the EPI analysis then focused on west-central New Jer-
sey and east/central Pennsylvania. The economy in these areas is clearly linked by geography, sepa-
rated only by the Delaware River. Card and Krueger argue that the only distinguishing factor
between New Jersey and Pennsylvania employment in 1992 was the minimum wage. This should
be particularly true in the Central Jersey/East-Central Pennsylvania area, where comparisons can lit-
erally be made "right across the river." In addition, this region includes the area in and around
Princeton, N.J., where Card and Krueger worked when they conducted the New Jersey study. The
EPI analysis concentrated on Burger King units - which make up 40% of the Card-Krueger data
set - and Wendy's units.
The results are astounding. The Card-Krueger data set consistently reports employment
losses where none actually took place and employment gains far in excess of their true values. Al-
though the EPI analysis covered 25% of the franchised units in the Card-Krueger data set, there are
very few instances in which the Card-Krueger numbers even closely resemble the actual payroll re-
cords. In fact, with one-third of the observations, the Card-Krueger data set fails to identify the cor-
rect direction of employment change - whether it was a job loss or a job gain! Not only are the
Card-Krueger numbers wrong, they are often catastrophically wrong.
3
As Graphs 1 and 2 show, the employment changes in the Card-Krueger data set are spread
over a wide range, while the payroll data - reflecting the accurate employment numbers for the pe-
riod studied — is generally confined to a fairly narrow range. In the region of Pennsylvania defined
by zip code 190XX, Card and Krueger reported significant gains in employment for several units,
and a serious decline in jobs at another unit. In contrast, payroll records show modest increases in
employment throughout the region, generally due to standard seasonal sales variations. Likewise, in
the part of New Jersey defined by zip code 088XX, Card and Krueger reported a number of signifi-
cant increases in employment, none of which are close to the generally modest seasonal increases
found in payroll records.
1. Card-Krueger VS. Payroll Data: Penn.
Payroll Data
Card-Krueger
Zip 194XX
Survey
190XX
Zip 189XX Zip
-50%
0%
50%
100%
150%
Employment Losses
Employment Gains
Burger King Units
(See Graph 2 on next page.)
4
2. Card-Krueger VS. Payroll Data: N.J.
Zip 088XX
Payroll Data
086XX
Card-Krueger
Survey
Zip 085XX Zip
-50%
0%
50%
100%
150%
Employment Losses
Employment Gains
Burger King Units
In short, the Card-Krueger data set does not square with reality. Fully 15% of the entire
Card-Krueger data set (which included company-owned and franchised units) was examined during
this process - a sufficiently-large sample to discredit the entire set of employment numbers used
for the New Jersey study.
These conclusions have dramatic implications for the current debate over minimum
wages. The nation's leading proponent of a higher minimum wage - Labor Secretary Robert
Reich - can no longer rely on this study when addressing questions about job loss. In fact, he must
now go back and correct the record for the numerous times he has referenced this study as "evi-
dence" to support his position. The Labor Department's chief economist (one of the authors of the
New Jersey study) has testified before Congress that he believes this study is the best work avail-
able on the job loss issue; he must now correct the record. Minority Leader Richard Gephardt has
argued forcefully that, based on this work, there is no evidence of job loss after a minimum wage
hike. Based on the facts presented here, Mr. Gephardt and his allies must now correct the record.
Even President Clinton - who says "the weight of the evidence" suggests there is no job
loss - must change his position. The facts show that the New Jersey study - relied on so heavily
by the President's economic advisors - doesn't carry any "weight" when it comes to measuring
employment effects.
Finally, the media- which has been seriously misled by this study - must correct the record.
5
How Could This Happen?
The New Jersey study was doomed from the start. When the authors released the data, they
also released the survey questions used in the original data collection. Because most of the reports
on the New Jersey study focus on its treatment of job loss, some observers are surprised to learn
that only one of the 24 questions in the survey is even related to minimum wage employment. (The
others deal primarily with employee benefits and price levels for certain products.) Even more
shocking - - especially for a study originating in a respected institution such as Princeton Univer-
sity - is that it was impossible for this single question to generate reliable data!
Although the primary goal of the study was to measure the employment impact of a higher
minimum wage, Card and Krueger only asked the following question about entry-level employ-
ment: How many part-time and full-time employees are employed in your restaurant, excluding
managers and assistant managers? On the surface, this may seem to be a solid question, but when
placed in perspective, this question represents an exceptionally unsophisticated attempt at measur-
ing employment changes. Consider the following:
The survey never asked how many hours were being worked in the restaurant, only how
many employees were working. Yet hours worked is the most important measure of overall em-
ployment in a restaurant. In fact, it is the only accurate measure! Yet, the authors of the New Jer-
sey study completely ignored hours worked. The authors did convert their data into Full Time
Equivalents (FTEs), but because they never measured hours, this was a crude "conversion" at
best.
Because of high turnover in the fast-food industry, it is unlikely the surveyors spoke with the
same manager in November that they had interviewed in February. Why is this important? Be-
cause the question asked was so broad that respondents to the survey were forced to incorporate
their own interpretations in the answers.
For example, the survey asked how many part-time and full-time employees the restaurant em-
ployed. But the survey fails to define two key parameters:
What is the time frame for the question? Does it mean the number of employees
working on the current shift? The number working today? Working this week?
The total number on the payroll- including those who are on vacation or who
work only during school holidays? Without this crucial information, the manager in
one Burger King might give the number of employees currently on the clock, while
the manager in the Wendy's down the street might give the number she thinks she
remembers scheduling for the entire week. In effect, a rubber ruler was used to
measure employment, with each respondent allowed to interpret the inquiry differ-
ently.
How is part-time defined? Is it anything under 40 hours per week, as defined in
the Fair Labor Standards Act? Anything under 35 hours as the Bureau of Labor
Statistics defines it? Is full-time defined as 37.5 hours, as in some labor contracts?
6
Or is full-time defined as 30 hours per week, as in the 1993-94 Clinton health care
reform proposal? Without a definition of full- and part-time, managers responding
to the survey were allowed to use their own interpretation.
Given the authors' propensity to rely on managers' interpretations of the question, they would
have had to survey the same individual during both waves of their survey if they were to sal-
vage anything resembling reliable data from the exercise. Unfortunately, there is no indication
in the survey instrument that Card and Krueger made any attempt to interview the same source.
And the nature of the business dictates that different managers must have responded (differ-
ently) in many cases. Obtaining proper data through this question was impossible - any consis-
tent data could only be the result of random coincidence!
The survey was conducted via telephone conversations with managers and assistant managers.
Anyone familiar with operations in a fast-food restaurant knows that these managers were al-
most surely not sitting in a quiet back office with payroll records spread out in front of them.
More likely, they were in the front of the restaurant, watching employees, handling problems,
and trying to answer the surveyor's questions all at the same time. In some cases, it is conceiv-
able that these managers were interrupted from cooking burgers or frying chicken in order to
handle the phone call from a surveyor for this study!
Without a photographic memory for the intricate details of payroll records, these managers
couldn't possibly come up with accurate numbers off the top of their heads in such an environ-
ment. And in the case of assistant managers - who are almost always focused on front-line op-
erations rather than scheduling, hiring, etc. - the surveyors were speaking with individuals
who spend little (if any) time examining payroll records and "counting employees." Appar-
ently, the authors of the New Jersey study never even bothered to qualify the survey respon-
dents to determine if they were giving their answers based on
memory or on payroll records.
Clearly, the single inquiry Card and Krueger used to develop
...[1]t is no wonder
that the data used
information on minimum wage employment was inadequate. In order
to gain the proper information for this kind of analysis, the authors
in the New Jersey
should have asked detailed questions about hours worked - how
study contain
many hours worked by full-time workers, total hours worked in part-
Inexplicable
fluctuations and
time positions, total hours worked by managers on non-management
bear little
(e.g., front line) duties. And the questions should have included clear
resemblance to
definitions of full- and part-time work.
the reality spelled
out in actual
With the comedy of errors outlined above, it is no wonder that
the data used in the New Jersey study contain inexplicable fluctuations
payroll records.
and bear little resemblance to the reality spelled out in actual payroll re-
cords. These serious mistakes and omissions have resulted in a cata-
strophically-flawed study doomed to become a textbook example of how not to collect data. More
importantly, mistakes made when the study was designed more than three years ago will now force
leading policymakers and economists to retract or revise positions that had been based on the "mer-
its" of the New Jersey study.
7
What Does the Correct Data Say?
When the Card-Krueger methodology of comparing New Jersey and Pennsylvania employ-
ment patterns is carried out using the correct payroll data, one finds significant job loss in New Jer-
sey's fast food sector after the minimum wage hike. This result would be expected, given decades
of research proving that higher mandated wages lead to fewer entry-level positions.
It is well-known that fast food restaurants in this region staff up for the holiday season to-
wards the end of the year. These establishments experience a significant increase in sales as com-
pared to February, when the first inquiry "baseline" was developed for the New Jersey study. The
question - and the premise of the entire Card-Krueger analysis - is, did employment increase
less in New Jersey than it would have if the minimum wage had not changed? The unequivocal an-
swer: yes.
From February (a seasonal low point for employment) to November (a seasonal high
point), the payroll data shows that employment grew 5% more in Pennsylvania, where the mini-
mum wage did not change, than in New Jersey. Card and Krueger argue forcefully that the only dif-
ference between the New Jersey and Pennsylvania economies was the higher minimum wage in
New Jersey. Based on their own arguments, one must conclude that the higher minimum wage
caused this 5% gap between the two states.
3. Seasonal Employment Changes from Payroll Data
Pennsylvania
+20.5%
New Jersey
+15.6%
0%
5%
10%
15%
20%
25%
8
4. Staffing up for the Holidays
+ 3.4 workers
25
+ 2.6 workers
per restaurant
20.3
per restaurant
19.9
20
16.9
17.3
15
10
5
0
Pennsylvania
New Jersey
February
November
As Graph 4 shows, staffing up for the holidays resulted in 3.4 additional employees per
store in Pennsylvania but only 2.6 new workers per store in New Jersey - where the minimum
wage had increased.
Senior policymakers in the U.S. Department of Labor - including Labor Secretary Reich
and his chief economist, Alan Krueger - have previously concluded that the New Jersey study is
the best work on the minimum wage in large part because it compares employment in New Jersey
to a "control" state where the entry-level wage did not change. In fact, Card and Krueger make a
strong case for this methodology in their new book. But Card and Krueger, using erroneous data,
concluded that there was no job loss in New Jersey and that jobs declined in Pennsylvania (where
the minimum wage stayed the same). Using the correct data and the Card-Krueger methodology, it
is clear that employment declined in New Jersey compared to Pennsylvania.
Can These Findings Be Verified Independently?
The analysis outlined in this document has already been verified by independent econo-
mists. Michigan State University economist David Neumark and William Wascher, Senior Econo-
mist at the Board of Governors of the Federal Reserve System, have used data from payroll records
to re-evaluate the Card-Krueger study.
9
The Neumark-Wascher findings⁸ are compelling:
First, the data collected by CK [Card and Krueger] indicate employment vari-
ation with standard deviations four to eight times larger than is observed in the payroll
data, variation that, to us, seems implausibly large. Second, whereas CK's data imply
that the New Jersey minimum wage increase led to an employment increase in New Jer-
sey relative to the Pennsylvania control group, the payroll data imply that the mini-
mum wage increase led to a 4.8 percent decline in New Jersey relative to the
Pennsylvania control group.
the payroll data raise doubts regarding the quality of CK's data, and suggest,
contrary to CK's conclusion, that New Jersey's minimum wage increase had a nega-
tive effect on employment.
