Abstract
David Card and Alan B Krueger are known for their substantial contributions to the field of labour economics. Due to their accomplishments, they were awarded the IZA Prize in Labour Economics in 2006. It was a pleasant surprise for me to discover that their book Wages, School Quality and Employment Demand includes some of their most influential work on issues like wage inequality and the role of unions. Since I have a background in educational studies, I was really pleased to find out that the authors enriched their book with a comprehensive and extensive discussion about the effects of school quality on earnings.
The book is divided into two main parts; the first section focuses on school quality and its impact on wages in the USA. The authors use empirical data to investigate whether the quality of the schools matters. They give ample statistical evidence that the quality of schooling affects earnings. They conveniently break down their data to make comparisons between groups of individuals (e.g. white vs black people). As far as the impact of school resources on attainment and returns is concerned, their results are inconclusive: the authors explain why they believe that more research is needed on this front in order to build a more robust case around the relationship of available school resources and returns. I found this to be a politically important and timely discussion in the context of the current financial crisis.
The second part of the book focuses on the relationship between minimum wage and employment. The authors offer statistical evidence based on empirical data to show that the rise in the minimum wage can raise average teenage wages without lowering teenage employment rates or altering school enrolment patterns. The authors devote Chapters 6 and 7 to investigating a case study built around the fast-food industry of New Jersey. They conclude that the increase in minimum wage does not negatively affect total employment. Finally, in the last chapter, the authors give evidence on the role of nominal wage contracts and conclude that unexpected real wage fluctuations can be associated with systematic employment moves towards the opposite direction.
Throughout the book, the authors displayed impressive methodological expertise. In particular their use quantitative methods and regression models were informative and insightful. The authors were successful in using data from natural experiments in order to strengthen their methodology and make their analyses and results much more persuasive. They acknowledge, however, that their data are non-experimental; therefore, it is not easy to draw definite cause and effect conclusions between the key variables.
On the negative side, although I really enjoyed the book, it is possible that readers who are less comfortable with regression modelling and quantitative methods in general may find the book a little difficult to read. Readers who are less comfortable with complex data designs may be less enthusiastic about the fact that the book elaborates so heavily on statistical methods: it includes a large number of equations, graphs and tables full of regression coefficient estimates. Obviously, the book relies heavily on empirical data from the USA and at times I felt less prepared to make direct generalizations to the European context – this may have reduced slightly the usefulness of the book for European practitioners.
On the whole, I found that the book offers a timely discussion regarding a much politicized debate around the responsibility of societies to invest more in education and on their young people. The book is a gold mine of data which can spark lively discussions among educationalists, sociologists and economists, as long as they can comfortably go through a 300-page book which relies heavily on quantitative analyses.
I would certainly suggest this book to academics, as well as to postgraduate students. State officials (e.g. people working in Ministries of Education, Labour or Finance) would also find this book not only interesting but useful in their work. I would consider this book to be a must for people who are not familiar with the past work of the authors, because it gives a representative view of their published research.