[Congressional Record Volume 141, Number 31 (Thursday, February 16, 1995)]
[Extensions of Remarks]
[Pages E387-E388]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page E387]]
              FIFTY YEARS OF RESEARCH ON THE MINIMUM WAGE

                                 ______


                            HON. JIM SAXTON

                             of new jersey

                    in the house of representatives

                      Thursday, February 16, 1995
  Mr. SAXTON. Mr. Speaker, for many years it has been a matter of 
conventional wisdom among economists that the minimum wage causes fewer 
jobs to exist than would be the case without it. This is simply a 
matter of price theory, taught in every economics textbook, requiring 
no elaborate analysis to justify. Were this not case, there would be no 
logical reason why the minimum wage could not be set at $10 or $400 per 
hour.
  Historically, defenders of the minimum wage have not disputed the 
disemployment effects of the minimum wage. Rather, they argued that 
there was a redistributive effect that left the working poor better 
off. In other words, the higher incomes of those with jobs offset the 
lower incomes of those without jobs, as a result of the minimum wage.
  Now, the Clinton administration is advancing the novel economic 
theory that modest increases in the minimum wage will have no impact 
whatsoever on employment. Some administration officials have even 
hinted that raising the minimum wage can raise employment. This 
proposition in based entirely on the work of three economists: David 
Card and Alan Krueger of Princeton, and Lawrence Katz of Harvard. Their 
studies of increases in the minimum wage in California, Texas, and New 
Jersey apparently found no loss of jobs among fast food restaurants 
that were surveyed before and after the increase.
  It is not yet clear how or why Card, Katz, and Krueger got the 
results that they did. It is clear, however, that their findings are 
directly contrary to virtually every empirical study ever done on the 
minimum wage. These studies were exhaustively surveyed by the Minimum 
Wage Study Commission, which concluded that a 10-percent increase in 
the minimum wage reduced teenage employment by 1 to 3 percent.
  The following survey of the academic research on the minimum wage is 
designed to give nonspecialists a sense of just how isolated the Card, 
Krueger, and Katz studies are. It will also indicate that the minimum 
wage has wide-ranging negative effects that go beyond unemployment. For 
example, higher minimum wages encourage employers to cut back on 
training, thus depriving low-wage workers of an important means of 
long-term advancement, in return for a small increase in current 
income. For many workers this is a very bad tradeoff, but one for which 
the law provides no alternative.
                Summary of Research on the Minimum Wage


                  The minimum wage reduces employment

       Currie, Janet, and Fallick, Bruce. 1993. A Note on the New 
     Minimum Wage Research. National Bureau of Economic Research 
     Working Paper No. 4348 (April).
       Gallasch, H.F., Jr. 1975. Minimum Wages and the Farm Labor 
     Market. Southern Economic Journal, vol. 41 (January): 480-
     491.
       Gardner, Bruce. 1981. What Have Minimum Wages Done in 
     Agriculture? In Rottenberg (1981a): 210-232.
       Peterson, John M. 1957. Employment Effects of Minimum 
     Wages, 1938-50. Journal of Political Economy, vol. 65 
     (October): 412-430.
       Peterson, John M., and Stewart, Charles T., Jr. 1969. 
     Employment Effects of Minimum Wage Rates. Washington: 
     American Enterprise Institute.


  The minimum wage reduces employment and Real Federal Minimum Wages. 
     Journal of Political Economy, vol. 81 (March/April): 435-441.

       Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1981a. 
     Effects of the Minimum Wage on Youth Employment and 
     Unemployment. In Minimum Wage Study Commission (1981), vol. 
     5, pp. 1-26.
       Brown, Charles; Gilroy, Curtis; and Kohen, Andrew. 1981b. 
     Time-Series Evidence of the Effect of the Minimum Wage on 
     Teenage Employment and Unemployment. In Minimum Wage Study 
     Commission (1981), vol. 5, pp. 103-127.
       Fleisher, Belton M. 1981. Minimum Wage Regulation in Retail 
     Trade. Washington: American Enterprise Institute.
       Hammermesh, Daniel S. 1982. Minimum Wages and the Demand 
     for Labor, Economic Inquiry, vol. 20 (July): 365-380.
       Meyer, Robert H., and Wise, David A, 1981. Discontinuous 
     Distributions and Missing Persons: The Minimum Wage and 
     Unemployed Youth. In Minimum Wage Study Commission (1981), 
     vol. 5, pp. 175-201.
       Meyer, Robert H., and Wise, David A. 1983a. The Effects of 
     the Minimum Wage on the Employment and Earnings of Youth. 
     Journal of Labor Economics, vol. 1 (January): 66-100.
       Minimum Wage Study Commission. 1981. Report, 7 vols. 
     Washington: U.S. Government Printing Office.
       Neumark, David, and Wascher, William. 1992. Employment 
     Effects of Minimum and Subminimum Wages: Panel Data on State 
     Minimum Wage Laws. Industrial and Labor Relations Review, 
     vol. 46 (October): 55-81.
       Ragan, James F., Jr. 1977. Minimum Wages and the Youth 
     Labor Market. Review of Economics and Statistics, vol. 59 
     (May): 129-136.
       Vandenbrink, Donna C. 1987. The Minimum Wage: No Minor 
     Matter for Teens. Economic Perspectives, Federal Reserve Bank 
     of Chicago, vol. 11 (March/April): 19-28.
       Welch, Finis. 1974. Minimum Wage Legislation in the United 
     States. Economic Inquiry, vol. 12 (September): 285-318.
       Welch, Finis. 1978. Minimum Wages: Issues and Evidence. 
     Washington: American Enterprise Institute.
       Welch, Finis, and Cunningham, James. 1978. Effects of 
     Minimum Wages on the Level and Age Composition of Youth 
     Employment. Review of Economics and Statistics, vol. 60 
     (February): 140-145.


   the minimum wage reduces employment most among black teenage males

       Al-Salam, Nabeel; Quester, Aline; and Welch, Finis. 1981. 
     Some Determinants of the Level and Racial Composition of 
     Teenage Employment. In Rottenberg (1981a): 124-154.
       Iden, George. 1980. The Labor Force Experience of Black 
     Youth: A Review. Monthly Labor Review, vol. 103 (August): 10-
     16.
       Mincer, Jacob. 1976. Unemployment Effects of Minimum Wages. 
     Journal of Political Economy, vol. 84 (August): S87-S104.
       Moore, Thomas G. 1971. The Effect of Minimum Wages on 
     Teenage Unemployment Rates. Journal of Political Economy, 
     vol. 79 (July/August): 897-902.
       Ragan, James F., Jr. 1977. Minimum Wages and the Youth 
     Labor Market. Review of Economics and Statistics, vol. 59 
     (May): 129-136.
       Williams, Walter. 1977a. Government Sanctioned Restraints 
     that Reduce Economic Opportunities for Minorities. Policy 
     Review (Fall): 7-30.
       Williams, Walter. 1977b. Youth and Minority Unemployment. 
     Study prepared for the Joint Economic Committee, U.S. 
     Congress. Joint Committee Print, 95th Congress, 1st session. 
     Washington: U.S. Government Printing Office.


 The minimum wage helped South African whites at the expense of blacks

       Bauer, P.T. 1959. Regulated Wages in Under-developed 
     Countries. In The Public Stake in Union Power, ed. Philip D. 
     Bradley. Charlottesville, VA: University of Virginia Press, 
     324-349.


                The minimum wage hurts blacks generally

       Behrman, Jere R.; Sickles, Robin C.; and Taubman, Paul. 
     1983. The Impact of Minimum Wages on the Distributions of 
     Earnings for Major Race-Sex Groups: A Dynamic Analysis. 
     American Economic Review, vol. 73 (September): 766-778.
       Linneman, Peter. 1982. The Economic Impacts of Minimum Wage 
     Laws: A New Look at an Old Question. Journal of Political 
     Economy, vol. 90 (June): 443-469.


                  The minimum wage hurts the unskilled

       Krumm, Ronald J. 1981. The Impact of the Minimum Wage on 
     Regional Labor Markets. Washington: American Enterprise 
     Institute.


                The minimum wage hurts low wage workers

       Brozen, Yale. 1962. Minimum Wage Rates and Household 
     Workers. Journal of Law and Economics, vol. 5 (October): 103-
     109.
       Cox, James C., and Oaxaca, Ronald L. 1982. The Political 
     Economy of Minimum Wage Legislation. Economic Inquiry, vol. 
     20 (October): 533-555.
       Gordon, Kenneth. 1981. The Impact of Minimum Wages on 
     Private Household Workers. In Rottenberg (1981a): 191-209.


