Jonathan Diamond at Huffington Post:
“In a paper published in 1993, Princeton economists David Card and Alan Krueger (now chairman of the Council of Economic Advisors) tracked the impact of a 19 percent increase in New Jersey’s minimum wage rate, comparing its effect on employment to employment across the river in Pennsylvania, where the minimum wage remained constant at the pre-increase rate of $4.25 an hour.
It was a perfect natural experiment. The populations on either side of the Delaware were in almost all respects identical; the border between them was not a barrier to either commerce or employment. Workers from Pennsylvania were free to seek jobs in New Jersey. Business owners in New Jersey were not constrained from relocating to Pennsylvania. Customers, of course, were free to cross the bridge in search of the best deals.
What the authors found was that “contrary to the central prediction of a text book model of the minimum wage, but consistent with a growing number of studies based on cross-sectional-time series comparisons of affected and unaffected markets and employers, we find no evidence that the rise in New Jersey’s minimum wage reduced employment at fast-food restaurants in the state.” In fact, they found that employment increased after the minimum wage rose. It’s a finding that has been born out again and again.”