In addition to their analysis of the payroll data itself, Neumark and Wascher confirmed the
zip code "blocks" used in the analysis above are representative of the Card-Krueger data set, so the
conclusions can reasonably be applied to the entire Card-Krueger data set. And they found that us-
ing actual payroll data from only two of the four restaurant chains studied by Card and Krueger has
little, if any, statistical impact on the conclusions.
Setting the Record Straight
The Card-Krueger New Jersey study has clearly - and unfortunately - worked its
way into mainstream economic thought. However, as this document proves conclusively, the
New Jersey study can no longer be cited in the debate over minimum wage increases and job loss.
The statistical analysis in the New Jersey study is advanced and sophisticated, but the end result is
clear: garbage in, garbage out. In the end, the employment-related analysis in the New Jersey study
is little more than an academic exercise that carries no real-life implications. Clearly, the New Jer-
sey report provides no "evidence" that would warrant throwing out decades of research measuring
job loss after a mandated wage hike.
The record must be corrected. The minimum wage affects millions of entry-level employ-
ment opportunities and employees nationwide. It impacts labor costs across the country. Fortu-
nately, the critical errors in this study have now been identified. If not for these stunning
revelations, national policy on the minimum wage might have been set on the basis of worthless
conclusions drawn from the catastrophically-flawed New Jersey report.
For more information on the New Jersey report or the minimum wage issue in general,
please contact Carlos Bonilla or Thomas K. Dilworth of the Employment Policies Institute
at 202-347-5178.
10
Notes
1. Card, David and Krueger, Alan. "Minimum Wages and Employment: A Case Study of the
Fast-Food Industry in New Jersey and Pennsylvania." The American Economic Review, September
1994, p. 776.
2. Quotes in this paragraph from Labor Secretary Robert Reich and senior Clinton advisor
Laura D'Andrea Tyson are drawn from a February 3, 1995 White House press conference.
3. "Seeking Fairness," by Richard Gephardt, Washington Times, February 12, 1995.
4. "Is It Necessary to Raise the Minimum Wage?" by Jim Florio, Los Angeles Daily News,
January 29, 1995. This article also appeared in the Baltimore Evening Sun on January 26, 1995, and
the York Daily Record on January 25, 1995.
5. Card, David and Krueger, Alan. Myth & Measurement. Princeton University Press: Prince-
ton, NJ 1995
6. In many cases, the authors of the New Jersey study failed to survey every restaurant in a
given region. However, by obtaining payroll records for all franchised establishments and thereby
"closing" zip code blocks, the Employment Policies Institute's analysis guarantees coverage of all
units from those zip codes used in the New Jersey study.
7. In his January 24, 1995, State of the Union Address, President Clinton said, "...I've studied
the arguments and the evidence for and against a minimum wage increase. I believe the weight of
the evidence is that a modest increase does not cost jobs..."
8. Neumark's and Wascher's findings are summarized in a March 1995 paper entitled "The Ef-
fect of New Jersey's Minimum Wage Increase on Fast-Food Employment: A Re-Evaluation Using
Payroll Records." The paper is available from the authors. Copies are also available through the
Employment Policies Institute.
JOINT ECONOMIC COMMITTEE
House Republican Members
CONGRESS OF THE UNITED STATES
Jim Saxton. NJ
Vice-Chairman
Thomas Ewing, IL
Jack Quinn. NY
Donald Manzullo, IL
ANNOTATED TALKING POINTS
J.Saxton INSIDE MAIL
Marshall Sanford. !-
William Thornberry. TX
1537 Longworth House Office Building Washington, DC 20515 Phone: 202-226-3234
Wednesday, February 15, 1995
50 YEARS OF RESEARCH ON THE MINIMUM WAGE
Introduction
For many years it has been a matter of conventional wisdom among economists that
the minimum wage causes fewer jobs to exist than would be the case without it. This is simply
a matter of price theory, taught in every economics textbook, requiring no elaborate analysis to
justify. Were this not the case, there would be no logical reason why the minimum wage could
not be set at $10 or $400 per hour.
Historically, defenders of the minimum wage have not disputed the disemployment
effects of the minimum wage. Rather, they argued that there was a redistrubutive effect that left
the working poor better off. In other words, the higher incomes of those with jobs offset the
lower incomes of those without jobs, as a result of the minimum wage.'
Now, the Clinton Administration is advancing the novel economic theory that modest
increases in the minimum wage will have no impact whatsoever on employment. Some
Administration officials have even hinted that raising the minimum wage can raise employment.
This proposition is based entirely on the work of three economists: David Card and Alan
Krueger of Princeton, and Lawrence Katz of Harvard. Their studies of increases in the
minimum wage in California, Texas and New Jersey apparently found no loss of jobs among
fast food restaurants that were surveyed before and after the increase.
It is not yet clear how or why Card, Katz and Krueger got the results that they did. It is
clear, however, that their findings are directly contrary to virtually every empirical study ever
done on the minimum wage. These studies were exhaustively surveyed by the Minimum Wage
Study Commission, which concluded that a 10% increase in the minimum wage reduced
teenage employment by 1% to 3%.
The following survey of the academic research on the minimum wage is designed to
give nonspecialists a sense of just how isolated the Card, Krueger and Katz studies are. It will
also indicate that the minimum wage has wide-ranging negative effects that go beyond
unemployment. For example, higher minimum wages encourage employers to cut back on
training, thus depriving low wage workers of an important means of long-term advancement, in
return for a small increase in current income. For many workers this is a very bad trade-off,
but one for which the law provides no alternative.
I
See, for example, Levitan and Belous (1979).
2
See Card (1992b), Card and Krueger (1994), and Katz and Krueger (1992).
Page 2
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
Summary of Research on the Minimum Wage
The minimum wage reduces employment.
Currie, Janet, and Fallick, Bruce. 1993. A Note on the New Minimum Wage
Research. National Bureau of Economic Research Working Paper No.
4348 (April).
Gallasch, H.F., Jr. 1975. Minimum Wages and the Farm Labor Market. Southern
Economic Journal, vol. 41 (January): 480-491.
Gardner, Bruce. 1981. What Have Minimum Wages Done in Agriculture? In
Rottenberg (1981a): 210-232.
Peterson, John M. 1957. Employment Effects of Minimum Wages, 1938-50.
Journal of Political Economy, vol. 65 (October): 412-430.
Peterson, John M., and Stewart, Charles T., Jr. 1969. Employment Effects of
Minimum Wage Rates. Washington: American Enterprise Institute.
The minimum wage reduces employment more among teenagers than adults.
Adie, Douglas K. 1973. Teen-Age Unemployment and Real Federal Minimum
Wages. Journal of Political Economy, vol. 81 (March/April): 435-441.
Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1981a. Effects of the
Minimum Wage on Youth Employment and Unemployment. In Minimum
Wage Study Commission (1981), vol. 5, pp. 1-26.
Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1981b. Time-Series Evidence
of the Effect of the Minimum Wage on Teenage Employment and
Unemployment. In Minimum Wage Study Commission (1981), vol. 5, pp.
103-127.
Fleisher, Belton M. 1981. Minimum Wage Regulation in Retail Trade.
Washington: American Enterprise Institute.
Hammermesh, Daniel S. 1982. Minimum Wages and the Demand for Labor.
Economic Inquiry, vol. 20 (July): 365-380.
Page 3
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
Meyer, Robert H., and Wise, David A. 1981. Discontinuous Distributions and
Missing Persons: The Minimum Wage and Unemployed Youth. In
Minimum Wage Study Commission (1981), vol. 5, pp. 175-201.
Meyer, Robert H., and Wise, David A. 1983a. The Effects of the Minimum Wage
on the Employment and Earnings of Youth. Journal of Labor Economics,
vol. 1 (January): 66-100.
Minimum Wage Study Commission. 1981. Report, 7 vols. Washington: U.S.
Government Printing Office.
Neumark, David, and Wascher, William. 1992. Employment Effects of Minimum
and Subminimum Wages: Panel Data on State Minimum Wage Laws.
Industrial and Labor Relations Review, vol. 46 (October): 55-81.
Ragan, James F., Jr. 1977. Minimum Wages and the Youth Labor Market. Review
of Economics and Statistics, vol. 59 (May): 129-136.
Vandenbrink, Donna C. 1987. The Minimum Wage: No Minor Matter for Teens.
Economic Perspectives, Federal Reserve Bank of Chicago, vol. 11
(March/April): 19-28.
Welch, Finis. 1974. Minimum Wage Legislation in the United States. Economic
Inquiry, vol. 12 (September): 285-318.
Welch, Finis. 1978. Minimum Wages: Issues and Evidence. Washington: American
Enterprise Institute.
Welch, Finis, and Cunningham, James. 1978. Effects of Minimum Wages on the
Level and Age Composition of Youth Employment. Review of Economics
and Statistics, vol. 60 (February): 140-145.
The minimum wage reduces employment most among black teenage males.
Al-Salam, Nabeel; Quester, Aline; and Welch, Finis. 1981. Some Determinants of
the Level and Racial Composition of Teenage Employment. In Rottenberg
(1981a): 124-154.
Iden, George. 1980. The Labor Force Experience of Black Youth: A Review.
Monthly Labor Review, vol. 103 (August): 10-16.
Page 4
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
Mincer, Jacob. 1976. Unemployment Effects of Minimum Wages. Journal of
Political Economy, vol. 84 (August): S87-S104.
Moore, Thomas G. 1971. The Effect of Minimum Wages on Teenage
Unemployment Rates. Journal of Political Economy, vol. 79 (Ju-
ly/August): 897-902.
Ragan, James F., Jr. 1977. Minimum Wages and the Youth Labor Market. Review
of Economics and Statistics, vol. 59 (May): 129-136.
Williams, Walter. 1977a. Government Sanctioned Restraints that Reduce
Economic Opportunities for Minorities. Policy Review (Fall): 7-30.
Williams, Walter. 1977b. Youth and Minority Unemployment. Study prepared for
the Joint Economic Committee, U.S. Congress. Joint Committee Print,
95th Congress, 1st session. Washington: U.S. Government Printing Office.
The minimum wage helped South African whites at the expense of blacks.
Bauer, P.T. 1959. Regulated Wages in Under-developed Countries. In The Public
Stake in Union Power, ed. Philip D. Bradley. Charlottesville, VA:
University of Virginia Press, 324-349.
The minimum wage hurts blacks generally.
Behrman, Jere R.; Sickles, Robin C.; and Taubman, Paul. 1983. The Impact of
Minimum Wages on the Distributions of Earnings for Major Race-Sex
Groups: A Dynamic Analysis. American Economic Review, vol. 73
(September): 766-778.
Linneman, Peter. 1982. The Economic Impacts of Minimum Wage Laws: A New
Look at an Old Question. Journal of Political Economy, vol. 90 (June):
443-469.
The minimum wage hurts the unskilled.
Krumm, Ronald J. 1981. The Impact of the Minimum Wage on Regional Labor
Markets. Washington: American Enterprise Institute.
Page 5
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
The minimum wage hurts low wage workers.
Brozen, Yale. 1962. Minimum Wage Rates and Household Workers. Journal of
Law and Economics, vol. 5 (October): 103-109.
