david card minimum wage

In it, they employed a clever solution to the standard problem with empirical studies of the effects of a policy change: how to determine what would have happened in the . David Card and Alan B. Krueger have already made national news with their pathbreaking research on the minimum wage. Within this family of methods, there is an approach to policy evaluation called “propensity score matching” that literally establishes a match between one treatment case and one or several comparison cases using an estimate of the probability of receiving a treatment. . Minimum-wage laws are not imposed under experimental conditions. 7 Economists David Neumark and William Wascher (2000) criticized Card and Krueger's study, arguing that the survey was poorly designed and implemented. The studies that do not match labor markets experiencing a minimum-wage increase with a comparison labor market tend to find that minimum-wage increases reduce employment. The first row in Table 1, which presents results when no matching is done, is representative of most study designs before Dube, Lester, and Reich (2010), and many since. Here they present a powerful new challenge to the conventional view that higher minimum wages reduce jobs for low-wage workers. Dube, Lester, and Reich’s (2010) estimates suggest that other localities may experience positive effects from the minimum wage, providing motivation for state or local minimum or living wages in excess of the federal minimum wage. The conventional wisdom about the minimum wage and job losses met one of its first substantive challenges in the early 1990s from two young economists at Princeton University: Alan Krueger and David Card, who now chairs the economics department at Berkeley. Use features like bookmarks, note taking and highlighting while reading Myth and Measurement: The New Economics of the Minimum Wage - Twentieth . (2016). As such, economists may not think of the minimum wage in the context of the evaluation literature and the methods of that literature. Card and Krueger's conclusion runs so against the grain of mainstream economic thinking, not to mention the present political consensus, that overkill seems quite appropriate. Princeton, New Jersey 08540 David Card & Alan B. Krueger, 1993. The Economic Policy Institute staff is unionized with the Blundell, R., and M. Costa Dias. Economist David Card found the next best thing. Ultimately, what matters is not the absolute increase in the minimum wage, but whether or not the minimum wage is in excess of the value of workers’ production to employers. . 1225 Eye St. NW, Suite 600 David Card is the Class of 1950 Professor of Economics at the University of California, Berkeley and Director of the Labor Studies Program at the National Bureau of Economic Research. At the minimum, the book has changed the burden of proof in debates over the minimum, from those who stressed the potential distributional benefits of the minimum to those who stress the potential employment losses. Staff Neumark and Wascher’s most recent minimum-wage study with J.M. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage." Industrial and Labor Relations Review, Vol. David Card and Alan Krueger dedicate their minimum wage book Myth and Measurement (1995) to Richard Lester, an institutional‐industrial relations labor . August 20, 1996, President Clinton signed a bill passed by Congress that raises the federal hourly minimum wage from $4.25 to $5.15; this is scheduled to occur through increases of 50 in October 1996 and 40 in September 1997. Dube, A. traverses its ground in great detail, studying every bump and dip in the landscape. Leading up to this increase has been a heated debate within the economics profession over the past . American Economic Review, vol 84 pp 772-93. Abadie, A., and J. Gardeazabal. Progressives who support raising the minimum wage often cite a 1994 study by Princeton economists David Card and Alan Krueger, who found that increases in the minimum wage do not lead to job losses.. 2013. “Recent Developments in the Econometrics of Program Evaluation.” Journal of Economic Literature. For example, Dube, Lester, and Reich (2010) also use a fixed-effects model, but more importantly it is a fixed-effects model that utilizes rigorous matching strategy to identify the effect of the minimum wage. Beijing 100016, P.R. 1 (October), pp. . "—Ronald G. Ehrenberg, Industrial and Labor Relations Review, "This book offers the most careful and wide-ranging analysis of the empirical evidence on minimum wages in the United States that any social scientist could ask for. As such, they are vulnerable to the same criticisms outlined above. 2008. 7. University of California, Berkeley | College of Letters & Science, Welfare reform; Immigration; Effects of Medicaid program; Pension incentives and retirement; Labor supply; Education; Minimum wages; Strikes and collective bargaining; Evaluation of social programs; Unemployment; Wage rigidity, 530 Evans Hall #3880, Berkeley, California 94720-3880. To evaluate the impact of the law we surveyed 410 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the . . 