Krueger's Faulty Minimum Wage Study

National Review Online ^ | Aug. 30, 2011 | Carrie Lukas

[ReleaseTheHounds]

After President Obama tapped Princeton University professor Alan Krueger to chair the Council of Economic Advisors, Washington Post blogger Ezra Klein wrote that Krueger “is arguably the leading labor economist in the country” and “known for bringing a near-superhuman rigor” to the subject.

One wonders how any economist would earn a “near-superhuman” superlative for their research. One can particularly wonder in the case of Professor Krueger, who is known for his 1990s academic research that attempted to prove that employee wages were not subject to the laws of supply and demand.

In 1993, Krueger and David Card published a study that examined employment statistics of fast-food restaurants in New Jersey and Pennsylvania following the Garden State’s minimum wage hike. The authors reported that employment at fast-food chains in New Jersey increased by 13 percent compared to restaurants across the Delaware River in Pennsylvania. Clinton administration Labor secretary Robert Reich, Senator Kerry, Senator Kennedy, and other luminaries of the Left pointed to the study’s findings to call for raising the minimum wage.

But analysis by independent researchers revealed the Krueger-Card report, which was based on a phone survey in which fast food restaurant managers and assistant managers were asked about their staff size, to be deeply flawed. The Employment Policy Institute analyzed the phone survey results against actual payroll data from the restaurants and concluded that “the data set used in the New Jersey study bears no relation to numbers drawn from payroll records of the restaurants the New Jersey study claims to cover.”

[ReleaseTheHounds]

I remembered this yesterday when this news was released.

This so-called academic is a complete fraud. It's amazing Princeton kept him on staff. Now he's heading up the Council of Economic Advisors!!! Lord, please help us!

[Former Proud Canadian]

Yup. You are doomed.

[DrC]

I thought it was intuitively obvious that if you raise the price of labor, the demand for it will increase. Isn’t that what you learned in Econ 101? Krueger merely “proved” this obvious point. People who throw stones at his study obviously are just envious of his academic success. /sarc

[bjc]

The study methodology is amazingly naive. He is based in New Jersey, as is ADP. One phone call could have provided him with reams of actual payroll records which he could have sliced and diced in numerous ways. But that would have been easy to replicate and would certainly have shown the decrease in employment that did in fact take place. (See comments in NR article.)

[Scutter]

Another credentialed enemy of science.

[Common Sense 101]

Professor Krueger, who is known for his 1990s academic research that attempted to prove that employee wages were not subject to the laws of supply and demand.

So costs do not impact prices, which do not impact demand, which do not impact supply... so let it be written, so let it be done. What an a$$ clown.

[MrB]

Any graduate from Father Guido Sarducci’s “Five Minute University” could have debunked the fallacy that increasing price increases demand.

[Eric in the Ozarks]

Egghead.

[Williams]

Heard a NYT dimwit on Greta last night gushing about this idiot.

Then she loved his consumption tax, so brilliant she says bc you announce it 2 years in advance and it will spur the economy as “people do anything they can to avoid that tax” by spending, but then abracadabra in 2 years it’s great bc then it encourages people to save.

Where do they grow these people, on stupid trees?

[Hodar]

In 1993, Krueger and David Card published a study that examined employment statistics of fast-food restaurants in New Jersey and Pennsylvania following the Garden State’s minimum wage hike. The authors reported that employment at fast-food chains in New Jersey increased by 13 percent compared to restaurants across the Delaware River in Pennsylvania.

This defies common sense. Labor costs rise, so in an effort to maintain fiscally viable - you increase your labor pool by 13%? And this man has a PhD in Economics, yet has no clue how to run a business?

Living proof that those who can't, 'teach'.

[wayoverontheright]

Two comments about minimum wage:

First, the consumer is always forgotten. How are wages increased without prices of goods and services going up? We all should fight wage increases by fiat, because in the end we all pay.

The sad thing about minimum wage is the harm it does to the young. Lying at home on mom and dad’s sofa, they cannot learnt the following: How to show up. How to show up on time. How to show up on time dressed properly. How to cooperate with others to achieve goals. The value of money. The value of hard work. Our kids, therefore, not having had the luxury of learning life’s lessons from menial jobs while young, may never get off the sofa.

[Don Corleone]

Professor Krueger, who is known for his 1990s academic research that attempted to prove that employee wages were not subject to the laws of supply and demand.

A true Keynesians Keynesian with a touch of Roosevelt's Marxism on the side.

[libertarian neocon]

Kreuger’s nomination is evidence that Obama hasn’t learned a thing and our economy will only get worse. I wonder if he will suggest an increase in the minimum wage to increase employment. That’ll be rich (though it will make us poor).