Cox, James C., and Oaxaca, Ronald L. 1982. The Political Economy of Minimum
Wage Legislation. Economic Inquiry, vol. 20 (October): 533-555.
Gordon, Kenneth. 1981. The Impact of Minimum Wages on Private Household
Workers. In Rottenberg (1981a): 191-209.
The minimum wage hurts low wage workers particularly during cyclical
downturns.
Kosters, Marvin, and Welch, Finis. 1972. The Effects of Minimum Wages on the
Distribution of Changes in Aggregate Employment. American Economic
Review, vol. 62 (June): 323-332.
Welch, Finis. 1974. Minimum Wage Legislation in the United States. Economic
Inquiry, vol. 12 (September): 285-318.
The minimum wage increases job turnover.
Hall, Robert E. 1982. The Minimum Wage and Job Turnover in Markets for
Young Workers. In The Youth Labor Market Problem: Its Nature, Causes,
and Consequences, ed. Richard B. Freeman and David A. Wise, pp. 475-
497. Chicago: University of Chicago Press.
The minimum wage reduces average earnings of young workers.
Meyer, Robert H., and Wise, David A. 1983b. Discontinuous Distributions and
Missing Persons: The Minimum Wage and Unemployed Youth.
Econometrica, vol. 51 (November): 1677-1698.
The minimum wage drives workers into uncovered jobs, thus lowering wages
in those sectors.
Brozen, Yale. 1962. Minimum Wage Rates and Household Workers. Journal of
Law and Economics, vol. 5 (October): 103-109.
Page 6
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
Tauchen, George E. 1981. Some Evidence on Cross-Sector Effects of the
Minimum Wage. Journal of Political Economy, vol. 89 (June): 529-547.
Welch, Finis. 1974. Minimum Wage Legislation in the United States. Economic
Inquiry, vol. 12 (September): 285-318.
The minimum wage reduces employment in low-wage industries, such as
retailing.
Cotterman, Robert F. 1981. The Effects of Federal Minimum Wages on the
Industrial Distribution of Teenage Employment. In Rottenberg (1981a):
42-60.
Douty, H.M. 1960. Some Effects of the $1.00 Minimum Wage in the United
States. Economica, vol. 27 (May): 137-147.
Fleisher, Belton M. 1981. Minimum Wage Regulation in Retail Trade.
Washington: American Enterprise Institute.
Hammermesh, Daniel S. 1981. Employment Demand, the Minimum Wage and
Labor Costs. In Minimum Wage Study Commission (1981), vol. 5, pp. 27-
84.
Peterson, John M. 1981. Minimum Wages: Measures and Industry Effects.
Washington: American Enterprise Institute.
The minimum wage hurts small businesses generally.
Kaun, David E. 1965. Minimum Wages, Factor Substitution and the Marginal
Producer. Quarterly Journal of Economics, vol. 79 (August): 478-486.
The minimum wage causes employers to cut back on training.
Hashimoto, Masanori. 1981. Minimum Wages and On-the-Job Training.
Washington: American Enterprise Institute.
Hashimoto, Masanori. 1982. Minimum Wage Effects on Training on the Job.
American Economic Review, vol. 72 (December): 1070-1087.
Page 9
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
Datcher, Linda P., and Loury, Glenn C. 1981. The Effect of Minimum Wage
Legislation on the Distribution of Family Earnings Among Blacks and
Whites. In Minimum Wage Study Commission (1981), vol. 7, pp. 125-146.
Johnson, William R., and Browning, Edgar K. 1981. Minimum Wages and the
Distribution of Income. In Minimum Wage Study Commission (1981), vol.
7, pp. 31-58.
Kohen, Andrew I., and Gilroy, Curtis L. 1981. The Minimum Wage, Income
Distribution, and Poverty. In Minimum Wage Study Commission (1981),
vol. 7, pp. 1-30.
The minimum wage helps unions.
Linneman, Peter. 1982. The Economic Impacts of Minimum Wage Laws: A New
Look at an Old Question. Journal of Political Economy, vol. 90 (June):
443-469.
Cox, James C., and Oaxaca, Ronald L. 1982. The Political Economy of Minimum
Wage Legislation. Economic Inquiry, vol. 20 (October): 533-555.
The minimum wage lowers the capital stock.
McCulloch, J. Huston. 1981. Macroeconomic Implications of the Minimum Wage.
In Rottenberg (1981a): 317-326.
The minimum wage increases inflationary pressure.
Adams, F. Gerard. 1987. Increasing the Minimum Wage: The Macroeconomic
Impacts. Briefing Paper, Economic Policy Institute (July).
Brozen, Yale. 1966. Wage Rates, Minimum Wage Laws, and Unemployment.
New Individualist Review, vol. 4 (Spring): 24-33.
Gramlich, Edward M. 1976. Impact of Minimum Wages on Other Wages,
Employment, and Family Incomes. Brookings Papers on Economic
Activity (No. 2): 409-461.
Grossman, Jean B. 1983. The Impact of the Minimum Wage on Other Wages.
Journal of Human Resources, vol. 18 (Summer): 359-378.
Page 10
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
The minimum wage increases teenage crime rates.
Hashimoto, Masanori. 1987. The Minimum Wage Law and Youth Crimes: Time-
Series Evidence. Journal of Law and Economics, vol. 30 (October): 443-464.
Phillips, Llad. 1981. Some Aspects of the Social Pathological Behavior Effects of
Unemployment among Young People. In Rottenberg (1981a): 174-190.
The minimum wage encourages employers to hire illegal aliens.
Beranek, William. 1982. The Illegal Alien Work Force, Demand for Unskilled
Labor, and the Minimum Wage. Journal of Labor Research, vol. 3
(Winter): 89-99.
Few workers are permanently stuck at the minimum wage.
Brozen, Yale. 1969. The Effect of Statutory Minimum Wage Increases on Teen-
age Employment. Journal of Law and Economics, vol. 12 (April): 109-122.
Smith, Ralph E., and Vavrichek, Bruce. 1992. The Mobility of Minimum Wage
Workers. Industrial and Labor Relations Review, vol. 46 (October): 82-88.
The minimum wage has had a massive impact on unemployment in Puerto
Rico.
Freeman, Alida Castillo, and Freeman, Richard B. 1991. Minimum Wages in
Puerto Rico: Textbook Case of a Wage Floor? National Bureau of
Economic Research Working Paper No. 3759 (June).
Rottenberg, Simon. 1981b. Minimum Wages in Puerto Rico. In Rottenberg (1981-
a): 327-339.
The minimum wage has reduced employment in foreign countries.
Forrest, David. 1982. Minimum Wages and Youth Unemployment: Will Britain
Learn from Canada? Journal of Economic Affairs, vol. 2 (July): 247-250.
Corbo, Vittorio. 1981. The Impact of Minimum Wages on Industrial Employment
in Chile. In Rottenberg (1981a): 340-356.
Page 11
JEC Annotated Talking Points "Minimum Wage"
Wednesday, February 15, 1995
Gregory, Peter. 1981. Legal Minimum Wages as an Instrument of Social Policy in
Less Developed Countries, with Special Reference to Costa Rica. In
Rottenberg (1981a): 377-402.
Rosa, Jean-Jacques. 1981. The Effect of Minimum Wage Regulation in France. In
Rottenberg (1981a): 357-376.
Characteristics of minimum wage workers.
Employment Policies Institute. 1994. The Low-Wage Workforce. Washington:
Employment Policies Institute.
Haugen, Steven E., and Mellor, Earl F. 1990. Estimating the Number of Minimum
Wage Workers. Monthly Labor Review, vol. 113 (January): 70-74.
Kniesner, Thomas J. 1981. The Low-Wage Workers: Who Are They? In
Rottenberg (1981a): 459-481.
Mellor, Earl F. 1987. Workers at the Minimum Wage or Less: Who They Are and
the Jobs They Hold. Monthly Labor Review, vol. 110 (July): 34-38.
Mellor, Earl F., and Haugen, Steven E. 1986. Hourly Paid Workers: Who They
Are and What They Earn. Monthly Labor Review, vol. 109 (February): 20-
26.
Smith, Ralph E., and Vavrichek, Bruce. 1987. The Minimum Wage: Its Relation to
Incomes and Poverty. Monthly Labor Review, vol. 110 (June): 24-30.
Van Giezen, Robert W. 1994. Occupational Wages in the Fast-Food Industry.
Monthly Labor Review, vol. 117 (August): 24-30.
ORIGINAL
SURVEY INSTRUMENT
THE CARD-KRUEGER
NEW JERSEY FAST FOOD STUDY
As supplied by David Card and Alan Krueger
Fast Food Restaurant Survey
January-March 1992
Restaurant Information
Chain: Burger King
KFC
Roy Rogers
Wendy's
Location:
NJ
PA
Phone Number:
Note if changed:
Date:
Callbacks # 1
# 2
# 3
Hello, may I please speak to the manager or assistant manager?
I'm conducting a survey for economists at Princeton University on the
effects of the Minimum Wage in the restaurant industry. The survey will
only take a few minutes and your answers will be kept strictly
confidential. Would you mind answering a few questions about your
restaurant?
Refused
Asked to call back? When:
Otherwise continue to question 1.
1. How many full-time and part-time workers are employed in your
restaurant, excluding managers and assistant managers?
Number full-time:
Number part-time:
2. And how many managers and assistant managers?
2
3. What percent of your workers are teenagers?
percent.
4. What is the average starting wage rate for a nonmanagement employee at
your restaurant today?
($ per hour)
the minimum wage
5. Is it the same starting rate for full-time and part-time workers?
Yes:
Otherwise:
full-time employees:
($ per hour)
part-time employees:
($ per hour)
6a. Do new employees at your restaurant usually receive a raise after some
time on the job?
No:
Go to question 7.
Yes:
Then ask
b. About how many weeks do they typically have to work until that raise?
weeks
C. And how much is the usual raise?
($ per hour)
7. Do you have any special programs to recruit new workers, such as free
bus fare or a bonus to an employee who recruits a new worker?
No programs
Bus fare or other transportation assistance
Bonus for employee who recruits a new worker
Other
8a. Are there any employees in your restaurant who receive a training wage
of less than $4.25 per hour
No:
Go to question 9.
Yes:
Then ask
What percent of employees earn less than $4.25 per hour:
3
9. About what percent of your full-time and part-time employees are
currently earning between $4.25 and $5.00 per hour? Not the managers
and assistant managers: just the non-management employees.
percent.
10. Do you provide employees with a free or reduced price meal?
No:
Yes, free meals
Yes, reduced-price meals
11. About what percent of your employees have been working at the
restaurant for over 6 months?
Percent
12. About what percent have been working at the restaurant for over a
year?
Percent
13. What are your hours for a typical weekday (Monday to
Thursday)?
Open from
to
14. And what are your hours on Saturday?
Open from
to
4
Now I have a few questions on prices in your store.
with tax
15. What is the price of a medium soda :
without tax
with tax
16. What is the price of a small order of fries:
without tax
17a. Ask for Burger King, Roy Rogers, or Wendy's Only
with tax
What is the price of a regular hamburger:
without tax
17b. Ask for KFC Only
with tax
What is the price for 2 pieces of chicken:
without tax
Or equivalent (specify):
18. How many cash registers are in your store?
(number)
19. How many (of these cash registers) do you usually have open
at 11:00 am?
