Minimum Wages and Employment: a Case Study of the

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Minimum Wages and Employment: A Case Study of the
Fast-Food Industry in New Jersey and Pennsylvania: Reply

Replication and reanalysis are important endeavors
in economics, especially when new findings
run counter to conventional wisdom. In their
Comment on our 1994 American Economic Review
article, David Neumark and William Wascher
(2000) challenge our conclusion that the
April 1992 increase in the New Jersey minimum
wage led to no loss of employment in the fast-food
industry. Using data drawn from payroll records
for a set of restaurants initially assembled by Richard
Berman of the Employment Policies Institute
(EPI) and later supplemented by their own datacollection
efforts, Neumark and Wascher (hereafter,
NW) conclude that “... the New Jersey
minimum-wage increase led to a relative decline
in fast-food employment in New Jersey” compared
to Pennsylvania.1 They attribute the discrepancies
between their findings and ours to problems
in our fast-food restaurant data set. Specifically,
they argue that our use of employment data derived
from telephone surveys, rather than from
payroll records, led us to draw faulty inferences
about the effect of the New Jersey minimum
In this paper we attempt to reconcile the
contrasting findings by analyzing administrative
employment data from a new representative
sample of fast-food employers in New Jersey
and Pennsylvania, and by reanalyzing NW’s
data. Most importantly, we use the Bureau of
Labor Statistics’s (BLS’s) employer-reported
ES-202 data file to examine employment
growth of fast-food restaurants in a set of major
chains in New Jersey and nearby counties of
Pennsylvania.2 We draw two samples from the
ES-202 files: a longitudinal file that tracks a
fixed sample of establishments between 1992
and 1993, and a series of repeated cross sections
from the end of 1991 through 1997. Because the
BLS data are derived from unemploymentinsurance
(UI) payroll-tax records, the employment
measures are free of the kinds of survey
errors that NW allege affected our earlier results.
In addition, because the ES-202 data include
information for all covered employers in a
fixed group of restaurant chains, there is no
reason to doubt the representativeness of the
BLS sample.
A comparison of fast-food employment
growth in New Jersey and Pennsylvania over
the period of our original study confirms the key
findings in our 1994 paper, and calls into question
the representativeness of the sample assembled
by Berman, Neumark, and Wascher.
Consistent with our original sample, the BLS
fast-food data set indicates slightly faster employment
growth in New Jersey than in the
Pennsylvania border counties over the time period
that we initially examined, although in
most specifications the differential is small and
statistically insignificant. We also use the BLS
* Card: Department of Economics, Evans Hall, University
of California, Berkeley, CA 94720, and National Bureau
of Economic Research; Krueger: Department of
Economics, Princeton University, Princeton, NJ 08544, and
National Bureau of Economic Research. The analysis in
Sections I, II, and III, subsection E, of this paper is based on confidential Bureau of Labor Statistics (BLS) ES-202 data.
The authors thank the BLS staff for assistance with these
data. Although the BLS data are confidential, persons employed by an eligible organization may apply to BLS for
restricted access to ES-202 data for statistical research purposes. Data from our 1994 paper are available via anonymous
FTP from the minimum directory of
All opinions and analysis in this paper reflect the views of the authors and not the U.S. government. We thank seminar
participants at Princeton University, the National Bureau of Economic Research, the University of Pennsylvania, the
University of California-Berkeley, the Kennedy School
(Harvard University), and Larry...
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