[Congressional Record Volume 142, Number 75 (Friday, May 24, 1996)]
[Extensions of Remarks]
[Pages E918-E919]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              MINIMUM WAGE

                                 ______


                            HON. JIM SAXTON

                             of new jersey

                    in the house of representatives

                         Thursday, May 23, 1996

  Mr. SAXTON, Mr. Speaker, earlier today in my remarks during the 
debate on increasing the minimum wage, I mentioned over 100 studies 
that unanimously agree that raising the minimum wage has a detrimental 
effect on employment. I also mentioned that the ``Card-Krueger 
studies'' are erroneous in their conclusion that raising the minimum 
wage increased employment in New Jersey.
  This summary of the academic research--100 studies--on the minimum 
wage is designed to give nonspecialists a sense of just how isolated 
the Card-Krueger studies are. It also indicates that the minimum wage 
has wide-ranging negative effects that go beyond just 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.
  Last year I placed into the Record the complete list of these 100 
studies. If you are interested in reviewing the complete list, please 
refer to page E387 of the February 16, 1995, issue of the Congressional 
Record.
  Also, for a better understanding of why I believe an increase in the 
minimum wage will hurt those it's intended to help, I am putting into 
the Record a Joint Economic Committee Report entitled ``Raising the 
Minimum Wage: The Illusion of Compassion'', April 1996.

          Raising the Minimum Wage: The Illusion of Compassion

       ``[B]ut as Clinton himself explained two years ago, hiking 
     the minimum [wage] is `the wrong way to raise the incomes of 
     low-wage earners.' ''--(Time, February 6, 1995, p. 27).

       Once again, we hear the cries to raise the minimum wage. 
     The rhetoric is familiar; ``the minimum wage isn't a living 
     wage,'' and ``we need to ensure that work pays.'' However, 
     raising the minimum wage is a misguided passion. All the 
     valid research shows that raising the minimum wage destroys 
     jobs. It hurts exactly those workers it intends to help--the 
     poor, the unskilled, and the young. Everyone wants to see 
     income growth boost the economic well-being of the working 
     poor, but throwing many of them out of work is not the 
     solution.


                       sawing off the first rung

       The major way the minimum wage hurts the poor is by cutting 
     off the first rung of the employment ladder. Raising the 
     minimum wage destroys jobs. This statement is 
     incontrovertible. Economists have consistently proven the 
     job-destroying effects of higher minimum wages. But more 
     importantly, higher minimum wages destroy entry-level jobs. 
     Without entry level jobs, low-skilled and young workers 
     cannot start jobs and gain valuable work skills.


                        blocking work to welfare

       The rhetoric of raising the minimum wage has been linked to 
     welfare. Proponents of higher minimum wages argue that a 
     higher minimum wage is necessary to encourage welfare 
     recipients to enter the work force. Tragically, as the 
     minimum wage encourages welfare recipients to search for 
     employment, it makes it more difficult for them to find work. 
     First, with fewer jobs available, it is more difficult for 
     all workers to find employment. Second, a higher minimum wage 
     makes work more attractive to many people. This expanded pool 
     of job applicants allows employers to be more selective. 
     Employers pick applicants with more skills from this pool. 
     Welfare recipients suffer because there are fewer jobs and 
     more competition. The result of higher minimum wages is to 
     keep welfare recipients dependent on the government for a 
     longer time.


                        destroying human capital

       It is increasingly apparent that the key to a prosperous 
     life is education. Sadly, incomes of high-school drop-outs 
     are failing to keep pace with the incomes of college 
     graduates. Dropping out of high school is almost a guarantee 
     of a difficult life. Public policy should take careful pains 
     to encourage students to stay in school. Unfortunately, 
     raising the minimum wage encourages high-school students to 
     drop out. By altering the rewards to work, some students 
     leave school for minimum wage jobs. However, without a high 
     school degree, advancement is more difficult.


      the argument for higher minimum wages: the Sandy Foundation

       ``Now, I've studied the arguments and the evidence for and 
     against a minimum wage increase. I believe the weight of the 
     evidence is that a modest increase does not cost jobs, and 
     may even lure people back into the job market.''--President 
     Bill Clinton, State of the Union Address, Jan. 24, 1995.