All of them
OR
number open
.
20a. Is your store company-owned or a franchise unit:
Company owned
Go to 21
Franchised unit
Then Ask
20b. Does the owner work in the store?
21. What town is restaurant located in?
5
Interviewer check
restaurant in Pennsylvania. Go to END
restaurant in New Jersey. Go to 22.
NEW JERSEY ONLY
22. The New Jersey minimum wage is scheduled to rise to $5.05 per hour on
April 1. Have you heard about this increase?
No
Yes
23. Will you have to raise the wages of some of your employees to comply
with the new law?
No
Yes
24. Would you say this rise in the minimum wage will have a big effect on
your costs of business, a small effect, or something in between?
Big effect
Small effect
In Between
END OF INTERVIEW:
Thanks for your assistance.
Fast Food Restaurant Survey
October 1992
Restaurant Information
Chain: Burger King
KFC
Roy Rogers
Wendy's
Location:
NJ
PA
Phone Number:
Date:
First Call:
Disconnect
No Answer
Busy
Callbacks
# 1
# 2
# 3
Check store type:
Same as
OR:
as above
Hello. May I please speak to the manager or assistant manager?
I'm conducting a survey for economists at Princeton University on the minimum
wage in the restaurant industry. We spoke to you early last year and we'd like
to follow up on any changes since then. The survey will only take a few minutes
and your answers will be kept strictly confidential. Would you mind answering a
few questions about your restaurant?
Refused
Asked to call back? When:
1. How many full-time and part-time workers are employed in your
restaurant, excluding managers and assistant managers?
Number full-time:
Number part-time:
2. And how many managers and assistant managers?
3a. Do you have any teenage employees (that is, less than 20 years old)?
No:
Go to question 4.
Yes:
Then ask
b. About how many full-time teenagers:
C. About how many part-time teenagers:
Page 2
4. What is the average starting wage rate for a nonmanagement employee
at your restaurant today?
($ per hour)
minimum wage
$5.05 in NJ
if response is "minimum" VERIFY
$4.25 in PA
5. Is it the same starting rate for full-time and part-time workers?
Yes:
Otherwise:
full-time employees:
($ per hour)
part-time employees:
($ per hour)
6a. Do new employees at your restaurant usually receive a raise after some
time on the job?
No:
Go to question 7.
Yes:
Then ask
b. About how many weeks do they typically have to work until that raise?
weeks
C. And how much is the usual raise?
($ per hour)
7. Do you have any special programs to recruit new workers, such as free
bus fare or a bonus to an employee who recruits a new worker?
No programs
Bus fare or transportation assistance
Bonus for employee who recruits a new worker
Other (explain)
8. Do you provide employees with a free or reduced price meal?
No:
Yes, free meals
Yes, reduced-price meals
Page 3
9. About what percent of your employees have been working at the
restaurant for over 6 months?
Percent
10. About what percent have been working at the restaurant for over a
year?
Percent
11. What are your hours for a typical weekday (Monday to
Thursday)?
Open from
to
12. And what are your hours on Saturday?
Open from
to
Now I have a few questions on prices in your store.
13. What is the price
with
without
of a medium soda:
tax
tax
14. What is the price of a
with
without
small order of fries:
tax
tax
15a. Ask for Burger King, Roy Rogers, or Wendy's Only
What is the price of a
with
without
regular hamburger:
tax
tax
15b. Ask for KFC Only
What is the price of
with
without
2 pieces of chicken:
tax
tax
Or equivalent entree (specify) :
16. How many cash registers are in your store?
(number)
17. How many (of these cash registers) do you usually have open
at 11:00 am?
All of them
OR
number open
.
END OF INTERVIEW: Thanks.
Code Book for New Jersey-Pennsylvania Data Set
Note: there are 410 observations in the data set
Column Location
Name:
Start
End
Format
Explanation
SHEET
1
3
3.0
sheet number (unique store id)
CHAIN
5
5
1.0
chain 1-bk; 2=kfc; 3=roys; 4=wendys
CO_OWNED
7
7
1.0
1 if company owned
STATE
9
9
1.0
1 if NJ; 0 if Pa
ZIP13
17
19
3.0
first 3 digits of zip
SHORE
21
21
1.0
1 if on NJ shore
First Interview
NCALLS
23
24
2.0
number of call-backs*
EMPFT
26
30
5.2
# full-time employees
EMPPT
32
36
5.2
# part-time employees
NMGRS
38
42
5.2
# managers/ass't managers
WAGE_ST
44
48
5.2
starting wage (S/hr)
INCTIME
50
54
5.1
months to usual first raise
FIRSTINC
56
60
5.2
usual amount of first raise (S/hr)
BONUS
62
62
1.0
1 if cash bounty for new workers
PCTAFF
64
68
5.1
% employees affected by new minimum
MEALS
70
70
1.0
free/reduced price code (See below)
OPEN
72
76
5.2
hour of opening
HRSOPEN
78
82
5.2
number hrs open per day
PSODA
84
88
5.2
price of medium soda, including tax
PFRY
90
94
5.2
price of small fries, including tax
PENTREE
96
100
5.2
price of entree, including tax
NREGS2
102
103
2.0
number of cash registers in store
NREGS11
105
106
2.0
number of registers open at 11:00 am
Second Interview
TYPE2
108
108
1.0
type 2nd interview 1=phone; 2-personal
STATUS2
110
110
1.0
status of second interview: see below
DATE2
112
117
6.0
date of second interview MMDDYY format
NCALLS2
119
120
2.0
number of call-backs*
EMPFT2
122
126
5.2
# full-time employees
EMPPT2
128
132
5.2
# part-time employees
NMGRS2
134
138
5.2
# managers/ass't managers
WAGE_ST2
140
144
5.2
starting wage (S/hr)
INCTIME2
146
150
5.1
months to usual first raise
FIRSTIN2
152
156
5.2
usual amount of first raise (S/hr)
SPECIAL2
158
158
1.0
1 if special program for new workers
MEALS2
160
160
1.0
free/reduced price code (See below)
OPEN2R
162
166
5.2
hour of opening
HRSOPEN2
168
172
5.2
number hrs open per day
PSODA2
174
178
5.2
price of medium soda, including tax
PFRY2
180
184
5.2
price of small fries, including tax
PENTREE2
186
190
5.2
price of entree, including tax
NREGS2
192
193
2.0
number of cash registers in store
NREGS112
195
196
2.0
number of registers open at 11:00 am
Codes:
Free/reduced Meal Variable:
0 = none
1 = free meals
2 = reduced price meals
3 = both free and reduced price meals
Second Interview Status
0 = refused second interview (count = 1)
1 = answered 2nd interview (count = 399)
2 - closed for renovations (count - 2)
3 = closed "permanently" (count - 6)
4 = closed for highway construction (count = 1)
5 = closed due to Mall fire (count = 1)
*Note: number of call-backs - 0 if contacted on first call
Feb. '92
Nov. '92
FT/PT
FT/PT
Wendy's in 072xx
0 / 30
35 / 30
Burger King in 080XX
6.5 / 20
30 / 25
Kentucky Fried Chicken in 082XX
0 / 11
22/4
Wendy's in 185XX
30 / 10
0 / 30
Roy Rogers in 189XX
27 / 12
0 / 30
Kentucky Fried Chicken in 075XX
0/7
14/0
Kentucky Fried Chicken in 070XX
0 / 22
25 / 15
Seasonal Employment Changes from Payroll Data
Pennsylvania
+20.5%
New Jersey
+15.6%
0%
5%
10%
15%
20%
25%
Staffing up for the Holidays
+ 3.4 workers
+ 2.6 workers
25
per restaurant
per restaurant
20.3
19.9
20
17.3
16.9
15
10
5
0
Pennsylvania
New Jersey
February
November
EMPLOYMENT
OLICIES
INSTITUTE
THE EMPLOYMENT POLICIES INSTITUTE FOUNDATION
The Employment Policies Institute is a non-profit research organization dedicated to expanding
employment opportunities at all levels of America's economy. In particular, EPI believes that
entry-level positions often provide the best job-training and education programs that many
Americans, especially young Americans and those seeking to move from welfare to work, can
have. By ensuring that these entry-level opportunities are preserved for those seeking a port of
entry into the workforce, America can make substantial improvements in both unemployment
and long term productivity.
The Institute dedicates most of its resources to educating the media, Congress, and the public
about issues affecting entry-level employment. Past research efforts have focused on (among
other topics) mandated health insurance, the minimum wage, and the value of part-time
employment. Institute contributors represent a cross-section of manufacturers and retailers
across the country.
The Institute has an aggressive research program underway. Noted academics from major
research universities are engaged in sponsored empirical research focusing on several issues
surrounding entry-level employment. Among other topics, this includes: income growth among
entry-level employees; the role of Federal wage policy in welfare reform; comparing the anti-
poverty effectiveness of the Earned Income Tax Credit to that of higher minimum wages; how
better skilled workers crowd out the less skilled when the minimum wage rises; and the long
term benefits of early work experience.
A list of recent reports is located on the reverse side
Suite 1110, 607 14th Street, N.W. - Washington, D.C. 20005 (202) 347-5178 Fax: (202) 347-5250
RECENT PUBLICATIONS
Jobs Taken by Mothers Moving from Welfare to Work: And the Effects of Minimum Wages on this
Transition, by Peter D. Brandon, Institute for Research on Poverty, University of Wisconsin - Madi-
son, February 1995.
Minimum Wage Laws and the Distribution of Employment, by Kevin Lang, Boston University,
January 1995.
The Low-Wage Workforce. Statistical analysis of the low-wage workforce from the 1992 Current Popula-
tion Survey. December 1994.
Mandates in Employment: A History of Added Burdens on the Unskilled, by Simon Rottenberg, Uni-
versity of Massachusetts, Amherst, August 1994.
The Use of Strike Replacement in Union Contract Negotiations: Experience from the U.S. and Can-
ada, by Peter Cramton, University of Maryland, and Joseph S. Tracy, Columbia University, May 1994.
The Effects of High School Work Experience on Future Economic Attainment, by Christopher J.
Ruhm, University of North Carolina at Greensboro, May 1994.
The Early Careers of Non-College-Bound Men, by Jeff Grogger, University of California, Santa Barbara,
May 1994.
Effects of the Employer Mandate in the Clinton Health Plan, by June E. O'Neill and Dave M. O'Neill,
Baruch College, City University of New York, March 1994.
The Effect of Recent Increases in the U.S. Minimum Wage on the Distribution of Income, by John T.
Addison and McKinley Blackburn, University of South Carolina at Columbia, March 1994.
Public Policies for the Working Poor: The Earned Income Tax Credit VS. Minimum Wage Legisla-
tion, by Richard V. Burkhauser, Syracuse University, and Andrew J. Glenn, Vanderbilt University,
March 1994.
The Impact of a Health Insurance Mandate on Labor Costs and Employment, by June E. O'Neill and
Dave M. O'Neill, Baruch College, City University of New York, September 1993.
Health Insurance Benefits and Income Support for Poor Families: Report on National Survey of
Leading Economists. Conducted by the University of New Hampshire Survey Center, this survey pre-
sents overwhelming agreement among economists on the effects of mandated health insurance or a
higher minimum wage. June 1993.
The Minimum Wage and the Employment of Teenagers: Recent Research, by Bruce Fallick, Univer-
sity of California-Los Angeles, and Janet Currie, Massachusetts Institute of Technology, June 1993.
