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 is very well known and still controversial. Interestingly, the original NJ-PA natural experiment was followed by another one involving the same two states, an experiment that has not yet been noted or examined. In 1996 and 1997, the federal minimum wage was increased in two steps, 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 from 1995 and 1998 to examine the impacts on employment, using difference-in-difference and difference-in-difference-in-difference estimators that exploit within- state and between-state comparisons. We find consistent evidence that employment of “at-risk” groups was negatively impacted in PA relative to other groups in PA and to comparable groups in NJ.