It's Simple: Hike The Minimum Wage, And You Put People Out Of Work

Click here to read this Gary Becker article from BusinessWeek, 1995. Excerpts:

"A recent and widely cited challenge of this kind has come from several studies by two Princeton University economists, David Card and Alan B. Krueger--the latter now Robert B. Reich's chief economist at the Labor Dept. One study finds that the change in employment after a minimum-wage hike is generally not bigger in states with a larger fraction of low-wage workers--the group that should be most affected by higher minimums.

Another study is frequently mentioned by Reich and others in the Administration to bolster the argument that a higher minimum does not lower employment. That study compares employment changes in fast-food restaurants in New Jersey and Pennsylvania after New Jersey raised its own minimum in 1992. Card and Krueger argue that because employment fell in Pennsylvania as much as it did in New Jersey, the drop in both states must have been due to other causes than the raise in the minimum.

There are some, and I am one of them, who believe that these studies have serious defects. Several of these were spelled out by Donald R. Deere and Finis R. Welch of Texas A&M University and Kevin M. Murphy of the University of Chicago in research they reported at the January meetings of the American Economic Assn.

For example, the higher federal minimum in 1990 and 1991 caused a much larger drop in New Jersey's teenage employment than Pennsylvania's, which could explain why employment did not fall more in New Jersey when that state increased its own minimum in 1992. New Jersey employers presumably anticipated the increase in their state's minimum when they sharply cut employment in responding to the earlier wage hike."