The Employment Effect in Retail Trade of a Minimum Wage: Evidence from California,
by Lowell J. Taylor, Carnegie Mellon University, June 1993.
The Minimum Wage: Good Social Policy? A landmark guide to understanding the minimum wage,
Employment Policies Institute, April 1993.
Employment Effects of Minimum and Subminimum Wages: Recent Evidence, by David Neumark,
University of Pennsylvania, February 1993.
Higher Wages, Greater Poverty: Trapping Americans in Poverty, by Carlos E. Bonilla, Employment
Policies Institute. Examination of the interaction between minimum wage hikes, earnings, transfer and
tax programs in California, February 1992.
Survey of Service Employees, prepared by Frederick/Schneiders Inc. Survey of current and former hospi-
tality industry employees, exploring the development of important job skills, February 1992.
Employment Changes
Individual Penn.
Zip Codes
Individual NJ Zip
Codes
-40%
-20%
0%
20%
40%
60%
Employment Losses
Employment Gains
Payroll Data
Card-Krueger
The Card-Krueger Survey.
What it asked.
What it didn't ask.
How many full-time and
What is full-time employment in your
part-time workers are
restaurant?
employed in your restaurant,
How many non-management workers meet
excluding managers and
that definition?
assistant managers?
Total full-time hours worked?
- This shift?
- Today?
- This pay period?
How many employees work less than
full-time hours?
Total part-time hours worked?
- This shift?
- Today?
- This pay period?
How many hours do managers and assistant
managers spend on non-management
duties?
New York
Pennsylvania
New Jersey
088XX
EDISON
PRINCETON
TRENTON
085XX-086XX
Delaware
Card-Krueger VS. Payroll Data: Penn.
Payroll Data
Zip 194XX
Card-Krueger
Survey
Zip 190XX
Zip 189XX
-50%
0%
50%
100%
150%
Employment Losses
Employment Gains
Card-Krueger VS. Payroll Data: N.J.
Zip 088XX
Payroll Data
Zip 086XX
Card-Krueger
Survey
Zip 085XX
-50%
0%
50%
100%
150%
Employment Losses
Employment Gains
Card-Krueger VS. Payroll Data (088XX)
Payroll Data
Card-Krueger
Survey
-20%
0%
20%
40%
60%
80%
100%
Employment Losses
Employment Gains
Wendy's Units
Card-Krueger VS. Payroll Data (190XX)
Payroll Data
Card-Krueger
Survey
-50%
0%
50%
100%
150%
Employment Losses
Employment Gains
Burger King Units
Pennsylvania
New Jersey
088XX
EDISON
PRINCETON
TRENTON
085XX-086XX
EMPLOYMENT
OLICIES
EPI VIDEO TRANSCRIPT
INSTITUTE
THE CLINTON ADMINISTRATION ON THE NEW JERSEY FAST FOOD STUDY
Dr. Alan Krueger, Labor Department Chief Economist and Princeton University Co-author
of the Fast Food study, before the Joint Economic Committee, 2/22/95
"In a number of studies -- I think the best one -- compared New Jersey and Pennsylvania. What
we did was to conduct a survey of fast food restaurants in New Jersey, as well as along the
border of Pennsylvania. New Jersey raised its minimum wage to $5.05 an hour on April 1, 1992,
giving New Jersey the highest minimum wage in the country. And what we expected to find was
when we re-interviewed these restaurants about eight months later, what we expected to find was
that employment would decline -- fast food restaurants have extremely high turnover, it's very
easy for them to adjust their employment due to attrition. And what we found was rather
surprising. what we found was, in fact, employment fared better in New Jersey than it did in
Pennsylvania."
Dr. Laura D'Andrea Tyson, Chairman of the Council of Economic Advisers, and Labor
Secretary Robert Reich, at a White House press conference, 2/3/95
TYSON: "...you have to look at the empirical evidence, I'm just telling you what the evidence
is. I mean, we have a series of studies here, it's not like we're going on this -- we 're taking this
course -- without looking at the evidence very carefully. The evidence is overwhelming. What's
happened here is that we have a whole new set of research, and so the theory that somehow an
increase in the minimum wage might affect employment is now at odds with the empirical
evidence -- the empirical evidence doesn't support that."
REICH: "If I could just add one thing -- there are a number of studies, one study that I find
particularly persuasive, and again the studies have looked at minimum wage increases, the effects
of minimum wage increases on employment, but in New Jersey, in 1992, the minimum wage was
hiked, in New Jersey, from the federal $4.25 up to $5.05, and a very exhaustive, detailed study
was taken of businesses that hired minimum wage workers along the border between New Jersey
and Eastern Pennsylvania, that did not hike the minimum wage kept it at $4.25. It actually
turned out that those businesses in New Jersey began hiring more than the businesses in
Pennsylvania -- it actually increased job growth."
President Bill Clinton, State of the Union Address, 1/24/95
"Now, I've studied the arguments and the evidence for and against a minimum wage increase.
I believe the weight of the evidence is that a modest increase does not cost jobs, and may even
lure people back into the job market."
Suite 1110, 607 14th Street, N.W. - Washington, D.C. 20005= (202) 347-5178- Fax: (202) 347-5250
EMPLOYMENT
OLICIES
INSTITUTE
MEDIA COVERAGE OF THE CARD-KRUEGER STUDY
"A study that examined the impact of an increase in the minimum wage in New Jersey in 1992 has
caused a great stir in recent months among labor economists. The Princeton University study,
conducted by David Card and Alan Krueger, who is now the Labor Department's chief economist,
compared hiring practices in 437 fast-food restaurants in southern New Jersey and neighboring eastern
Pennsylvania. New Jersey was increasing its statewide minimum wage at the time; Pennsylvania was
not. Automation did not follow, nor did layoffs. Rather, the number of jobs in New Jersey
restaurants grew as the wage rose."
-- Los Angeles Times, 1/26/95
"
[N]ow a clutch of bright young economists is challenging their profession's conventional wisdom.
And, it seems, they have the president's ear. This is unsurprising, for one of the heretics, Alan
Krueger of Princeton, works in the administration Within the administration, Mr. Reich's case has
been bolstered by the work collected in a forthcoming book by Mr. Krueger and a colleague at
Princeton, David Card, which argues that there is little evidence of any job losses from increases in
the minimum wage."
-- The Economist, 1/21/95
"
[U]ntil recently, there was still nearly unanimous agreement among economists that any [minimum
wage] increase would cost jobs. Mr. Card and Mr. Krueger have never been excessively respectful
of received wisdom, though. And their own research
has blown gaping holes in the consensus."
-- The New York Times, 2/2/95
"In the most compelling study, Card and Krueger surveyed 437 fast-food restaurants in New Jersey
and nearby eastern Pennsylvania in the Spring of 1992 at a time when New Jersey was raising the
state's minimum wage. If economic theory was right the New Jersey restaurants should see a
decline in fast-food employment However, it didn't work out quite that way "
-- The Washington Post, 1/11/95
Also reprinted in:
The Newark Star-Ledger, The Cleveland Plain Dealer,
The Seattle Times, The Arizona Republic
"In their most influential study, Card and Krueger surveyed more than 400 fast-food restaurants in
New Jersey, which raised its minimum to $5 an hour in 1992, and in adjacent eastern Pennsylvania,
which did not. To their surprise, employment actually grew in New Jersey relative to Pennsylvania."
-- San Francisco Chronicle, 1/25/95
Suite 1110, 607 14th Street, N.W. - Washington, D.C. 20005- (202) 347-5178- Fax: (202) 347-5250
"
[A] rash of new studies says [the] textbook model just isn't so. One in particular was authored
by Alan Krueger, now chief economist at the Labor Department, and Princeton economist David Card.
When New Jersey raised its state minimum wage in 1992, Card and Krueger found that the number
of low-wage jobs in fast-food restaurants actually went up."
-- Chicago Tribune, 1/29/95
"Contrary to expectations (and economic theory), Card and Krueger found that employment in New
Jersey rose after the minimum wage was increased."
-- The Boston Globe, 1/29/95
"One widely talked-about study, co-authored by Alan Krueger, now the Labor Department's chief
economist, and Princeton's David Card, found the number of low-wage jobs in New Jersey's fast-food
restaurants actually went up when the state raised its minimum wage. At the same time, jobs actually
shrank next door in Pennsylvania where the minimum wage stayed the same.
-- The Detroit News, (Tribune Media Services), 2/5/95
"Professor Card's research papers have had a way of jumping from ivory-tower academic journals to
front pages and television news programs. Card's best-known works are studies suggesting that
raising the minimum wage may not prompt employers to cut back on their hiring of minimum-wage
workers, contradicting what most economists have long believed. These results have figured heavily
in the current debate on whether to increase the minimum wage."
-- The New York Times, 3/21/95
"
[A] new and comprehensive study by two Princeton University economists rebuts the conventional
wisdom
Card and Krueger found that employment in New Jersey actually expanded after that state
hiked its minimum wage "
-- The Detroit News, 1/30/95
"
[A] new study by two labor economists at Princeton University on the effect of the higher
minimum wage on employment in [N.J.]'s fast-food restaurants -- one of the major employers of
young workers who earn the minimum wage -- suggests that it has not been a significant deterrent to
hiring Washington is also watching New Jersey's experience with the higher minimum wage as the
Clinton Administration tries to decide how hard to lean on employers as a route for delivering benefits
to working Americans."
-- The New York Times, 3/20/93
"
[A] distinguished group of US economists has examined the effects of recent changes in state and
federal minimum wages. Their results have turned conventional wisdom upside down... The most
compelling survey was conducted by Krueger, now chief economist at the US Labor Department, in
conjunction with Card.. The U.S. evidence is overwhelming: increasing minimum wages to a
tolerable level in low-wage labour markets does not cost jobs, and can even increase employment."
-- The Financial Times, 9/30/94
"Some -- among them new House Majority Leader Richard Armey of Texas -- say raising the
minimum wage will reduce jobs, though a recent study by David Card and Alan Krueger, two
Princeton economists, undercuts this idea. Card and Krueger found that total jobs often rise as the
minimum wage rises..."
-- Los Angeles Times, (bylined column) 2/12/95
"One frequently cited study compared employment at fast-food restaurants in New Jersey and
neighboring Pennsylvania after New Jersey raised its minimum wage to $5.05 an hour, while
Pennsylvania's remained at $4.25. It found that low-wage employment in New Jersey actually
increased slightly despite the minimum wage hike."
-- Knight-Ridder, 1/29/95
"[Minority Whip David] Bonior said that recent studies have concluded that such a raise [in the
minimum wage] 'won't cost us jobs.' He cited a 1993 study by economists David Card of Princeton
University and Alan Krueger (then also of Princeton) showing that a minimum wage increase resulted
in modest job creation in fast food restaurants in Pennsylvania and New Jersey."
-- The Bureau of National Affairs, 2/15/95
"Contrary to the claims of the opponents of a minimum-wage boost, the economists - David Card and
Alan B. Krueger -- found that employment in the New Jersey outlets actually went up more than in
comparable restaurants on the Pennsylvania side of the border corridor."
-- The San Diego Union-Tribune, 3/12/95
"The most recent [study] came out just last month after New Jersey raised its minimum wage and 437
fast-food restaurants were asked what effect this had on their employment. Would you believe that
they actually hired more employees? Why would they lay off when they are selling more hamburgers?
