Card wins Nobel Prize for research on wages
A Us-based economist won the Nobel prize for economics for pioneering research that showed an increase in minimum wage does not lead to less hiring and immigrants do not lower pay for native-born workers, challenging commonly held ideas.
Two others shared the award for creating a way to study these types of societal issues.
Canadian-born David Card of the University of California, Berkeley, was awarded half of the prize for his research on how minimum wage, immigration and education affect the labour market.
The other half was shared by Joshua Angrist from the Massachusetts Institute of Technology and Dutch-born Guido Imbens from Stanford University for their framework for studying issues that cannot rely on traditional scientific methods. The Royal Swedish Academy of Sciences said the three have “completely reshaped empirical work in the economic sciences”.
In a study published in 1994, Mr Card looked at what happened to jobs at Burger King, KFC, Wendy’s and Roy Rogers when New Jersey raised its minimum wage from 4.25 to 5.05 US dollars, using restaurants in bordering eastern Pennsylvania as the control, or comparison, group.
Contrary to previous studies, he and his research partner Alan Krueger, who died in 2019, found that an increase in the minimum wage had no effect on the number of employees. Mr Card’s minimum wage research fundamentally altered economists’ views of such policies.
As noted by the Economist magazine, in 1992 a survey of the American Economic Association’s members found that 79% agreed that a minimum wage law increased unemployment among younger and lower-skilled workers.
Those views were largely based on traditional economic views of supply and demand: If you raise the price of something, you get less of it.
By 2000, however, just 46% of the AEA’S members said minimum wage laws increase unemployment, largely because of Mr Card and Mr Krueger’s research.
Their findings sparked interest in further research into why a higher minimum wouldn’t reduce employment.
One conclusion was that companies are able to pass on the cost of higher wages to customers by raising prices.
In other cases, if a company was a major employer in a particular area, it may have been able to keep wages particularly low, so that it could afford to pay a higher minimum without cutting jobs.
Mr Card also found that incomes of those who are native born workers can benefit from new immigrants, while immigrants who arrived earlier are the ones at risk of being negatively affected.