18.
The Card-Krueger Study
A 1992 study used extensively by minimum wage advocates in legislating
the most recent increase is that done by two Princeton economists, David
Card and Alan Krueger. Published as a book in 1994, the study focused on
a comparison of fast food restaurants in the state of New Jersey with a
minimum wage increased to $5.05 and in the state of Pennsylvania with the
minimum wage remaining at $4.25. The study was embarrassingly faulty in
its methodology. The minimum wage law addresses the payment of
labor on an hourly
basis.
But the Card-Krueger study looked at the total number of
employees
and not the total number of
hours
of employment.
Equally fatal
to any scientific credibility of their study was their method of gathering
their data. The study method was to call the fast food restaurants and
ask -- whoever was the manager on duty at the moment -- how many employees
the store had. Further, in asking the question, the respondent was not
even given a time frame, such as the number of employees at the store
at the time of the call, or the number of employees scheduled to work
during the course of the day or the number of workers scheduled to work
that week. Thus each telephone answerer at the stores could interpret the
question with their own meaning! With such a faulty method, the study
produced data so ridiculously skewed as to be obvious to even a casual
observer. As stated in a report by the Employment Policies Institute:
"These serious mistakes and omissions have resulted in a study doomed
to become a textbook example of how
not
to collect data." Once these
flaws were made known by critics, Labor Secretary Robert Reich changed
his claims for the minimum wage from a means to "actually increase jobs"
to arguing that a "modest" increase would cause "negligible job loss."
Fortunately, for those interested in a validly conducted test of the
effect the minimum wage law had on hourly employment in these fast food
restaurants, the Employment Policies Institute did a follow-up study using
actual payroll data. A similar study was also done by economists David
Neumark and Willam Wascher. Not surprisingly, these studies found that
in fact the 18%
higher
minimum wage law
reduced
the number of hours of employment by about 5% -- just as common sense would suggest.
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