Minimum Wages and Employment: a Case Study of the

Minimum Wages and Employment: A Case Study of the
Fast-Food Industry in New Jersey and Pennsylvania: Reply
By
DAVID CARD AND ALAN B. KRUEGER*

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
wage.
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)... [continues]

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