Townhall.com’s Larry Elder interviewed Dr. Lowell Gallaway, Ohio University Distinguished Professor Emeritus of Economics, in a story on “If Minimum Wage Is So Great, Why Cite Bogus Study?”
The head of a Los Angeles-based nonprofit “sustainable economy” association calls for a higher minimum wage. No surprise there. But he cites a major pro-minimum wage study that responsible academics long ago abandoned.
Daniel Flaming of the Economic Roundtable, in a recent Los Angeles Times op-ed, said: “The conclusion that wage fairness is not a zero-sum game was established by a landmark study comparing neighboring counties in New Jersey and Pennsylvania, after New Jersey increased the minimum wage but Pennsylvania did not. It found that after the wage hike, employment in the fast-food industry increased more in New Jersey counties than in neighboring Pennsylvania counties.”
Dr. Lowell Gallaway
Well, actually, no. This now infamous study by David Card and Alan Krueger did not prove such an outlandish thing. Here’s what happened.
New Jersey raised its minimum wage. Pennsylvania did not. What will happen to the fast-food industry in these adjacent states? Good test case, right? If New Jersey fast-food workers suffered, it proves what most economists believe — that minimum wage harms workers, particularly unskilled men, women and minorities, the kind of folks the left claims they care about. If, on the other hand, New Jersey’s new wage law had no effect — or even helped — so much for the “artificially increase the cost of labor and you decrease the demand for it” argument.
Surprisingly, researchers discovered that New Jersey fast-food restaurants saw an increase in employment relative to Pennsylvania. The study flew around the liberal world faster than a Sarah Palin joke. President Bill Clinton cited it. But a funny thing happened when the study was peer reviewed.
Researchers seeking to replicate the results obtained actual payroll records — rather than simply phoning and asking hiring personnel whether they hired people during the period studied. Turns out, payroll records did not corroborate the verbal assertions made by employers. New Jersey actually suffered a decline in employment relative to Pennsylvania — just as traditional economic theory would have anticipated.
So why is this bogus study still cited? I put that question to Ohio University economist Lowell Gallaway, who has written critically about the study. Gallaway said: “The Card-Krueger study is still cited because it is useful politically. … It still has legs because the minimum-wage notion is an idea that just will not die. You cannot put it to rest by any amount of evidence demonstrating its problems. Whenever people want to believe something strongly enough, any study that supports that belief — no matter how bad it is — will be accepted.”
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