Tuesday, April 14, 2026

Problems with Card and Krueger Data

 


1. Measurement / data quality concerns (the most famous issue)

What Card & Krueger did

They studied fast-food employment in:

  • New Jersey (raised minimum wage)
  • Pennsylvania (did not)

They collected employment data via a telephone survey of restaurants before and after the policy change.


Criticism

A. Survey response error

Later researchers argued:

  • Some employment figures reported by phone were inaccurate or inconsistently reported
  • Managers may not precisely track employment headcounts in real time
  • Nonresponse and reporting differences could bias results

B. Reconstructed payroll data tells a different story (partial contradiction)

A follow-up study using administrative payroll records (instead of phone surveys) found:

  • A small negative employment effect, unlike the original paper’s zero/positive result

This became one of the strongest critiques:

“When you use more reliable data, the result weakens.”


2. Sampling issues

A. Small and non-random sample

  • Only a few hundred fast-food restaurants
  • Not a random sample of all employers or all low-wage workers

Critics argue:

  • Results may not generalize beyond fast food
  • Industry may behave differently than others (e.g., retail, manufacturing)

B. Chain composition changes

Some critics noted:

  • Changes in which types of restaurants responded before/after
  • Potential compositional bias (not exactly the same establishments across periods)

3. Timing and short-run vs long-run effects

Card & Krueger measured relatively short-run effects.

Criticism:

  • Even if employment doesn’t fall immediately, firms might adjust later via:
    • automation
    • slower hiring
    • reduced expansion

So critics argue:

“No short-run effect ≠ no long-run effect”


4. Specification and interpretation disputes

Even among economists who accept the data, there is disagreement about interpretation:

A. “Employment levels vs employment quality”

Critics argue the study may miss:

  • hours reductions
  • reduced benefits
  • slower job growth
  • increased prices passed to consumers

So even if headcount is stable:

labor market adjustment may still be occurring elsewhere


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