Working Paper: NBER ID: w3997
Authors: Lawrence F. Katz; Alan B. Krueger
Abstract: Using data from a longitudinal survey of fast food restaurants in Texas, the authors examine the impact of recent changes in the federal minimum wage on a low-wage labor market The authors draw four main conclusions. First, the survey results indicate that less than 5 percent of fast food restaurants use the new youth subminimum wage even though the vast majority paid a starting wage below the new hourly minimum wage immediately before the new minimum went into effect. Second, although some restaurants increased wages by an amount exceeding that necessary to comply with higher minimum wages in both 1990 and 1991, recent increases in the federal minimum wage have greatly compressed the distribution of starting wages in the Texas fast food industry. Third, employment increased relatively in those firms likely to have been most affected by the 1991 minimum wage increase. Fourth, changes in the prices of meals appear to be unrelated to mandated wage changes. These employment and price changes do not seem consistent with conventional views of the effects of increases in a binding minimum wage.
Keywords: minimum wage; fast food; labor market; youth employment
JEL Codes: J38; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| federal minimum wage increases (J38) | starting wages (J31) |
| federal minimum wage increases (J38) | employment levels (J23) |
| federal minimum wage increases (J38) | pricing strategies (D49) |
| federal minimum wage increases (J38) | wage structure (J31) |
| minimum wage changes (J38) | youth subminimum wage utilization (J38) |