Department of Economics

University of Delaware

Working Paper #2007-08

New Jersey and PA Once Again:  What Happened to Employment When the PA-NJ Minimum Wage Differential Disappeared?

Saul D. Hoffman and Diane Trace

ABSTRACT

Card and Krueger’s analysis of the impact of the 1992 increase in the NJ state minimum wage on employment in fast-food restaurants in NJ and PA is very well known and still controversial. In 1996 and 1997, the federal minimum wage was increased in two steps from $4.25 to $5.15, thereby increasing the minimum wage by $0.90 in PA but by just $0.10 in NJ. We use CPS data from 1995 and 1998 to examine the impacts of this increase on employment in the two states, using difference-in-difference and difference-in-difference-in-difference estimators that exploit within-state and between-state comparisons. We find quite consistent evidence that employment of “at-risk” groups was negatively affected in PA relative to other groups in PA and to comparable groups in NJ.  We also find, looking back at the 1992 NJ increase, that the employment gains reported by Card and Krueger were not widely distributed.

JEL Classification: J010, J080, J780

Key Words: Minimum Wage, Card-Krueger