Daniel Goh (McGill ID: 260305028)
ECON 426, Article Summary
12 October 2011
Title: Minimum Wages and Employment: A Case Study of the Fast-Food Industry in
New Jersey and Pennsylvania
Authors: David Card, Alan B. Krueger
Source: American Economic Review
Date: September 1994
Keywords: Employment, Minimum Wage, Prices
• What is the effect of an increase in minimum wage on establishment level
employment and product price outcomes?
• The increase in minimum wage did not decrease employment in the fast-food
chains surveyed; in fact, employment increased following the minimum wage
• Prices in fast-food restaurants in New Jersey increased higher in comparison to
restaurants in Pennsylvania.
• This investigation builds on studies that have found mixed results, but with the
general conclusion that increases in minimum wage do not have significant
adverse impacts on employment (Card 1992, Lawrence F. Katz and Krueger
1992, Stephen Machin and Alan Manning1994).
Frontier: Effects of minimum wage increases on employment and prices.
• Data was collected in two waves before (late February and early March 1992) and
after (November and December 1992) the minimum wage increase in fast-food
restaurants in Pennsylvania and New Jersey.
• To investigate the effect of the minimum wage increase on entry into the fast-food
industry, investigators utilized McDonald’s national restaurant directories and
compared numbers of newly opened restaurants over different states in a period
from 1986 to 1991.
• Data from the Current Population Survey (CPS) from 1991 to