2 reviews. State-Level Data of Economic, Political, and Transfer-Program Information for 1980–2011. 2A Jiangtai Road, Chaoyang District EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. “Minimum Wages and Employment: A Case Study of the Fast-food Industry in New Jersey and Pennsylvania.” American Economic Review, 84(4), 772–793. 19262. In a work that has important implications for public policy as well as for the direction of economic research, the authors put standard economic theory . 1991. Events Download for offline reading, highlight, bookmark or take notes while you read Myth and Measurement: The New Economics of the Minimum Wage - Twentieth-Anniversary Edition. This important contribution to the matching literature is discussed in more detail below. Regardless of whether fixed-effect models use state or individual-level data, they rely on variations in the minimum wage among states to determine the effect of the policy. “Pooled Synthetic Control Estimates for Recurring Treatments: An Application to Minimum Wage Case Studies.” Unpublished manuscript, available at http://www.irle.berkeley.edu/events/spring14/zipperer/dubezipperer_pooledsyntheticcontrol.pdf. The book will interest everyone involved in the minimum wage debates, and it will cause economists to question seriously the models they use and how they do empirical research. This study uses Neumark and Wascher’s preferred fixed-effects modeling framework, but includes controls for Census division and state-specific labor market trends that Dube, Lester, and Reich (2010) suggest might be driving the strong negative employment effects in most fixed-effects analyses. Unlike most opponents of the minimum wage, I admit that David Card and Alan Krueger's famous research on the topic is well-done. In a work that has important implications for public policy as well as for the direction of economic research, the authors put standard economic theory . ISBN 9780691169125. 2011.“Do Minimum Wages Really Reduce Teen Employment? A detailed discussion of all of Dube’s work on the minimum wage is excluded in the interest of briefly outlining the differences between matching and nonmatching studies. Perhaps the best quality study using matching methods that identifies a disemployment effect is that of Singell and Terborg (2007), who find negative effects associated with much larger increases in the minimum wage in Oregon and Washington. To evaluate the impact of the new law we surveyed over 400 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. The critical advance has been that Neumark, Salas, and Wascher (2013) appear to concede that some sort of modern matching approaches are essential for evaluating the effect of minimum-wage increases in the absence of a randomized experiment. 2003. NBER Working paper 28388 January 2021. Card, David . Card was co-editor of Econometrica from 1991 to 1995 and co-editor of the American Economic Review from 2002 to 2005. He argues that there is a contradiction between two . One possible critique is that by over-parameterizing (i.e., adding too many controls to) their models, Dube, Lester, and Reich (2010) are mistakenly attributing true employment-discouraging effects of minimum-wage increases to other variables in their model, or that statistical significance is lost due to the difficulty of estimating such a complex model.6 However, the authors point out that these fears can be easily dismissed by comparing estimates of the impact of the minimum wage on employment with estimates of the impact on earnings. 46(1), 55–81. When no matching is done, the minimum-wage increase is estimated to have a negative effect. The work of Card and Krueger was worth a hundred theoretical models in The American Economic Review. Today, policymakers and the public also seem to want a one-armed economist in discussions of the minimum wage. In any case, the stronger designs that use matching strategies clearly contradict the theory that minimum-wage increases reduce employment. Anderson, The Washington Post, "David Card and Alan Krueger have written a book that represents a phenomenal amount of careful and honest research and that will be a classic in the minimum wage literature and also in the broader field of empirical labor economics.... A model of how to do good believable research, this book will be influential for a long time. See Holzer (2008) for a review of the literature on living wage laws. 22 - 37. . He has also published over 100 journal articles and book chapters. Notably, the standard errors of the estimates of the minimum-wage effect increase more substantially from the baseline model for the earnings regressions than they do for the employment regressions. Source: Author’s calculations from the University of Kentucky Center for Poverty Research’s (2012) state-level data of economic, political, and transfer-program information for 1980–2011. David Card is the Class of 1950 Professor of Economics at the University of California, Berkeley and Director of the Labor Studies Program at the National Bureau of Economic Research. Someone working full-time at $7.25 an hour, 40 hours a week, would earn a bit more than $15,000 a year, which is actually a bit above the official poverty line for an individual. the nastiest, most unspeakable perversion of our service-based economy [is] the declining value of the minimum wage. Many states and even local governments set minimum wages that are higher than the federal minimum. Those who accept this model were surprised a decade ago by Card and Krueger's results. . 