A U.S.- based economist, David Card, won the Nobel prize in economics on October 11th for pioneering research about the labor force. The research showed how an increase in the minimum wage does not hinder hiring and immigrants do not lower pay for native born workers. Joshua Angrist and Guido Imbens shared the award with Card.
In a study published in 1993, Card looked at what happened to jobs at Burger King, KFC, Wendy's, and other fast food restaurant called Roy Rodgers when New Jersey raised its minimum wage from $4.25 to $5.05. Using restaurants in eastern Pennsylvania, Card and his late partner Alan Krueger found that an increase in the minimum wage had no effect on the number of employees. Card and Krueger's studies changed economists' views of wage laws. From the year of their study to 2000 less people agreed with the statement that minimum wage laws increase unemployment.
Card and Krueger's research produced conclusions into why a higher minimum wage would not reduce employment. One conclusion was that companies are able to pass on the cost of higher wages to customers by raising prices. Also, if a company is a major employer in an area, it may be able to keep wages particularly low, so it could afford to pay a higher minimum without cutting jobs. Higher pay would attract more applicants, boosting labor supply. Their research deserved an award and made a huge impact on other economists. It is too bad that Krueger died in 2019 and was not able to share the award.
Card also found that an rush of immigrants into a city does not cost native workers jobs or lower their earnings. Card studied the labor market in Miami when Cuba allowed their citizens to leave in 1980. The 125,000 people who left Cuba resulted in a 7% increase in the Miami's workforce. However, Card discovered no negative effects for Miami residents with low levels of education. Some work even showed that increase immigration can have a positive impact on income for people born in the country.
Angrist and Imbens won their half of the award for working out the methodological issues that allow economists to draw conclusions about cause and effect according to strict scientific methods. They figured out to isolate the effects of things like an extra year of school that enabled researchers to draw clearer conclusions about cause and effect, even if they are unable to control factors they way scientists in a lab can. For example, Imbens published a paper found out that a basic income prize of $15,000 did not have much effect on a person's likelihood to work.
Source: 3 US-based economists win Nobel for research on wages, jobs (apnews.com)
2 comments:
Their study is going to have a huge impact on public policies. Minimum wage is a very complicated matter, and they helped to simplify the decision for policymakers. Besides, based on the evidence in their study, extreme immigration policies can not be justified now if the purpose is to protect domestic employment opportunities. Such an excuse can not be the cover for xenophobia and racism anymore.
I think these people have done a great justice for the world. They have proven that immigration shouldn't be looked at as a problem when it comes to the job market. This is simply a racist claim how can more workers with less education be a problem to a market that has vast amounts of jobs for these credentials and also for others? They have also helped the problem we are actually facing now in America of minimum wage. With their information I believe we should change the base minimum wage to a higher amount.
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