 The minimum wage hurts low wage workers particularly during cyclical 
                               downturns

       Kosters, Marvin, and Welch, Finis. 1972. The Effects of 
     Minimum Wages on the Distribution of Changes in Aggregate 
     Employment. American Economic Review, vol. 62 (June): 323-
     332.
       Welch, Finis. 1974. Minimum Wage Legislation in the United 
     States. Economic Inquiry, vol. 12 (September): 285-318.


                the minimum wage increases job turnover

       Hall, Robert E. 1982. The Minimum Wage and Job Turnover in 
     Markets for Young Workers. In The Youth Labor Market Problem: 
     Its Nature, Causes, and Consequences, ed. Richard B. Freeman 
     and David A. Wise, pp. 475-497. Chicago: University of 
     Chicago Press.


       the minimum wage reduces average earnings of young workers

       Meyer, Robert H., and Wise, David A. 1983b. Discontinuous 
     Distributions and Missing Persons: The Minimum Wage and 
     Unemployed Youth. Econometrica, vol. 51 (November): 1677-
     1698.
       The minimum wage drives workers into uncovered jobs, thus 
     lowering wages in those sectors.
       Brozen, Yale. 1962. Minimum Wage Rates and Household 
     Workers. Journal of Law and Economics, vol. 5 (October): 103-
     109.
       Tauchen, George E. 1981. Some Evidence on Cross-Sector 
     Effects of the Minimum Wage. Journal of Political Economy, 
     vol. 89 (June): 529-547.
       Welch, Finis. 1974. Minimum Wage Legislation in the United 
     States. Economic Inquiry, vol. 12 (September): 285-318.


  the minimum wage reduces employment in low-wage industries, such as 
                               retailing

       Cotterman, Robert F. 1981. The Effects of Federal Minimum 
     Wages on the Industrial Distribution of Teenage Employment. 
     In Rottenberg (1981a): 42-60.
       [[Page E388]] Douty, H.M. 1960. Some Effects of the $1.00 
     Minimum Wage in the United States. Economica, vol. 27 (May): 
     137-147.
       Fleisher, Belton M. 1981. Minimum Wage Regulation in Retail 
     Trade. Washington: American Enterprise Institute.
       Hammermesh, Daniel S. 1981. Employment Demand, the Minimum 
     Wage and Labor Costs. In Minimum Wage Study Commission 
     (1981), vol. 5, pp. 27-84.
       Peterson, John M. 1981. Minimum Wages: Measures and 
     Industry Effects. Washington: American Enterprise Institute.


           the minimum wage hurts small businesses generally.

       Kaun, David E. 1965. Minimum Wages, Factor Substitution and 
     the Marginal Producer. Quarterly Journal of Economics, vol. 
     79 (August): 478-486.


       the minimum wage causes employers to cut back on training.

       Hashimoto, Masanori. 1981. Minimum Wages and On-the-Job 
     Training. Washington: American Enterprise Institute.
       Hashimoto, Masanori. 1982. Minimum Wage Effects on Training 
     on the Job. American Economic Review, vol. 72 (December): 
     1070-1087.
       Leighton, Linda, and Mincer, Jacob. 1981. The Effects of 
     Minimum Wages on Human Capital Formation. In Rottenberg 
     (1981a): 155-173.
       Ragan, James F., Jr., 1981. The Effect of a Legal Minimum 
     Wage on the Pay and Employment of Teenage Students and 
     Nonstudents. In Rottenberg (1981a): 11-41.


the minimum wage has long-term effects on skills and lifetime earnings.

       Brozen, Yale. 1969. The Effect of Statutory Minimum Wage 
     Increases on Teen-age Employment. Journal of Law and 
     Economics, vol. 12 (April): 109-122.
       Feldstein, Martin. 1973. The Economics of the New 
     Unemployment. The Public Interest (Fall): 14-15.


    the minimum wage leads employers to cut back on fringe benefits.