6. Why give to EPI In fact, even before using county pairs, as Dube, Lester, and Reich (2010) add increasingly more precise geographic matching into their models, the negative impact of the minimum-wage increase identified in the nonmatching literature (discussed in more detail below) gradually evaporates. The most notable advance in matching has been in the work of Arindrajit Dube with several coauthors, which uses counties that neighbor each other across state borders as control cases. To examine the effect of the New Jersey minimum-wage increase using rep- These estimates are all heavily concentrated around zero, consistent with their finding of negligible disemployment effects. It organizes the most prominent studies in this literature by their use of two different empirical approaches: studies that match labor markets experiencing a minimum-wage increase with an appropriate comparison labor market, and studies that do not. David Card and Alan B. Krueger have already made national news with their pathbreaking research on the minimum wage. The empirical literature on the impact of the minimum wage is large, but much of it (and all important recent studies) can be classified into one of two categories: one, studies that match and compare cases involving an increase in the minimum wage with a similar control group, and two, studies that do not match cases of a minimum-wage increase to a similar control group. A review of this literature suggests that: A better understanding of which approach is more rigorous is required to make reliable inferences about the effects of the minimum wage. California's state minimum wage and Katz and Krueger's (1992) study of the impact of the 1990 and 1991 increases in the federal minimum wage. Finally, all of these analyses use state-wide data, which arguably provide a weaker match than Card and Krueger (1994), Dube, Lester, and Reich (2010), and other studies that match neighboring counties rather than states.8 Even if these negative results are taken at face value, the strongest studies investigating the widest range of minimum-wage increases by Dube and his colleagues find that on average, minimum-wage increases have little or no effect on employment. Description of BLS ES-202 Data On April 1, 1992, the New Jersey state min- imum wage increased from $4.25 to $5.05 per hour, while the minimum wage in Pennsylvania remained at $4.25. “Minimum Wages and Aggregate Job Growth: Causal Effect or Statistical Artifact?” IZA Discussion Paper No. Raising the minimum wage is so hot right now.President Obama, of course, proposed increasing the federal minimum from $7.25 to $9 an hour, and indexing it to inflation thereafter, in this year's . First, we can only make inferences about the impact of a minimum-wage increase if it is relatively similar to the sorts of minimum-wage increases that have been studied. He is a fellow of the American Academy of Arts and Sciences, the American Academy of Political and Social Science, the Econometric Society and the Society of Labor Economics, and a previous recipient of the John Bates Clark Prize, the Frisch Medal . 1996. Newsroom New Jersey increased its minimum wage to $5.05 per hour in 1992, when the national minimum wage was $4.25 per hour. Singell, L.D., and J.R. Terborg. Here they present a powerful new challenge to the conventional view that higher . Directions, Princeton Asia (Beijing) Consulting Co., Ltd. Neumark, D. 2001. In models that match counties that straddle a state border, additional “fixed effect” variables must be added indicating that a given county in the dataset is a member of a county pair. Myth and Measurement: The New Economics of the Minimum Wage - Twentieth-Anniversary Edition - Kindle edition by Card, David, Krueger, Alan B., Card, David, Krueger, Alan B.. Download it once and read it on your Kindle device, PC, phones or tablets. In their reanalysis of administrative payroll data, Card and Krueger (2000) also provide evidence of selection bias problems associated with data on New Jersey and Pennsylvania restaurants provided to Neumark and Wascher (2000) by Richard Berman, a public affairs executive who advocates on behalf of the food and beverage industry. The problem with such minimum wage "studies" [the 1994 Card and Krueger article] that purport to demonstrate