The liberals' faith healers in this instance are David Card and Alan Krueger, who are the authors of a book called Myth and Measurement: The New Economics of the Minimum Wage (Princeton, N.J.: Princeton University Press, 1995, 422 pp.). Their book is described by its publisher as presenting "a powerful new challenge to the conventional view that higher minimum wages reduce jobs for low-wage workers... [U]sing 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...they present a battery of evidence showing that increases in the minimum wage lead to increases in pay, but no loss in jobs."
Here is lefty Rob Wile using the Card and Krueger study:
Last week, tens of thousands of fast food workers went on strike to protest their current wages, bringing the debate over raising the minimum wage back into relief.Opponents of doing so argue that it would by definition increase unemployment.But Berkeley's David Card and Princeton's Alan Krueger, who also recently stepped down as chair of the White House Council on Economic Advisers, have twice shown that that is not necessarily the case.In their 1994 study Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania, the pair surveyed whether an increase in New Jersey's minimum wage reduced employment at fast food restaurants by comparing it with seven border counties in Pennsylvania.The evidence showed New Jersey's new $5.05 wage floor, enacted in April of 1992, was actually correlated with an increase in employment, and at a minimum did not negatively affect it.In 1998, they came back to the question in another study, this time using BLS data, as well as findings from a study that refuted that initial data. A total of 687 restaurants were examined.They basically found the same thing again, writing:The increase in New Jersey's minimum wage probably had no effect on total employment in New Jersey's fast-food industry, and possibly had a small positive effect.
What's really going on is that Card and Krueger studied what were minuscule hikes in a specific sector. Amazingly, Krueger admitted this in a 2013 interview with PBS:
[I]t turns out, you don’t have to raise prices that much to offset the higher costs of a minimum wage increase. What we found was that about a 3 percent increase in the price of fast food was enough to compensate the employers for the higher cost of labor as a result of the minimum wage increase.They know that they were playing with minuscule changes. Here is some of the back and forth during the PBS interview:
A 3 percent increase in prices is hardly noticeable to most customers. So that’s one reason why you don’t see much of an effect on the product demand side: There isn’t a reduction in people going to the fast food restaurants when the minimum wage increases.
And I would also add, that customers accept it. If they’re told, “Look, prices went up because the minimum wage increased. It’s not that we’re being greedy; It’s that we’re required to pay higher wages,” I think that they are willing to accept that kind of a price increase. That’s one factor that the higher prices helps to offset the cost of the minimum wage.
Paul Solman [PBS]: How high can you jack up the minimum wage before you start discouraging employment? Why shouldn’t Wal-Mart — why shouldn’t all big box stores — be required to provide full healthcare benefits, for example? How far can you push this?
Alan Krueger: That’s a really good question. And David Card and I, in our book, “Myth and Measurement: The New Economics of the Minimum Wage,” tried to look very hard for the tipping point. I think that there is a level at which the conventional effects dominate — when the minimum wage goes too high and employers cut back on employment.Beyond this, there have been questions about the methodology used by Card and Krueger.
Notes Lachlan Markay:
This, of course, is in addition to the faulty application of the methodology of the natural sciences in a social science. That this faulty methodology is used is admitted in the blurb to the book:
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 other words, there are multiple problems with the book from both theoretical and empirical directions, but it has become the cited book for lefties attempting to support the evil minimum wage.
So what does Tyler Cowen, of the Koch-funded George Mason University think about the work of these two and their sloppy misleading work on the minimum wage? He writes today:
I believe Card and Krueger will and should win Nobel Prizes...