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Krueger examined if an increase in minimum wages in 1992 decreased employment in 410 fast food restaurants in New Jersey and Pennsylvania. They performed two rounds of interviews. The first wave occurred a month before the wage increase, while the second…
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Download file to see previous pages Card and Krueger disproved those who argue that raising minimum wages is bad for employees because it will result to loss of jobs and lower fringe benefits and bad for the economy because it can result to closing of stores and lower number of new stores to be opened. I agree with these findings because higher minimum wages would not necessarily reduce food demand, so the labor demand remains the same, or it would even be higher, if food demand increases after the wage increased. However, minimum-wage increases must be indexed to inflation to avoid the erosion of real wages and to reduce poverty and income inequality.
I believe that that their findings, which showed that increasing minimum wages is not necessarily bad for employees (as some critics of wage increases suggest, because it did not result to lower employment and fringe benefits), make sense because higher wages will not necessarily impact the demand for fast food products and demand for experienced, motivated workers. Card and Krueger showed that employment level even increased because of high demand, despite the recession during this time. If food demand remains the same, then stores would need the same number of people. In addition, if, because of the recession, more people ate at fast food restaurants where food products are cheaper, then demand for fast food would even increase. A rise in food demand will influence store owners to hire more people. Furthermore, with more customers, store owners would not find it rational or moral to reduce fringe benefits, such as free food or reduced food prices for employees. Store owners may see these fringe benefits as motivators for their employees too, so it would not be reasonable for them to remove it. At the same time, store owners should also consider the competition for experienced fast food workers. Though they do not need workers to have some level of college education, some store owners may want more experienced workers ...Download file to see next pagesRead More
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