       McKenzie, Richard B. 1980. The Labor Market Effects of 
     Minimum Wage Laws: A New Perspective. Journal of Labor 
     Research, vol. 1 (Fall): 255-264.
       Wessels, Walter J. 1980. Minimum Wages, Fringe Benefits, 
     and Working conditions. Washington: American Enterprise 
     Institute.


 the minimum wage encourages employers to install labor-saving devices.
       Trapani, John M., and Moroney, J.R. 1981. The Impact of 
     Federal Minimum Wage Laws on Employment of Seasonal cotton 
     farm Workers. In Rottenberg (1981a): 233-246.


 the minimum wage hurts low-wage regions, such as the south and rural 
                                 areas

       Colberg, Marshall R. 1960. Minimum Wage Effects on 
     Florida's Economic Development. Journal of Law and Economics, 
     vol. 3 (October): 106-117.
       Colberg, Marshall. 1981. Minimum Wages and the Distribution 
     of Economic Activity. In Rottenberg (1981a): 247-263.
       Krumm, Ronald J. 1981. The Impact of the Minimum Wage on 
     Regional Labor Markets. Washington: American Enterprise 
     Institute.


       the minimum wage increases the number of people on welfare

       Brandon, Peter D. 1995. Jobs Taken by Mothers Moving from 
     Welfare to Work and the Effects of Minimum Wages on this 
     Transition. Washington: Employment Policies Institute 
     Foundation.
       Leffler, Keith b. 1978. Minimum Wages, Welfare, and Wealth 
     Transfers to the Poor. Journal of Law and Economics, vol. 21 
     (October): 345-358.


               the minimum wage hurts the poor generally

       Stigler, George J. 1946. The Economics of Minimum Wage 
     Legislation. American Economic Review, vol. 36 (June): 358-
     365.


             the minimum wage does little to reduce poverty

       Bonilla, Carlos E. 1992. Higher Wages, Greater Poverty. 
     Washington: Employment Policies Institute.
       Brown, Charles, 1988. Minimum Wage Laws: Are They 
     Overrated? Journal of Economic Perspectives, vol. 2 (Summer): 
     133-145.
       Johnson, William R., and Browning, Edgar K. 1983. The 
     Distributional and Efficiency Effects of Increasing the 
     Minimum Wage: A Simulation. American Economic Review, vol. 73 
     (March): 204-211.
       Kohen, Andrew I., and Gilroy, Curtis L. 1981. The Minimum 
     Wage, Income Distribution, and Poverty. In Minimum Wage Study 
     Commission (1981), vol. 7, pp. 1-30.
       Parsons, Donald, O. 1980. Poverty and the Minimum Wage. 
     Washington: American Enterprise Institute.
       Smith, Ralph E., and Vavrichek, Bruce. 1987. The Minimum 
     Wage: its Relation to Incomes and Poverty. Monthly Labor 
     Review, vol. 110 (June): 24-30.


              The minimum wage helps upper income families

       Bell, Carolyn Shaw. 1981. Minimum Wages and Personal 
     Income. In Rottenberg (1981a): 429-458.
       Datcher, Linda P., and Loury, Glenn C. 1981. The Effect of 
     Minimum Wage Legislation on the Distribution of Family 
     Earnings Among Blacks and Whites. In Minimum Wage Study 
     Commission (1981), vol. 7, pp. 125-146.
       Johnson, William R., and Browning, Edgar K. 1981. Minimum 
     Wages and the Distribution of Income. In Minimum Wage Study 
     Commission (1981), vol. 7, pp. 31-58.
       Kohen, Andrew I., and Gilroy, Curtis L. 1981. The Minimum 
     Wage, Income Distribution, and Poverty. In Minimum Wage Study 
     Commission (1981), vol. 7, pp. 1-30.


                     The minimum wage helps unions

       Linnerman, Peter. 1982. The Economic Impacts of Minimum 
     Wage Laws: A New Look at an Old Question. Journal of 
     Political Economy, vol. 90 (June): 443-469.
       Cox, James C., and Oaxaca, Ronald L. 1982. The Political 
     Economy of Minimum Wage Legislation. Economic Inquiry, vol. 
     20 (October): 533-555.


               The minimum wage lowers the capital stock

       McCulloch, J. Huston, 1981. Macroeconomic Implications of 
     the Minimum Wage. In Rottenberg (1981a): 317-326.