That's the magic of the minimum wage."
-- The San Antonio Express-News, 2/5/95
"New findings by labor economists have weakened the chief argument against an increase, namely that
it will cost jobs. Data collected from employers after minimum-wage increases in New Jersey and
California suggest that job loss does not necessarily follow and that a higher minimum wage would
benefit some industries by reducing job turnover and luring more workers into the workforce."
-- The [Minneapolis] Star Tribune, 2/5/95
EMPLOYMENT
POLICIES
CARD-KRUEGER FINDINGS
INSTITUTE
Minimum Wages and Employment: A Case Study of the Fast
Food Industry in New Jersey and Pennsylvania
David Card and Alan Krueger
American Economic Review, September 1994.
"We believe that a control group of fast food stores in Eastern Pennsylvania forms
a natural basis for comparison with the experiences of restaurants in New Jersey."
(p.773)
"
seasonal patterns of employment are similar in New Jersey and Eastern
Pennsylvania." (p.773)
"Despite the increase in wages, full-time-equivalent employment increased in New
Jersey relative to Pennsylvania." (p.776)
"
we find no evidence that the rise in New Jersey's minimum wage reduced
employment at fast food restaurants in the state." (p.792)
"
we find that the increase in the minimum wage increased employment."
(p.792)
A full copy of the New Jersey Fast Food Study can be obtained from the:
American Economic Association
2014 Broadway, Suite 305
Nashville, TN 37203
(615) 322-2595
Suite 1110, 607 14th Street, N.W. - Washington, D.C. 20005 (202) 347-5178- Fax: (202) 347-5250
EMPLOYMENT
OLICIES
INSTITUTE
FOR IMMEDIATE RELEASE
CONTACT: John Doyle
(202) 347-5178
CRIPPLING FLAWS IN NEW JERSEY MINIMUM WAGE STUDY REVEALED;
ADMINISTRATION'S WAGE INCREASE PLAN BUILT ON 'WORTHLESS' REPORT
WASHINGTON, DC (March 29, 1995) The Clinton administration's proposal to raise
the minimum wage is based on a catastrophically-flawed "study" that relies on numbers which
have just been proven grossly inaccurate, according to a new report released today by the
Employment Policies Institute.
The New Jersey study, which measured the impact of New Jersey's minimum wage
increase on fast-food restaurant employment, has been cited repeatedly by senior administration
officials, most notably Labor Secretary Robert Reich, as evidence that a minimum wage increase
won't cause job loss. The results of the New Jersey report have also been cited as fact by
leading news organizations across the country. The study, conducted by two Princeton
economists and published last year, was based on telephone interviews with restaurant managers.
"The new evidence released today proves the New Jersey study is dead wrong and based
on poorly collected data," said Richard Berman, executive director of the Institute. "In fact, the
employment numbers used in the New Jersey study bear no relation to the real payroll records
of the very same restaurants examined in the study."
(more)
Suite 1110, 607 14th Street, N.W. - Washington, D.C. 20005 (202) 347-5178 Fax: (202) 347-5250
-2-
Speaking at a news conference on Capitol Hill, Berman noted several examples of "wild
employment shifts" in the New Jersey survey data, including:
A Wendy's restaurant which, according to the New Jersey data, had no full-time
employees in February 1992 but jumped to 35 full-timers after a minimum wage hike;
A Roy Rogers restaurant in Eastern Pennsylvania which reported 27 full-time employees
in February but zero full-time workers in November; and
A New Jersey Kentucky Fried Chicken restaurant which reported only seven part-time
employees in February, but had 14 full-time and no part-time employees after the
minimum wage increase.
According to the Institute report, when the actual payroll records are analyzed, one finds
job losses in New Jersey resulting from the minimum wage hike, rather than the job gains
reported in the New Jersey study.
"Secretary Reich -- the nation's leading proponent of a minimum wage hike - has called
this a 'particularly persuasive' study and has cited it on numerous occasions, including in
Congressional testimony. But the facts show this study is nothing more than a sophisticated
academic exercise in analyzing badly flawed data, with no implications for real life," said
Berman.
"It's important to note that when the techniques employed in the New Jersey study are
coupled with the actual payroll data they detect the same job loss predicted by research over the
last 50 years.
"If not for the Institute's revelations, Clinton Administration policy on the minimum wage
might have been based on the worthless conclusions drawn from the New Jersey report."
###
The Employment Policies Institute is a non-profit research organization dedicated to studying
issues surrounding entry-level employment.
SURVEY DATA
THE CARD-KRUEGER
NEW JERSEY FAST FOOD STUDY
As supplied by David Card and Alan Krueger and
compiled by the Employment Policies Institute Foundation
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
1
Burger King
180
30
15
3.5
35
37.5
21
-44%
2
KFC
181
6.5
6.5
0
15
9.75
7.5
-23%
3
KFC
189
3
7
3
7
6.5
6.5
0%
4
Wendys
181
20
20
0
36
30
18
-40%
5
Wendys
180
6
26
28
3
19
29.5
55%
6
Wendys
180
0
31
#N/A
#N/A
15.5
#N/A
#N/A
7
Burger King
190
50
35
15
18
67.5
24
-64%
8
Burger King
190
10
17
26
9
18.5
30.5
65%
9
KFC
190
2
8
3
12
6
9
50%
10
KFC
189
2'
10
2
9
7
6.5
-7%
11
Roy Rogers
190
2.5
20
1
25
12.5
13.5
8%
12
Burger King
194
40
30
9
32
55
25
-55%
13
Burger King
194
8
27
7
39
21.5
26.5
23%
14
Burger King
194
10.5
30
18
10
25.5
23
-10%
15
Burger King
194
6
9
5
20
10.5
15
43%
16
KFC
194
5
17.5
15
4
13.75
17
24%
17
KFC
194
1,
15
4
13
8.5
10.5
24%
18
Roy Rogers
194
10
6
6
20
13
16
23%
19
Roy Rogers
194
20
13
5
15
26.5
12.5
-53%
20
Roy Rogers
194
5
23
2
19
16.5
11.5
-30%
21
Roy Rogers
194
10
12.5
2
18
16.25
11
-32%
22
Roy Rogers
189
27
12
0
30
33
15
-55%
23
Roy Rogers
194
4
28
8
20
18
18
0%
24
Roy Rogers
194
10
15
10
10
17.5
15
-14%
25
Wendys
194
0
28
0
31
14
15.5
11%
26
Roy Rogers
190
3
16
5.5
10
11
10.5
-5%
27
Roy Rogers
190
7
16
5
19
15
14.5
-3%
28
Burger King
180
21
9
6
25
25.5
18.5
-27%
29
Burger King
180
1
32
5
15
17
12.5
-26%
30
Burger King
180
10
20
7
25
20
19.5
-3%
31
Burger King
180
0
27
0
42
13.5
21
56%
32
Burger King
181
17
4
0
22
19
11
-42%
33
Burger King
181
0
24
11
12
12
17
42%
34
Burger King
180
25
15
0
45
32.5
22.5
-31%
Pa
Card-Krueger Survey Data
Wave 1
Wave
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
35
Burger King
181
6
20
7.5
25
16
20
25%
36
KFC
180
6
10
4
20
11
14
27%
37
KFC
180
0
15
6
15
7.5
13.5
80%
38
Wendys
180
30
10
7
18
35
16
-54%
39
Wendys
181
8
25
0
28
20.5
14
-32%
40
Wendys
181
0
15
0
16
7.5
8
7%
41
Wendys
181
10
20
10
20
20
20
0%
42
KFC
194
2
12
1
14
8
8
0%
43
Burger King
186
20
25
0
48
32.5
24
-26%
44
Burger King
185
20
55
25
10
47.5
30
-37%
45
Burger King
184
10
30
0
42
25
21
-16%
46
Burger King
185
15
50
19
29
40
33.5
-16%
47
Burger King
185
1
37.5
0
32
19.75
16
-19%
48
KFC
186
0
9
2
9
4.5
6.5
44%
49
Wendys
184
0
25
0
30
12.5
15
20%
50
Wendys
185
30
10
0
30
35
15
-57%
51
Wendys
185
4
19
5
20
13.5
15
11%
52
Wendys
185
12
20
10
35
22
27.5
25%
53
Burger King
190
#N/A
#N/A
7
24
#N/A
19
#N/A
54
Burger King
190
8
18
8
27
17
21.5
26%
55
Burger King
190
0
25
15
15
12.5
22.5
80%
56
Burger King
190
2
21
27.5
8
12.5
31.5
152%
57
KFC
190
1
9
0
18
5.5
9
64%
58
Roy Rogers
190
5
20
0
20
15
10
-33%
59
Wendys
190
8
17.5
14
12
16.75
20
19%
60
Burger King
194
25
20
12
23
35
23.5
-33%
61
Burger King
194
37.5
2
8
25
38.5
20.5
-47%
62
Burger King
194
5
27
26
15
18.5
33.5
81%
63
Burger King
195
25
8
10
16
29
18
-38%
64
Burger King
189
6
30
5
30
21
20
-5%
65
Burger King
194
8
28
6
20
22
16
-27%
66
