Nobel Prize winner studied wage hikes in fast-food restaurants

David Card, a University of California-Berkeley economist, won this year’s Nobel Prize in his field, an honor that he’ll share with two other scholars. Card’s work, which explores changes in labor markets and has turned research about the minimum wage on its head, has renewed resonance at this moment. He and Princeton’s Alan Krueger (who died a few years ago) published a paper that focuses on what impact, if any, rising wages had on an industry. Specifically, their 1994 American Economic Review article focused on what happened to fast-food restaurants in New Jersey, which raised its standard pay to $5.05 in 1992 (the highest state minimum wage at the time!!!) and similar establishments in Pennsylvania, where wages didn’t change. This now-classic study of 400 Wendy’s, Roy Rogers, KFCs, and Burger King locations is often taught in undergraduate econ classes and the like. Don’t expect us to make much sense of regression models, but among many fascinating results, Card and Krueger found that the price of a fast-food meal rose faster in New Jersey than Pennsylvania, but not significantly and for various reasons, including more payroll expenses. Yet their most significant conclusion contradicted the conventional wisdom that employers cut jobs because they hiked pay. In fact, their study argued that as wages increased, employment generally did as well. Imagine that.

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