Increasing the minimum wage impact employment levels. How do employers in a low-wage labor cent studies that rely on a similar comparamarket respond to an increase in the mini- tive methodology have failed to detect a mum wage? The prediction from conven- negative employment effect of higher minitional economic theory is unambiguous: a mum wages. Analyses of the 1990-1991 inrise in the minimum wage leads perfectly creases in the federal minimum wage competitive employers to cut employment (Lawrence F. Katz and Krueger, 1992; Card, (George J. Stigler, 1946).
Therefore, although studies 1992a) and of an earlier increase in the in the 1970’s based on aggregate teenage minimum wage in California (Card, 1992b) employment rates usually confirmed this find no adverse employment impact. A study prediction,’ earlier studies based on com- of minimum-wage floors in Britain (Stephen parisons of employment at affected and un- Machin and Alan Manning, 1994) reaches a affected establishments often did not (e.g., similar conclusion. Richard A. Lester, 1960, 1964).
Bill on Minimum Wage
A bill signed into law in November 1989 raised the federal minimum wage from $3.35 per hour to $3.80 effective April 1, 1990, with a further increase to $4.25 per hour on April 1, 1991. In early 1990 the New Jersey legislature went one step further, enacting parallel increases in the state minimum wage for 1990 and 1991 and an increase to $5.05 per hour effective April 1, 1992. The scheduled 1992 increase gave New Jersey the highest state minimum wage in the country and was strongly opposed by business leaders in the state (see Bureau of National Affairs, Daily Labor Report, 5 May 1990).
Moreover, in the two years between passage of the $5.05 minimum wage and its effective date, New Jersey’s economy slipped into recession. Concerned with the potentially adverse impact of a higher minimum wage, the state legislature voted in March 1992 to phase in the 80-cent increase over two years. The vote fell just short of the margin required to override a gubernatorial veto, and the Governor allowed the $5.05 rate to go into effect on April 1 before vetoing the two-step legislation. Faced with the prospect of having to roll back wages for minimumwage earners, the legislature dropped the issue. Despite a strong last-minute challenge, the $5.05 minimum rate took effect as originally planned.