Burger King
189
32
25
8
30
44.5
23
-48%
67
KFC
194
1
9
4
12
5.5
10
82%
68
Roy Rogers
194
4
25
0
0
16.5
0
-100%
3
Page 2
Card-Krueger Survey Data
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
69
Roy Rogers
194
2
16
4
15
10
11.5
15%
70
Wendys
194
12
15
#N/A
#N/A
19.5
#N/A
#N/A
71
Wendys
194
20
10
21
5.5
25
23.75
-5%
72
Burger King
190
14
15
30
15
21.5
37.5
74%
73
Burger King
190
7.5
14
35
6.5
14.5
38.25
164%
74
Roy Rogers
190
7
25
2.5
17.5
19.5
11.25
-42%
75
Roy Rogers
190
4
16
3
13
12
9.5
-21%
76
Roy Rogers
191
5
20
23
16
15
31
107%
77
Roy Rogers
190
6
22.5
2
12
17.25
8
-54%
78
Burger King
186
2.5
20
0
12
12.5
6
-52%
79
Burger King
182
2
30
3
23
17
14.5
-15%
80
Burger King
88
0
22
2
40
11
22
100%
8,1,
Burger King
88
0
20
5
25
10
17.5
75%
82
Roy Rogers
88
10
20
8
24
20
20
0%
83
Roy Rogers
70
4.5
25.5
2
33
17.25
18.5
7%
84
Burger King
79
0
25
26.5
10
12.5
31.5
152%
85
KFC
77
0
13
1
15
6.5
8.5
31%
86
Wendys
77
30
20
0
25
40
12.5
-69%
87
Burger King
70
#N/A
10
16
6
#N/A
19
#N/A
88
Burger King
70
0
34
23
22
17
34
100%
89
Wendys
82
20
10
28
10
25
33
32%
90
Wendys
82
0
14
8
12
7
14
100%
91
Burger King
72
0
35
0
35
17.5
17.5
0%
92
Roy Rogers
70
15
15
6
20
22.5
16
-29%
93
Wendys
72
0
30
35
30
15
50
233%
94
Burger King
80
5
19
4.5
20
14.5
14.5
0%
95
Burger King
80
9
10
7
13
14
13.5
-4%
96
Burger King
76
0
45
30
20
22.5
40
78%
97
Roy Rogers
85
2
2
5
2
3
6
100%
98
KFC
86
10
8
4
17
14
12.5
-11%
99
Burger King
70
30
15
10
20
37.5
20
-47%
100
KFC
88
4
10
0
7
9
3.5
-61%
101
KFC
70
6
4
4
3
8
5.5
-31%
102
KFC
88
4
16
6
15
12
13.5
13%
3
Card-Kruege urvey Data
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
103
Roy Rogers
70
12
20
6
11
22
11.5
-48%
104
Wendys
88
8
12
10
35
14
27.5
96%
105
Roy Rogers
70
6
50
4
60
31
34
10%
106
Roy Rogers
74
13
10
10
12
18
16
-11%
107
Wendys
74
25
13
0
45
31.5
22.5
-29%
108
Wendys
74
8
14.5
25
8
15.25
29
90%
109
Wendys
74
12.5
20
#N/A
#N/A
22.5
#N/A
#N/A
110
Burger King
87
7
20
0
35
17
17.5
3%
111
Burger King
87
10
6
6
25
13
18.5
42%
112
KFC
87
0
25
2
20
12.5
12
-4%
113
Wendys
77
12.5
10
#N/A
#N/A
17.5
#N/A
#N/A
114
Wendys
70
4
26
5
25
17
17.5
3%
115
KFC
89
6.5
7.5
3
16
10.25
11
7%
116
Roy Rogers
88
20
20
7
18
30
16
-47%
117
Roy Rogers
88
15
25
8
22
27.5
19
-31%
118
Wendys
88
#N/A
#N/A
11
25
#N/A
23.5
#N/A
119
Wendys
88
0
30
#N/A
#N/A
15
#N/A
#N/A
4
120
Wendys
88
10
30
4
37
25
22.5
-10%
121
Burger King
79
5
17
10
8
13.5
14
4%
122
Burger King
79
8.5
6.5
6
0
11.75
6
-49%
123
Burger King
78
4.5
30
7.5
30
19.5
22.5
15%
124
Burger King
78
1
12
0
0
7
0
-100%
3
125
Burger King
70
35
15
12
13.5
42.5
18.75
-56%
126
KFC
79
10
5
12
8
12.5
16
28%
127
Roy Rogers
70
8
25
26
12
20.5
32
56%
128
Roy Rogers
78
12
18
1.5
33
21
18
-14%
129
Roy Rogers
79
4
30
5
15
19
12.5
-34%
130
Wendys
70
20
10
10
17
25
18.5
-26%
131
Burger King
77
12
33
20
6
28.5
23
-19%
132
Burger King
77
10
20
20
20
20
30
50%
133
Roy Rogers
77
4
20
5
17.5
14
13.75
-2%
134
Roy Rogers
77
5
42
7
30
26
22
-15%
135
Wendys
77
8
19
0
30
17.5
15
-14%
136
Burger King
78
23
10
5
21
28
15.5
-45%
Page 4
Card-Krueger Survey Data
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(##XXX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
137
Burger King
70
0
10
10
4
5
12
140%
138
Roy Rogers
70
15
35
15
15
32.5
22.5
-31%
#N/A
27.5
#N/A
#N/A
139
Roy Rogers
70
15
25
15
140
Roy Rogers
70
25
10
12
10
30
17
-43%
141
Roy Rogers
70
15
8
8
12
19
14
-26%
142
Burger King
80
13
12
15
15
19
22.5
18%
143
Burger King
80
10
18
0
42.5
19
21.25
12%
144
KFC
81
0
13
0
15
6.5
7.5
15%
145
KFC
81
4
11
2
14
9.5
9
-5%
146
KFC
80
0
15
3
7
7.5
6.5
-13%
147
KFC
81
5
10
5
15
10
12.5
25%
16
4
9
13
8.5
-35%
148
Burger King
70
5
149
KFC
72
3
8
6
12
7
12
71%
150
KFC
70
8
12
2
7
14
5.5
-61%
151
KFC
82
5
9
4
6
9.5
7
-26%
152
KFC
82
3
14
4
11
10
9.5
-5%
41.5
-3%
153
Roy Rogers
80
20
46
22
39
43
154
Roy Rogers
82
18
45
0
45
40.5
22.5
-44%
155
Wendys
82
4
16
3
20
12
13
8%
156
Burger King
80
10
10
0
20
15
10
-33%
80
2.5
27
0
20
16
10
-38%
157
Roy Rogers
158
Wendys
80
14
7
9
7
17.5
12.5
-29%
159
Wendys
80
11.5
10
0
28
16.5
14
-15%
160
Wendys
70
4.5
20
21
6
14.5
24
66%
161
Burger King
74
12
23
11
22
23.5
22
-6%
15
20
25.5
28%
162
Burger King
70
14
12
18
163
Burger King
74
25
10
0
25
30
12.5
-58%
164
Burger King
70
10
8
20
15
14
27.5
96%
165
Burger King
70
10
20
15
15
20
22.5
13%
166
Roy Rogers
70
13
31
11
23
28.5
22.5
-21%
167
Wendys
76
12
35
17
22
29.5
28
-5%
168
Wendys
76
5
10
8
7
10
11.5
15%
169
Burger King
78
3
60
0
15
33
7.5
-77%
170
Burger King
86
16
30
20
40
31
40
29%
Card-Krueger Survey Data
Page 5
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(##XXX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
171
Burger King
85
10
6
7.5
10
13
12.5
-4%
172
KFC
86
6
13
4
7
12.5
7.5
-40%
173
Roy Rogers
86
10
12
5
30
16
20
25%
174
Roy Rogers
85
5
30
10
30
20
25
25%
175
Wendys
86
#N/A
25
15
25
#N/A
27.5
#N/A
176
Burger King
86
12
40
0
32
32
16
-50%
177
Burger King
86
15
20
15
15
25
22.5
-10%
178
Burger King
86
10
30
12
24
25
24
-4%
179
Burger King
85
6.5
23.5
15
15
18.25
22.5
23%
180
KFC
85
0
25
2
11
12.5
7.5
-40%
181
Roy Rogers
86
3
25
5
20
15.5
15
-3%
182
Roy Rogers
86
6
22
7
17
17
15.5
-9%
183
Roy Rogers
86
0
20
4
35
10
21.5
115%
184
Roy Rogers
86
15
25
8
38
27.5
27
-2%
185
Burger King
80
4
31
6
44
19.5
28
44%
186
KFC
80
5
12
0
11
11
5.5
-50%
187
Roy Rogers
80
3
15
3
15
10.5
10.5
0%
188
Burger King
70
0
25
14
14
12.5
21
68%
189
Burger King
88
15
15
15
20
22.5
25
11%
190
KFC
70
0
14
6
2
7
7
0%
191
KFC
70
0
7
0
13
3.5
6.5
86%
192
Roy Rogers
70
10
20.5
2
25
20.25
14.5
-28%
193
Roy Rogers
70
5
15
11
7
12.5
14.5
16%
194
Wendys
70
25
6.5
13
18
28.25
22
-22%
195
Burger King
88
15
20
10
20
25
20
-20%
196
Burger King
70
26
6
15
10
29
20
-31%
197
Burger King
74
20
15
13
13
27.5
19.5
-29%
198
Burger King
75
0
20
#N/A
#N/A
10
#N/A
#N/A
2
199
Burger King
74
15
18
26
10
24
31
29%
200
Burger King
74
5
15
4
17.5
12.5
12.75
2%
201
Burger King
76
30
10
13
17
35
21.5
-39%
202
Burger King
75
0
27
0
27
13.5
13.5
0%
203
Burger King
74
35
20
10
30
45
25
-44%
204
Burger King
76
0
35
29
14
17.5
36
106%
Page 6
Card-Krueger Survey Data
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
205
KFC
75
0
7
14
0
3.5
14
300%
206
KFC
76
3
15
4
11
10.5
9.5
-10%
15
24
32.5
35%
207
Roy Rogers
70
8
32
25
208
Roy Rogers
70
6
25
8
18
18.5
17
-8%
209
Wendys
74
4.5
20
11
14
14.5
18
24%
210
Burger King
85
4
30
12
30
19
27
42%
211
Burger King
87
11
11
9
12
16.5
15
-9%
212
Burger King
87
0
15
0
30
7.5
15
100%
213
Burger King
80
3
35
4
37
20.5
22.5
10%
214
Burger King
87
8
22
0
30
19
15
-21%
215
Burger King
87
4
18
14
6
13
17
31%
30
5
25
17.5
17.5
0%
216
Burger King
77
2.5
217
KFC
87
18
3
0
14
19.5
7
-64%
218
KFC
77
0
15
0
15
7.5
7.5
0%
219
KFC
87
0
12
2.5
11
6
8
33%
220
KFC
87
0
20
3
13
10
9.5
-5%
55
-31%
221
Roy Rogers
87
60
40
30
50
80
222
Roy Rogers
87
4.5
15
10
12
12
16
33%
223
Roy Rogers
80
12
13
0
27
18.5
13.5
-27%
224
Wendys
87
40
20
11
10
50
16
-68%
70
0
40
0
45
20
22.5
13%
225
Burger King
226
Burger King
70
0
35
2
25
17.5
14.5
-17%
227
Burger King
70
6
11
13.5
10
11.5
18.5
61%
228
Burger King
70
13.5
15
11
24
21
23
10%
229
Roy Rogers
70
17
14
20
14.5
24
27.25
14%
40
17.5
40
129%
230
Burger King
88
0
35
20
231
Burger King
89
20
25
6
15
32.5
13.5
-58%
232
Burger King
88
4
22.5
22
12
15.25
28
84%
233
Burger King
70
10
15
18
20
17.5
28
60%
234
Burger King
70
12
19
18
13
21.5
24.5
14%
235
Burger King
88
0
32
0
30
16
15
-6%
236
Burger King
70
1
38
10
50
20
35
75%
237
Burger King
88
8
10
21
6
13
24
85%
238
KFC
88
15
0
0
15
15
7.5
-50%
Card-Krueger Survey Data
Page 7
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
239
Roy Rogers
88
7
25.5
2
38
19.75
21
6%
240
Roy Rogers
88
20
20
15
20
30
25
-17%
241
Roy Rogers
88
6
16
3
20
14
13
-7%
242
Roy Rogers