       The argument against raising the minimum wage has a long 
     and noble history. Several of the most prominent economists 
     have argued against minimum wages. Yet, the Democrats 
     continue to argue for higher minimum wages. Labor Secretary 
     Robert Reich and Laura D'Andrea Tyson held a press conference 
     to laud several studies that claim that higher minimum wages 
     have no deleterious effects on employment. The whole argument 
     of the press conference was based on a study by Dr. David 
     Card and Dr. Alan Krueger of Princeton University. Drs. Card 
     and Krueger examined the differences between New Jersey, 
     which imposes a state-wide higher minimum wage, and 
     Pennsylvania, which kept the federal minimum wage. The 
     research, on which the Administration has based its 
     arguments, has collapsed under its own Height.
       Card and Krueger interviewed fast-food restaurants on both 
     sides of the Delaware River. They posited that any 
     differences between New Jersey and Pennsylvania could be 
     explained solely by the minimum wage. What they found was 
     that New Jersey restaurants hired more employees over the 
     period of the study than Pennsylvania restaurants.
       The results of the study were extraordinary. Card and 
     Krueger seemed to have discovered a refutation of the law of 
     demand. Economists were stunned. Because of the extraordinary 
     results, they debated the results. Many economists argued 
     that the differences between New Jersey and Pennsylvania were 
     more than simply differences of minimum wage rates. Other 
     economists argued that the study design was flawed.
       Other economists were able to review the study using better 
     data with devastating results for the Card-Krueger study and 
     the Administration argument. Card and Krueger gained their 
     data by asking one question. ``How many full-time and part-
     time workers are employed in your restaurant, excluding 
     managers and assistant managers?'' Depending upon the answer, 
     they interpolated employment trends. It is clear from this 
     question that their report was deeply flawed.
       First, the person answering the phone was allowed to 
     interpret this question differently. Did they mean how many 
     people this week, this month, this shift? Who is a part-time 
     worker? Varying interpretations of this question allowed 
     different answers from the same restaurant over the period of 
     the study. The data Card and Krueger collected show 
     incongruous results. For example, a Wendy's restaurant went 
     from 35 employees (zero full-time, 35 part-time) to 65 
     employees (35 full-time, 30 part-time). Other restaurants 
     show strange results as well.
       Second, they simply divided the number of part-time 
     employees by two and added them to the number of full-time 
     employees. This method of estimating employment effects 
     cannot accurately estimate the effects of higher minimum 
     wages. Restaurant managers simply could have responded to a 
     higher minimum by forcing employees to accept fewer hours.
       The best data Card and Krueger could have obtained from 
     these restaurants were hours worked. However, they did not 
     obtain that data. Another set of economists, Dr. David 
     Neumark and Dr. William Wascher, obtained the payroll data 
     from the restaurants Card and Krueger surveyed. When Neumark 
     and Wascher calculated the numbers, using the identical 
     statistical methodology of Card and Krueger, they found the 
     exact opposite of Card and Krueger. Card and Krueger found 
     that restaurant employment in New Jersey rose, while 
     restaurant employment in Pennsylvania fell. Neumark and 
     Wascher found that employment in Pennsylvania rose more 
     rapidly than employment in New Jersey. A

[[Page E919]]

     Presidential Commission found in 1980 that teenage employment 
     fell one to three percent for every ten percent hike in the 
     minimum wage. The difference between Pennsylvania and New 
     Jersey was exactly within that range.
       The Card and Krueger study has collapsed. The foundation of 
     the Administration's argument for higher wages has fallen 
     apart. Raising the minimum wage destroys jobs. Only by doing 
     sloppy research can economists arrive at another answer. The 
     Card and Krueger fiasco is an example when inadequate 
     research is used to buttress unwise policy.
       The minimum wage is an example of misguided compassion. It 
     is a policy that hurts those it is intended to help. We have 
     too many policies from Washington that are detrimental to 
     America's citizens. Effective compassion requires a 
     government that assists its citizens in acquiring the skills 
     necessary to provide for themselves and their families. It 
     requires a government that allows workers to keep more of 
     their income through lower taxes. It requires a government 
     that encourages economic growth through less government 
     spending and less regulation. It is time to measure 
     compassion by our efforts to minimize the number of Americans 
     receiving federal aid--not by the amount of government 
     largesse. Raising the minimum wage fails to live up to its 
     promise of assisting the poor.

                          ____________________