Economics of Minimum Wage Book Review

Myth and Measurement: The New Economics
of the Minimum Wage
David Card and Alan B. Krueger
Princeton, N.J.
Princeton University Press, 1997, 432 pp.
Author : David Card & Alan B. Krueger
Price : $ 46.95

Review : Economics of Minimum Wage

David Card and Alan B. Krueger have already made national news with their pathbreaking research on the minimum wage. Here they present a powerful new challenge to the conventional view that higher minimum wages reduce jobs for low-wage workers. In a work that has important implications for public policy as well as for the direction of economic research, the authors put standard economic theory to the test, using 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. In each case they present a battery of evidence showing that increases in the minimum wage lead to increases in pay, but no loss in jobs.

The Card-Krueger work is essentially correct: the minimum wage at levels observed in the United States has had little or no effect on employment. At the minimum, the book has changed the burden of proof in debates over the minimum, from those who stressed the potential distributional benefits of the minimum to those who stress the potential employment losses.

Card and Krueger didn't just question the conventional wisdom; they attacked it in a novel and powerful way. Instead of concocting a mathematical model and `testing' it with advanced statistical techniques, which is what most economists call research, they decided to test the theory in the real world. The work of Card and Krueger was worth a hundred theoretical models in The American Economic Review.

David Card and Alan Krueger have written a book that represents a phenomenal amount of careful and honest research and that will be a classic in the minimum wage literature and also in the broader field of empirical labor economics. A model of how to do good believable research, this book will be influential for a long time.

Clearly, this book should be read by any economist who wants to stay abreast of substantive, high level debates within the profession.The book already has assumed an important position within the field of labor economics, and significant research in years to come is likely to revolve around its principle thesis.I want to emphasize that my comments should not be interpreted as support for the position that increasing the minimum wage is sound public policy.More On Here