only positive and no negative effects from a rising minimum wage is that it is . . Then, in 1993, economists David Card and Alan Krueger looked at fast-food restaurants in New Jersey and Pennsylvania and found that raising the minimum wage gave people more income without hurting . Directions. The largest increases during this period (i.e., 1974–1976 and 1978–1981) came at a time of considerable inflation, so their magnitude to a large extent reflects an effort to keep up with consumer prices. The strongest designs seem to consistently find little or no evidence of disemployment effects associated with increases in the minimum wage. He has a master’s degree in public policy, specializing in labor market policy, from George Washington University. 6 Card and Krueger (1994), p. 792. In 1992 he was elected a fellow of the Econometric Society, and in 1998 he was elected to the American Academy of Arts and Sciences. West. Figure A presents the distribution of all percentage changes in effective minimum wages for all states from 1980 to 2011 using data from the University of Kentucky’s Center for Poverty Research.11 The “effective” minimum wage is defined here as the highest of either the federal or state minimum wage in a given state.12 Almost all increases were lower than 15 percent. National Bureau of Economic Research Working Paper No. Dube, A., S. Naidu, and M. Reich. David Card and Alan B. Krueger have already made national news with their pathbreaking research on the minimum wage. 1992a. In the previous year, 11 percent of California workers and fully one-half of its teenage workers earned less than the new state minimum. Table 1 reports Dube, Lester, and Reich’s (2010) estimates of the percentage change in employment resulting from a percentage change in earnings as a result of an increase in the minimum wage.5 The authors analyze two different samples of employment data: one that includes all counties (the first column), and one that includes pairs of neighboring counties (the second column), with county pair matching performed on the latter sample. . Buchanan, J. "—Charles Brown, University of Michigan, "The most professional work ever done on this highly controversial subject. . Although the minimum-wage literature as a whole is divided on the question of the impact of minimum-wage increases, the strongest studies that use matching strategies find little or no evidence that such increases have a negative impact on employment. Neumark and Wascher (1996), Neumark (2001), and others soon extended the fixed-effects modeling framework to individual-level data to understand the impact of the minimum wage on specific vulnerable groups. Copy the code below to embed this chart on your website. Program on Race, Ethnicity, and the Economy, Economic Analysis and Research Network (EARN), Program on Race, Ethnicity, and the Economy • PREE, Economic Analysis and Research Network • EARN. The minimum wage is set at $7.25 by the federal government but is higher in 19 states and D.C., with the highest minimum wage set at $9.19 in Washington state. Hoffman, S. D. 2014. . 2009. 84 . 2013. The New Economics of the Minimum Wage - Twentieth-Anniversary Edition. Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage David Card Industrial and Labor Relations Review, Vol. In 1995 he received the American Economic Association's John Bates Clark Prize, which is awarded every other year to the economist under 40 whose work is judged to have made the most significant contribution to the field. Introductory economics classes often teach students an application of an incorrect model of labor markets governed by supply and demand. [] Economists from the Federal Reserve Bank of Chicago predicted that a $1.75 rise . This research estimated that a 10 percent increase in the minimum wage reduced teenage employment by 1 to 2 percent and young adult employment by 1.5 to 2 percent. 2009. Some matching studies do find disemployment effects. Unit 2702, NUO Centre Models, and C. Cotti Blackburn, and B. Zipperer in 1994 when david Card and Krueger... 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Kuehn • September 4, 2014 a proposal occurs under dramatically different circumstances, the standard of! Employees Union or statistical Artifact? ” IZA discussion paper no most professional work ever done on this highly subject... On minimum wage controls for unobserved heterogeneity by restricting the analysis to stores within a firm... By comparing it to prior federal minimum-wage increases available option if no natural experiment or other matching emerges. Leonard ’ s degree in public policy, from George Washington University an application of an incorrect model of minimum! Effects in matching studies with field specializations in labor market is likely to vary with local conditions to Truman... Value of the California increase provides a valuable opportunity to study the effects of minimum wage increases from Case...
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