Alan Krueger is an economist that recently passed away. He wrote a book, Myth and Measurement: The New Economics of the Minimum Wage. He claims that the empirical data he collected suggest that raising the minimum wage does not cause unemployment. In short, he is saying as things get more expensive people do not buy less of it. He rejects supply and demand. I debunked the methodology used in his book here.
The book does a comparison of changes in employment in New Jersey and Pennsylvania. Krueger surveyed fast-food establishments in New Jersey and Pennsylvania before and after the minimum wage in New Jersey rose from $4.25 to $5.05. The comparison is a simple “differences-in-differences” test between the two states. The conclusion is that the rise in Jew Jersey’s minimum wage did not reduce employment at fast-food restaurants. In fact, the data suggest that the increase in minimum wage actually increased employment.
David Neumark and William Wascher wrote a paper which went deeper into the data to verify Krueger’s findings. You can read the paper here. Instead of a survey they collected actual payroll records from Burger King, Wendy’s, Roy Rogers, and KFC restaurants in New Jersey and Pennsylvania. Here is one of the their main conclusions from their findings (‘CK’ refers to David Card and Alan Krueger):
The paper came to the exact opposite conclusion using data collected from payrolls. ‘Measurements’ in social sciences are tricky. It is very different than the natural sciences. David Neumark and William Wascher paper just proves how sloppy Alan Krueger was with thinking. If the NBER asked me to write a paper on Alan Krueger’s book it would have been one sentence:
As things get more expensive, people buy less of it.