            The minimum wage increases inflationary pressure

       Adams, F. Gerard. 1987. Increasing the Minimum Wage: The 
     Macroeconomic Impacts. Briefing Paper, Economic Policy 
     Institute (July).
       Brozen, Yale. 1966. Wage Rates, Minimum Wage Laws, and 
     Unemployment. New Individualist Review, vol. 4 (Spring): 24-
     33.
       Gramlich, Edward M. 1976. Impact of Minimum Wages on Other 
     Wages, Employment, and Family Incomes. Brookings Papers on 
     Economic Activity (No. 2): 409-461.
       Grossman, Jean B. 1983. The Impact of the Minimum Wage on 
     Other Wages. Journal of Human Resources, vol. 18 (Summer): 
     359-378.


             the minimum wage increases teenage crime rates

       Hashimoto, Masanori. 1987. The Minimum Wage Law and Youth 
     Crimes: Time-Series Evidence. Journal of Law and Economics, 
     vol. 30 (October): 443-464.
       Phillips, Llad. 1981. Some Aspects of the Social 
     Pathological Behavior Effects of Unemployment among Young 
     People. In Rottenberg (1981a): 174-190.


      the minimum wage encourages employers to hire illegal aliens

       Beranek, William. 1982. The Illegal Alien Work Force, 
     Demand for Unskilled Labor, and the Minimum Wage. Journal of 
     Labor Research, vol. 3 (Winter): 89-99.


         few workers are permanently stuck at the minimum wage

       Brozen, Yale. 1969. The Effect of Statutory Minimum Wage 
     Increases on Teen-age Employment. Journal of Law and 
     Economics, vol. 12 (April): 109-122.
       Smith, Ralph E., and Vavrichek, Bruce, 1992. The Mobility 
     of Minimum Wage Workers. Industrial and Labor Relations 
     Review, vol. 46 (October): 82-88.


  the minimum wage has had a massive impact on unemployment in Puerto 
                                  Rico

       Freeman, Alida Castillo, and Freeman, Richard B. 1991. 
     Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor? 
     National Bureau of Economic Research Working Paper No. 3759 
     (June).
       Rottenberg, Simon. 1981b. Minimum Wages in Puerto Rico. In 
     Rottenberg (1981a): 327-339.


      the minimum wage has reduced employment in foreign countries

       Forrest, David. 1982. Minimum Wages and Youth Unemployment: 
     Will Britain Learn from Canada? Journal of Economic Affairs, 
     vol. 2 (July): 247-250.
       Corbo, Vittorio. 1981. The Impact of Minimum Wages on 
     Industrial Employment in Chile. In Rottenberg (1981a): 340-
     356.
       Gregory, Peter. 1981. Legal Minimum Wages as an Instrument 
     of Social Policy in Less Developed Countries, with Special 
     Reference to Costa Rica. In Rottenberg (1981a): 377-402.
       Rosa, Jean-Jacques. 1981. The Effect of Minimum Wage 
     Regulation in France. In Rottenberg (1981a): 357-376.


                 characteristics of minimum wage workers.

       Employment Policies Institute. 1994. The Low-Wage 
     Workforce. Washington: Employment Policies Institute.
       Haugen, Steven E., and Mellor, Earl F. 1990. Estimating the 
     Number of Minimum Wage Workers. Monthly Labor Review, vol. 
     113 (January): 70-74.
       Kniesner, Thomas J. 1981. The Low-Wage Workers: Who Are 
     They? In Rottenberg (1981a): 459-481.
       Mellor, Earl F. 1987. Workers at the Minimum Wage or Less: 
     Who They Are and the Jobs They Hold. Monthly Labor Review, 
     vol. 110 (July): 34-38.
       Mellor, Earl F., and Haugen, Steven E. 1986. Hourly Paid 
     Workers: Who They Are and What They Earn. Monthly Labor 
     Review, vol. 109 (February): 20-26.
       Smith, Ralph E., and Vavrichek, Bruce. 1987. The Minimum 
     Wage: Its Relation to Incomes and Poverty. Monthly Labor 
     Review, vol. 110 (June): 24-30.
       Van Giezen, Robert W. 1994. Occupational Wages in the Fast-
     Food Industry. Monthly Labor Review, vol. 117 (August): 24-
     30.
Vol. 141


WASHINGTON, THURSDAY, FEBRUARY 16, 1995

No. 31


House of Representatives