88
5.5
25
6
27.5
18
19.75
10%
243
Roy Rogers
88
14.5
14.5
#N/A
#N/A
21.75
#N/A
#N/A
0
244
Roy Rogers
70
15
25
12
30
27.5
27
-2%
245
Wendys
88
0
40
5
35
20
22.5
13%
246
Wendys
88
10
15
10
25
17.5
22.5
29%
247
Wendys
70
15
35
40
31
32.5
55.5
71%
248
Burger King
79
8
20
0
32
18
16
-11%
249
Burger King
78
0
20
8
10
10
13
30%
250
Burger King
70
0
27.5
12
20
13.75
22
60%
251
Burger King
78
8
15
2
18
15.5
11
-29%
252
KFC
78
2
7
3
4
5.5
5
-9%
253
KFC
78
6
12
10
5
12
12.5
4%
254
Roy Rogers
78
0
40
3
30
20
18
-10%
255
Wendys
78
8
32
0
35
24
17.5
-27%
256
Burger King
77
5
20
0
32
15
16
7%
257
Burger King
77
2
32
10
12.5
18
16.25
-10%
258
Burger King
77
0
24
7
23
12
18.5
54%
259
Burger King
77
6
40
11
30
26
26
0%
260
Burger King
77
11
20
20
20
21
30
43%
261
Burger King
77
15
21
20
27.5
25.5
33.75
32%
262
KFC
77
13
12
1
10
19
6
-68%
263
KFC
77
2
12
2
10
8
7
-13%
264
KFC
77
8
3
0
17.5
9.5
8.75
-8%
265
KFC
80
3
15
0
15
10.5
7.5
-29%
266
KFC
77
12
4
15
10
14
20
43%
267
KFC
87
2
9
2
6
6.5
5
-23%
268
Roy Rogers
77
10
20
12
18
20
21
5%
269
Roy Rogers
77
4
15
0
19
11.5
9.5
-17%
270
Wendys
77
20
10
4.5
30
25
19.5
-22%
271
Wendys
77
1
13
4
9
7.5
8.5
13%
272
Wendys
77
0
30
8
25
15
20.5
37%
Page 8
Card-Krueger Sur
Data
Wave 1
Wav
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
273
Burger King
78
#N/A
#N/A
10
32
#N/A
26
#N/A
274
KFC
78
0
12
11
3
6
12.5
108%
40
30
25
-17%
275
Burger King
70
0
60
5
276
Burger King
73
0
33
16
22
16.5
27
64%
277
Burger King
73
30
14
13
11
37
18.5
-50%
278
Burger King
73
9
12
4
34
15
21
40%
279
Burger King
73
10
8.5
12
13.5
14.25
18.75
32%
280
KFC
73
8
10
8.5
6
13
11.5
-12%
281
Roy Rogers
73
12
32
5
32
28
21
-25%
282
Roy Rogers
73
4
36
6
37
22
24.5
11%
283
Wendys
73
0
19
0
14
9.5
7
-26%
28
2
35
17
19.5
15%
284
Burger King
80
3
285
Burger King
80
11
17.5
20
15
19.75
27.5
39%
286
Burger King
80
4.5
20
12
17.5
14.5
20.75
43%
287
Burger King
80
2
30
0
35
17
17.5
3%
288
Burger King
80
10
10
20
10
15
25
67%
11
47%
289
KFC
80
2
11
2
18
7.5
290
KFC
80
2
13
0
12
8.5
6
-29%
291
KFC
80
7
4
5
3
9
6.5
-28%
292
KFC
80
3
9
9
9
7.5
13.5
80%
80
3
15
3
12
10.5
9
-14%
293
KFC
294
KFC
80
1
28
1
15
15
8.5
-43%
295
Roy Rogers
80
2
24
2
15
14
9.5
-32%
296
Roy Rogers
80
3
18
3
20
12
13
8%
297
Roy Rogers
80
3
27
12
25
16.5
24.5
48%
26
11
13
18%
298
Wendys
80
0
22
0
299
Wendys
80
3
28.5
11
19
17.25
20.5
19%
300
Burger King
70
3
40
22
11
23
27.5
20%
301
Burger King
71
0
25
15
17
12.5
23.5
88%
302
Burger King
70
18
6
18
10
21
23
10%
303
Burger King
70
19
7
15
7
22.5
18.5
-18%
304
Burger King
70
5
17
#N/A
28
13.5
#N/A
#N/A
305
Burger King
70
12
11
9
17
17.5
17.5
0%
306
KFC
70
0
22
25
15
11
32.5
195%
Card-Krueger Survey Data
Page 9
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
307
KFC
71
15
4
0
19
17
9.5
-44%
308
Roy Rogers
70
7
25
7
22
19.5
18
-8%
309
Roy Rogers
70
12
30
16
12
27
22
-19%
310
Wendys
70
0
40
0
40
20
20
0%
311
Wendys
70
8
16
10
14
16
17
6%
312
Burger King
82
6
6
10
12
9
16
78%
313
KFC
82
1
4
2
4
3
4
33%
314
Roy Rogers
82
7
7
4
8
10.5
8
-24%
315
Burger King
80
20
10
#N/A
#N/A
25
#N/A
#N/A
2
316
Burger King
80
4
22
20
18
15
29
93%
317
Burger King
80
10
20
4
26
20
17
-15%
318
Burger King
80
7
13
0
22.5
13.5
11.25
-17%
319
Burger King
81
0
10
0
23
5
11.5
130%
320
Burger King
81
0
20
0
0
10
0
-100%
3
321
Burger King
80
6.5
20
30
25
16.5
42.5
158%
322
KFC
80
2
10
10
3
7
11.5
64%
323
KFC
80
2
14
2
11
9
7.5
-17%
324
KFC
80
4
4
1
8
6
5
-17%
325
KFC
80
2
15
1
14
9.5
8
-16%
326
KFC
81
3
4
0
9
5
4.5
-10%
0
0
9
0
-100%
3
327
Roy Rogers
80
2
14
328
Roy Rogers
80
5
23
6
12
16.5
12
-27%
329
Roy Rogers
81
3
25
3
15
15.5
10.5
-32%
330
Roy Rogers
80
1
15
2
15
8.5
9.5
12%
331
Roy Rogers
80
3
18
2
15
12
9.5
-21%
-5%
332
Roy Rogers
80
0
20
5
9
10
9.5
333
Roy Rogers
80
2
12
3
10
8
8
0%
334
Wendys
81
8
12
0
23
14
11.5
-18%
335
Wendys
80
4
20
5
16
14
13
-7%
10
15
15
11
17.5
20.5
17%
336
Wendys
80
337
Burger King
70
8
9
#N/A
21
12.5
#N/A
#N/A
338
Burger King
72
9
15
15
30
16.5
30
82%
339
Roy Rogers
70
10
35
12
35
27.5
29.5
7%
340
Roy Rogers
72
10
20
10
15
20
17.5
-13%
Page 10
Card-Krueger Survey Data
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
341
Roy Rogers
72
0
20
5
22
10
16
60%
342
Roy Rogers
72
17.5
17.5
25
25
26.25
37.5
43%
343
Wendys
72
0
28
3
23
14
14.5
4%
344
Burger King
84
4
6
3
2
7
4
-43%
345
Burger King
82
11
9
0
30
15.5
15
-3%
346
Burger King
82
8
12
15
6
14
18
29%
347
Burger King
82
15
15
12
14
22.5
19
-16%
348
Burger King
84
0
8
4
0
4
4
0%
349
KFC
84
5
7
7
6
8.5
10
18%
350
KFC
82
0
11
22
4
5.5
24
336%
351
Roy Rogers
84
8
13
12
5
14.5
14.5
0%
352
Roy Rogers
84
4
15
1
15
11.5
8.5
-26%
353
Burger King
85
2
16.5
3
20
10.25
13
27%
354
Burger King
80
28
12
10
20
34
20
-41%
355
Burger King
80
5
29.5
25
5
19.75
27.5
39%
356
Burger King
80
18
6
5
9
21
9.5
-55%
357
Burger King
80
6
30
15
17
21
23.5
12%
358
KFC
80
2
7
3
7
5.5
6.5
18%
359
KFC
80
10
6
4
11
13
9.5
-27%
360
KFC
80
2
10.5
3
12
7.25
9
24%
361
3
10.5
0
0
8.25
0
-100%
3
Roy Rogers
85
362
Roy Rogers
80
8
9
5
20
12.5
15
20%
363
Roy Rogers
80
2
27.5
10
20
15.75
20
27%
364
Roy Rogers
79
0
19
#N/A
#N/A
9.5
#N/A
#N/A
5
365
Roy Rogers
80
7.5
22.5
#N/A
31
18.75
#N/A
#N/A
366
Wendys
85
2
17
3
17
10.5
11.5
10%
367
Burger King
83
0
22
0
26
11
13
18%
368
Burger King
83
3
25
5
32
15.5
21
35%
369
Burger King
83
6
13
4
23
12.5
15.5
24%
370
KFC
83
6
13
24
4
12.5
26
108%
371
KFC
83
0
25
14
7
12.5
17.5
40%
372
KFC
83
3.5
20
1
30
13.5
16
19%
373
Roy Rogers
83
2
17
1
19
10.5
10.5
0%
374
Wendys
83
0
20
0
25
10
12.5
25%
Page 11
Card-Krueger Survey Data
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
(###XX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
375
Burger King
70
0
15
0
0
7.5
0
-100%
3
376
Burger King
74
20
11.5
26
5
25.75
28.5
11%
377
Burger King
76
4
10
0
17
9
8.5
-6%
378
Burger King
76
12
6
11
12
15
17
13%
379
Burger King
76
20
12
28
6
26
31
19%
380
Burger King
76
10
15
15
14
17.5
22
26%
381
Burger King
70
6
4
7
2
8
8
0%
382
Burger King
76
#N/A
#N/A
0
30
#N/A
15
#N/A
383
Burger King
74
16
14
15
14
23
22
-4%
384
Burger King
76
0
19
14
10
9.5
19
100%
385
KFC
76
15
5
12
7
17.5
15.5
-11%
386
KFC
76
4
10
18
4
9
20
122%
387
Roy Rogers
74
24
16
8
30
32
23
-28%
388
Roy Rogers
76
4
28
6
15
18
13.5
-25%
389
Roy Rogers
76
14
13
25
15
20.5
32.5
59%
390
Roy Rogers
74
13
8
18
18
17
27
59%
391
Roy Rogers
76
16
15
8
24
23.5
20
-15%
392
Roy Rogers
76
8
6
5
27
11
18.5
68%
393
Roy Rogers
76
11
10
17
5
16
19.5
22%
394
Roy Rogers
74
6
17
1.5
15
14.5
9
-38%
395
Burger King
74
0
35
0
35
17.5
17.5
0%
396
Burger King
78
0
36
4
36
18
22
22%
397
KFC
88
0
17
0
13
8.5
6.5
-24%
398
Burger King
71
0
36
0
20
18
10
-44%
399
Burger King
71
0
36
13
9
18
17.5
-3%
400
Burger King
70
8
32
0
38
24
19
-21%
401
Burger King
71
4
28
13
17
18
21.5
19%
402
Burger King
71
30
15
0
35
37.5
17.5
-53%
403
KFC
71
3
10
5
5
8
7.5
-6%
404
KFC
71
20
10
25
7
25
28.5
14%
405
KFC
71
0
7
5
10
3.5
10
186%
406
KFC
71
2
10
19
3.5
7
20.75
196%
407
KFC
71
3.5
6.5
12
3
6.75
13.5
100%
408
Roy Rogers
71
3
33
5
25
19.5
17.5
-10%
Page 12
Card-Krueger Survey Data
Wave 1
Wave 2
Full Time
Obs
Chain
Zip Code
Full-Time
Part-Time
Full-Time
Part-Time
Equivalent Employees
% Change
Notes
#
.
(##XXX)
Employees
Employees
Employees
Employees
Wave 1
Wave 2
In FTEs
409
Wendys
71
7
8
0
35
11
17.5
59%
410
Wendys
70
0
33
10
24
16.5
22
33%
Data are presented in the same sequence as in the Card-Krueger public use tape
Full Time Equivalent Employees are calculated in the same manner as in the Card-Krueger estimation: 2 part-time
workers = 1 full time workers
Notes
0
Refused second interview
2
Closed for renovation
3
Closed permanently
4
Closed for Highway construction
5
Closed due to mall fire
#N/A
Missing value in the Card Krueger-Data Set
Page 13
Card-Krueger Survey Data