It is often projected that an increase in minimum wage would result in reduced employment rates. These assertions are drawn from the assumptions that employers would be aligned towards the mitigation of operating costs. Therefore, they would be discouraged from hiring more employees who would comprise extra costs. The article Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania examines the impact of a wage increase on employment rates in fast food restaurant within the two States.
Likewise, the article explores the changes in employment rates in stores that had initially been paying higher wages to the rates in stores that were paying lower wages. The topic of wage change on employment rates comprises an important topic. This is because it serves to indicate the response that employers extend to an increase in the minimum wage (Card and Krueger 1). The research further allows for the determination of factors that influence employment rates in establishment-level businesses. Initial researches on impacts of increased minimum wage on employment rates in the previous years indicated that the was indeed an inverse relationship between the two factors. The article examines whether such a trend exists in the 21st-century business environment.[Need an essay writing service? Find help here.]
In determining the influences of minimum wage rates on employment rates, Card & Krueger (1993) instituted a comparison of employment wages and prices at the stores located in New Jersey and Pennsylvania. These components were assessed before and after the introduction of the policy in New Jersey, which increased the minimum wage. This method is known as a comparative analysis. (Card and Krueger 1)The authors established a control group in the form of fast-food restaurants which were located in eastern Pennsylvania and had been unaffected by the change in the minimum wage policy. The authors use the labor supply theory in the research. The labor supply states that increased wage costs reduce employment rates. [Click Essay Writer to order your essay]
The authors obtained data from 410 restaurants in the first survey. Based on the study, 63 out of the 473 interviewees that had been identified in the initial survey, and failed to show up, and there was no completion of interviews with them. The 410 complete responses projected an 87% overall success. New Jersey projected a 91% response success while the response rate in New Jersey attained 72.5% success rate. In the second survey, which was conducted eight months after the introduction of the minimum wage increase in Pennsylvania, only 410 stores were interviewed. Out of the 90% of the population sample, 371 stores were successfully interviewed (Card & Krueger, 1993). It would be significant to consider that all of these interviews were conducted over the phone. A subsequent inquiry determined that out of the 39 restaurants that did not participate in the second survey, six of the stores had been closed, while two were temporarily closed. In addition, two were subject to renovation and thus could not participate in the interview.
The results indicate that employment rates reduced in the fast food restaurants that had been unaffected by the rise in minimum wage. Essentially, these are made up of the New Jersey restaurants that had been over 5% per hour and the Pennsylvania fast-food stores that had been paying above the minimum wage limits established by law (Card & Krueger, 1993). In addition, the New Jersey restaurants rose to the size of the Pennsylvania restaurants after the introduction of the lower minimum wage. The employment rates increased significantly in the restaurants that had been affected by the minimum wage policies. The 5.05% minimum wage limit served to increase employment rates in New Jersey (Card & Krueger, 1993). The control group projected average employment rates since the restaurants in Pennsylvania had been unaffected by the policy changes.
The results indicate that changes in minimum wage rates do not affect the employment rates negatively (Card & Krueger, 1993). Minimum wage rate policies influence employment rates positively. The results further allude to the positive responses of employers to minimum wage increases. The employers are willing to hire a bigger labor force when the minimum wage rate is high. While considering employment, the study found minimum wage increase to have no effect on the choice of employers. Instead, such inclinations are a culmination of other factors such as profitability and prevailing market forces.
Therefore, minimum wage increase in businesses or organizations does not lead to increased unemployment. Given the results derived upon in this article, it is evident that unemployment rates are not affected by changes in minimum wage policies. Contrary to these assertions, increased minimum wage has shown to result in increased employment. This may be because of increased employee productivity, which results in expanded businesses. Businesses are likely to grow faster with increased minimum wage. These assertions are an extension of the evidence drawn from New Jersey stores, which grew significantly after the introduction of the minimum wage laws.[“Write my essay for me?” Get help here.]
Card, David and Alan B. Krueger. “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in in New Jersey and Pennsylvania.” NBER Working Paper (1993): 1-43.