Myth and Measurement: The New Economics of the Minimum Wage (Twentieth-Anniversary Edition)

by David Card, Alan B. Krueger, David Card (Preface by), Alan B. Krueger (Preface by)

Overview

From David Card, winner of the Nobel Prize in Economics, and Alan Krueger, a provocative challenge to conventional wisdom about the minimum wage

David Card and Alan B. Krueger have already made national news with their pathbreaking research on the minimum wage. Here they present a powerful new challenge to the conventional view that higher minimum wages reduce jobs for low-wage workers. 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 to the test, using data from a series of recent episodes, including the 1992 increase in New Jersey's minimum wage, the 1988 rise in California's minimum wage, and the 1990–91 increases in the federal minimum wage. In each case they present a battery of evidence showing that increases in the minimum wage lead to increases in pay, but no loss in jobs.

A distinctive feature of Card and Krueger's research is the use of empirical methods borrowed from the natural sciences, including comparisons between the "treatment" and "control" groups formed when the minimum wage rises for some workers but not for others. In addition, the authors critically reexamine the previous literature on the minimum wage and find that it, too, lacks support for the claim that a higher minimum wage cuts jobs. Finally, the effects of the minimum wage on family earnings, poverty outcomes, and the stock market valuation of low-wage employers are documented. Overall, this book calls into question the standard model of the labor market that has dominated economists' thinking on the minimum wage. In addition, it will shift the terms of the debate on the minimum wage in Washington and in state legislatures throughout the country.

With a new preface discussing new data, Myth and Measurement continues to shift the terms of the debate on the minimum wage.

Product Details

ISBN-13:	9780691169125
Publisher:	Princeton University Press
Publication date:	12/22/2015
Edition description:	Twentieth-Anniversary Edition
Pages:	454
Product dimensions:	5.90(w) x 8.90(h) x 1.10(d)

About the Author

David Card, winner of the 2021 Nobel Prize in Economics, is Class of 1950 Professor of Economics at the University of California, Berkeley. Alan B. Krueger is Bendheim Professor of Economics and Public Affairs at Princeton University.

Table of Contents

Preface to the Twentieth-Anniversary Edition ix

Preface xxvii

Chapter 1 Introduction and Overview 1

Chapter 2 Employer Responses to the Minimum Wage: Evidence from the Fast-Food Industry 20

Chapter 3 Statewide Evidence on the Effect of the 1988 California Minimum Wage 78

Chapter 4 The Effect of the Federal Minimum Wage on Low-Wage Workers: Evidence from Cross-State Comparisons 113

Chapter 5 Additional Employment Outcomes 152

Chapter 6 Evaluation of Time-Series Evidence 178

Chapter 7 Evaluation of Cross-Section and Panel-Data Evidence 208

Chapter 8 International Evidence 240

Chapter 9 How the Minimum Wage Affects the Distribution of Wages, the Distribution of Family Earnings, and Poverty 276

Chapter 10 How Much Do Employers and Shareholders Lose? 313

Chapter 11 Is There an Explanation? Alternative Models of the Labor Market and the Minimum Wage 355

Chapter 12 Conclusions and Implications 387

References 401

Index 415

What People are Saying About This

Heckman

The analysis of minimum wage by Card and Krueger is both comprehensive and provocative. It challenges the received wisdom and is certain to be a major influence on all future work on the topic.
— James J. Heckman, University of Chicago

Richard Freeman

Most economists believe that minimum wages invariably reduce employment, but are they right? In this compelling analysis of the U.S. minimum wage, Card and Kreuger show that recent increases in the minimum wage had no adverse effect on employment. This pathbreaking book suggests that economists know less about what the invisible hand is up to than they let on.
— Richard Freeman, London School of Economics and Harvard University

Richard Layard

The most professional work ever done on this highly controversial subject.
— Richard Layard, London School of Economics

Charles Brown

In Card and Krueger's hands, the collage becomes a dangerous weapon; the idea that employment has fallen significantly in the wake of minimum wage increases is attacked with both new evidence and a careful look at previous studies.
— Charles Brown, University of Michigan

From the Publisher

"Most economists believe that minimum wages invariably reduce employment, but are they right? In this compelling analysis of the U.S. minimum wage, Card and Kreuger show that recent increases in the minimum wage had no adverse effect on employment. This pathbreaking book suggests that economists know less about what the invisible hand is up to than they let on."—Richard Freeman, London School of Economics and Harvard University

"Myth and Measurementis an extraordinarily important book. It will rank with seminal works in labor economics, including Gary Becker's Human Capital, Jacob Mincer's Schooling, Earnings, and Experience, Richard Freeman and James Medoff's What Do Unions Do?, and Edmund Phelp's (ed.) Microeconomic Foundations of Employment and Inflation Theory. 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."—Ronald G. Ehrenberg, Cornell University

"The analysis of minimum wage by Card and Krueger is both comprehensive and provocative. It challenges the received wisdom and is certain to be a major influence on all future work on the topic."—James J. Heckman, University of Chicago

"In Card and Krueger's hands, the collage becomes a dangerous weapon; the idea that employment has fallen significantly in the wake of minimum wage increases is attacked with both new evidence and a careful look at previous studies."—Charles Brown, University of Michigan

"The most professional work ever done on this highly controversial subject."—Richard Layard, London School of Economics

Ehrenberg

Myth and Measurement is an extraordinarily important book. It will rank with seminal works in labor economics, including Gary Becker's Human Capital, Jacob Miner's Schooling and Earnings, Richard Freeman and James Medoff's What Unions Do?, and Edmund Phelp's (ed.), Microeconomic Foundations of Employment and Inflation Theory. 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.
— Ronald G. Ehrenberg, Cornell University

Editorial Reviews

"Card and Krueger have written a powerful book underpinned by hard facts. . . . They explode myths and indict the prescriptions of conventional economic thinkers. Few will read this book from cover to cover, but many will quote its conclusions in the months to come."

