When New Jersey Boosted Its Minimum Wage 20 Years Ago


About 20 years ago, in the midst of a recession, New Jersey decided to boost its minimum wage to $5.05 an hour from $4.25. Its neighbor to the west, Pennsylvania, chose not to tinker with its wage floor. Two bright young economists at Princeton, David Card and Alan B. Krueger, recognized in that dull occurrence a promising natural experiment.

The two found fast-food joints along the New Jersey-Pennsylvania border, and surveyed them twice over the course of 11 months about how many people they employed. They figured that when New Jersey’s minimum wage went up, Garden State burger joints would hire fewer workers. The ones on the Pennsylvania side, acting as a kind of control, would see no change.

They were wrong. To everyone’s surprise, there was actually no change in employment in the New Jersey restaurants, relative to the Pennsylvania ones. The price of low-wage work had gone up, and somehow, demand had remained the same.

Annie Lowery tackles the fast food/minimum wage debate this morning in the Times magazine, and unsurprisingly, the conclusions are what they have been: economists cannot agree on what will or will not work (some have argued that the New Jersey study above, for example, may not be a microcosm of what could happen nation-wide), raising the minimum wage alone will not eradicate poverty, and since the minimum wage has eroded over time and Washington has been lead-footed when it has come to increasing it, raising it in individual states and cities has been popular among voters.

Costco’s Craig Jelinek, who pays his workers at least $11.50 an hour to start, makes an appearance: “Paying employees good wages makes good sense for business,” he says. And as we’ve seen: It can be good business for burger joints too.

Photo: Pop Culture Geek

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10 Comments / Post A Comment

honey cowl (#1,510)

I SEE THE DICK’S DRIVE IN TAG AND I AM HAPPY ABOUT IT

ruraljurer#2 (#3,855)

@honey cowl Yes!!!

lakawak (#4,475)

Of course, that doesn’t factor in that there was actual competition from the ones across the border…so they couldn’t simply increase customer wait times without losing business. Nor does it factor in the fact that when they did this, we were on the verge of the dot com bubble propping up (artificially) the economy for awhile.

Based on this obvious oversights, the last thing you could call these two would be “bright”. But I suspect they weren’t evne trying to be unbiased. Otherwise they would have checked the ENTIRE state…Including ones without border competition.

lakawak (#4,475)

Also doesn’t mention if they actually checked what the PA fast food places WERE paying their employees. For all we know, they increased their wages anyway, knowing if they didn’t, all the monkey workers would simply look for jobs a few miles east in NJ. This is usually what happens.

Oh…and yet ANOTHER thing this doesn’t take into account is that now…20 years later, almost all their jobs could be EASILY automated. Supermarket customers have already shown that they are not only willing, but PREFER to use the self-checkouts. And some McDonalds already have self-ordering kiosks that makes cashiers obsolete. And some automation in the kitchen could allow half the “cooks” to do the same job that the full staff does now.

jlq2 (#5,583)

@lakawak Did you actually read the original research article? Because they DO address that.

How does conducting a two store “study” with two points of data over 11 months qualify these guys as bright?!

Bright compared to Mike Dang? Sure.

Bright compared to the rest of us? No.

Meaghano (#529)

@Rodger Dodger@facebook It’s a pleasure to hear from such a discerning data scientist as yourself, but you might want to read this post again, and note that “bright” was part of the article Mike Dang was quoting, not his commentary. It’s okay, I am sure you are bright in many areas other than reading comprehension!

Sloane (#675)

@Meaghano That’s uncalled for.

When it comes to regional jobs that cannot be outsourced, wage increases do not affect total numbers of jobs filled, simply by way of demand for services. Good to know this simple economic lesson now has a proven tested example.

I consider myself a progressive and liberal and even I know the difference between a living wage and minimum wage. Look, if you want to raise kids and own a home, don’t go to work at a fast food restaurant. Get a higher paying job. If you aren’t qualified, get student loans and go to a technical or community college.

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