UNIVERSITY OF DELAWARE WORKING PAPER NO. 2007-08 NJ AND PA ONCE AGAIN: WHAT HAPPENED TO EMPLOYMENT WHEN THE PA-NJ MINIMUM WAGE DIFFERENTIAL DISAPPEARED?

Card and Krueger’s analysis of the impact of the 1992 increase in the NJ state minimum wage on employment in fast-food restaurants in NJ and PA is very well known. In 1996 and 1997, the federal minimum wage was increased from $4.25 to $5.15, thereby increasing the minimum wage by $0.90 in PA but by just $0.10 in NJ. We use CPS data to examine the impacts of this increase on employment of likely minimum wage workers in the two states, using DID and DIDID estimators that exploit within-state and between-state comparisons. We find consistent evidence that employment of “at-risk ” groups was negatively affected in PA relative to other groups in PA and to comparable groups in NJ