New Statesman and Society

"Our understanding of wage determination has been transformed by an intellectual revolution. . . . Until the Card-Krueger study, most economists, myself included, assumed that raising the minimum wage would have a clear negative effect on employment. But they found, if anything, a positive effect. Their result has since been confirmed using data from many episodes. There's just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America."—-Paul Krugman, New York Times

"Highly persuasive. . . . An exemplary book."—-J. W. Anderson, Washington Post

"Card and Krueger didn't just question the conventional wisdom; they attacked it in a novel and powerful way. Instead of concocting a mathematical model and 'testing' it with advanced statistical techniques, which is what most economists call research, they decided to test the theory in the real world. . . . The work of Card and Krueger was worth a hundred theoretical models in The American Economic Review."—-John Cassidy, New Yorker

"The nastiest, most unspeakable perversion of our service-based economy [is] the declining value of the minimum wage. . . . The downward pressure on wages is making this a country where working literally doesn't pay. . . . David Card and Alan Krueger show through meticulously assembled data that increasing minimum pay in the fast-food industry has no discernable effect on the number of jobs, on consumer prices, or even on employee benefits like free meals. . . . Labor markets, like so many other phenomena in the real world, are far from perfect and do not behave according to the theories of defunct economists."—-Joe Conason, New York Observer

From the Publisher

"Myth and Measurement . . . traverses its ground in great detail, studying every bump and dip in the landscape. . . . But that's just about what the issue requires. 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. That conclusion, reached through a number of separate studies, is this: The minimum wage not only doesn't kill jobs, it may even stimulate employment. . . . Myth and Measurement should be a very important book. It essentially settles the policy debate on the minimum wage, and the economics profession should spend a good bit of time engaging in profound reflection and in testing some of the field's first principles."

Voice Literary Supplement

Clearly, this book should be read by any economist who wants to stay abreast of substantive, high level debates within the profession.... The book already has assumed an important position within the field of labor economics, and significant research in years to come is likely to revolve around its principle thesis.

Journal of Economics - K. A. Couch

A very substantial book. . . . A highly persuasive collection of evidence. . . . An exemplary book.

The Washington Post - J.W. Anderson

Clearly, this book should be read by any economist who wants to stay abreast of substantive, high level debates within the profession.... The book already has assumed an important position within the field of labor economics, and significant research in years to come is likely to revolve around its principle thesis.

Journal of Economics - K.A. Couch

. . . the nastiest, most unspeakable perversion of our service-based economy [is] the declining value of the minimum wage. . . . The downward pressure on wages is making this a country where working literally doesn't pay. . . . David Card and Alan Krueger show through meticulously assembled data that increasing minimum pay in the fast-food industry has no discernable effect on the number of jobs, on consumer prices, or even on employee benefits like free meals. . . . Labor markets, like so many other phenomena in the real world, are far from perfect and do not behave according to the theories of defunct economists.

The New York Observer - Joe Conason

The Card-Krueger work is essentially correct: the minimum wage at levels observed in the United States has had little or no effect on employment. 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.
— Richard B. Freeman

Journal of Economic Perspectives

Although this book raises very sharp questions about the practice of labor economics, the book itself is terrific. CK's creative careful, and above-the-board empirical work is a model of how to do good believable research and this book will be influential for a long time.
— Paul Osterman

Industrial and Labor Relations Review

Although this book raises very sharp questions about the practice of labor economics, the book itself is terrific. CK's creative careful, and above-the-board empirical work is a model of how to do good believable research and this book will be influential for a long time.

Industrial and Labor Relations Review - Paul Osterman

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.

Journal of Economic Perspectives - Richard B. Freeman

Card and Krueger didn't just question the conventional wisdom; they attacked it in a novel and powerful way. Instead of concocting a mathematical model and 'testing' it with advanced statistical techniques, which is what most economists call research, they decided to test the theory in the real world. . . . The work of Card and Krueger was worth a hundred theoretical models in The American Economic Review.

The New Yorker - John Cassidy

Myth and Measurement may well be the most important labor economics monograph of the 1990s.

Industrial and Labor Relations Review - Ronald G. Ehrenberg

Clearly, this book should be read by any economist who wants to stay abreast of substantive, high level debates within the profession.... The book already has assumed an important position within the field of labor economics, and significant research in years to come is likely to revolve around its principle thesis.
— K. A. Couch

Journal of Economics

. . . the nastiest, most unspeakable perversion of our service-based economy [is] the declining value of the minimum wage. . . . The downward pressure on wages is making this a country where working literally doesn't pay. . . . David Card and Alan Krueger show through meticulously assembled data that increasing minimum pay in the fast-food industry has no discernable effect on the number of jobs, on consumer prices, or even on employee benefits like free meals. . . . Labor markets, like so many other phenomena in the real world, are far from perfect and do not behave according to the theories of defunct economists.
— Joe Conason

The New York Observer

A very substantial book. . . . A highly persuasive collection of evidence. . . . An exemplary book.
— J.W. Anderson

The Washington Post

Card and Krueger didn't just question the conventional wisdom; they attacked it in a novel and powerful way. Instead of concocting a mathematical model and 'testing' it with advanced statistical techniques, which is what most economists call research, they decided to test the theory in the real world. . . . The work of Card and Krueger was worth a hundred theoretical models in The American Economic Review.
— John Cassidy

The New Yorker