[MrB]

It’s amazing how leftists selectively acknowledge and deny the role of incentives in people’s economic decisions.

“No, giving money to ‘single moms’ doesn’t encourage out of wedlock births!”

[Texas resident]

baraq won’t learn.
He picks people based on their ideology not on their competance.
This new goof’s title is LABOR economist.
You bet he will push for issues that the unions want starting with raising the minimum wage.
The unions started making noise lateley that they are not happy with baraq. So this happens.

rewarding his friends.

[Maverick68]

did someone say “subhuman”?

[randita]

Other claims to fame:

KRUEGER’S GREATEST HITS: “WHY NOT PASS A 5 PERCENT… NATIONAL SALES TAX”? “Why not pass a 5 percent consumption tax to take effect two years from now? There are many different ways to implement a consumption tax, but for simplicity think about a national sales tax.” (Alan B. Krueger, “A Future Consumption Tax to Fix Today’s Economy,” The New York Times, 1/12/2009)

TAX WOULD COST FAMILIES “APPROXIMATELY $500 BILLION A YEAR”: “In the long run, a 5 percent consumption tax would raise approximately $500 billion a year, and fill a considerable hole in the budget outlook.” (Alan B. Krueger, “A Future Consumption Tax to Fix Today’s Economy,” The New York Times, 1/12/2009)

“THE MAIN DOWNSIDE…IS THAT TAXES REDUCE ECONOMIC ACTIVITY. BUT THE GOVERNMENT MUST MAKE CRITICAL TRADE-OFFS”: “The main downside of this proposal is that taxes reduce economic activity. But the government must make critical trade-offs, and a consumption tax could be the most efficient means to raise revenue to finance essential government functions.” (Alan B. Krueger, “A Future Consumption Tax to Fix Today’s Economy,” The New York Times, 1/12/2009)

JOB-DESTROYING CAP-AND-TRADE “WOULD BE ONE OF THE MOST IMPORTANCE AND SUBSTANTIAL PIECES OF ENVIRONMENTAL LEGISLATION IN OUR NATION’S HISTORY”: “As you know, one of the President’s top priorities is to develop a comprehensive energy and climate change plan to invest in clean energy, address the global climate crisis, and create new jobs. In turn, we believe that a greenhouse gas cap-and-trade program should play a central role in our effort to achieve these goals at the lowest possible cost. We are very appreciative of the work being done in both Houses of Congress to this end, and look forward to working together to craft successful legislation. An economy-wide GHG cap-and-trade program would be one of the most important and substantial pieces of environmental legislation in our nation’s history.” (Alan Krueger, Committee On Finance, U.S. Senate, Testimony, 5/7/2009)

KRUEGER BACKED “DRAMATIC STEPS” TOWARDS A CAP-AND-TRADE. “The Administration believes that it is no longer sufficient to address our nation’s energy needs by finding more fossil fuels, and instead we must take dramatic steps towards becoming a clean energy economy. These include encouraging the use of, and investment in, clean energy infrastructure and energy efficient technologies. … In addition to direct investments in clean energy, the Administration’s Budget proposed a cap-and-trade program that would provide incentives for firms to reduce GHG emissions and to invest in new, cleaner lines of business.” (Alan Krueger, “Statement On Energy, Natural Resources, And Infrastructure,” Treasury Department, 9/10/2009)

[JeffChrz]

Krugman is also a professor at Princeton. Years ago, I made a comment about Krugman asking how many times an economics professor can be wrong before he or she loses his or her job. Apparently, more times than an engineering professor.

One of the reasons I avoided the Ivies when I went to college twenty years ago. Actually, I passed on applying to Princeton because I thought the campus looked pretentious and elitist.

[loveliberty2]

If the Administration was looking for a Professosr with a real-world assessment of the consequences of wage laws, especially minimum wage questions, perhaps it might have looked to George Mason University instead of Princeton. There, the wisdom of Dr. Walter Williams presents a far different assessment.

Although Professor Williams has written and spoken frequently on such matters, the following message was published many years ago, utilizing Walter Williams' warning about the negative consequences of minimum wage laws on families and those who most need work experience and earnings. His words were true then, and he repeated them on Stossel just recently.

Dr. Williams understands and has been teaching, speaking, and writing about the tragic consequences of the so-called "progressive" policies which Democrats have inflicted upon Americans--all in the name of "helping" them.

Slavery to government is no better than slavery to individual masters. Yet, the "regressives" continue to buy power and influence by promoting policies that destroy opportunity, prosperity, and freedom for our own and future generations. This latest appointment is just another example of their disregard of fact as they take pursue their relentless ideology.

[Amerikan_Samurai]

So true. I don’t care what his alphabet soup degree is in, if he has not actually signed checks and run a successful business, he’s just another idiot from academia.