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

32 Pages Posted: 28 Dec 2006

See all articles by David Card

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Lawrence F. Katz

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: November 1993

Abstract

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

Suggested Citation

Card, David E. and Katz, Lawrence F. and Krueger, Alan B., An Evaluation of Recent Evidence on the Employment Effects of Minimum and Subminimum Wages (November 1993). NBER Working Paper No. w4528. Available at SSRN: https://ssrn.com/abstract=480271

David E. Card (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Lawrence F. Katz

Harvard University - Department of Economics ( email )

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HOME PAGE: http://www.economics.harvard.edu/faculty/katz/katz

National Bureau of Economic Research (NBER) ( email )

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Alan B. Krueger

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

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