Economics Nobel given for wage, job research
3 Us-based scholars share prestigious prize
STOCKHOLM – A U.s.-based economist won the Nobel prize in economics Monday for pioneering research that transformed widely held ideas about the labor force, showing how an increase in the minimum wage doesn’t hinder hiring and immigrants do not lower pay for native-born workers. 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 the minimum wage, immigration and education affect the labor 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 can’t rely on traditional scientific methods.
The Royal Swedish Academy of Sciences said the three have “completely reshaped empirical work in the economic sciences.”
Together, the three helped rapidly expand the use of “natural experiments,” or studies based on the observation of real-world data. Such research made economics more applicable to everyday life, provided policymakers with actual evidence on the outcomes of policies, and in time spawned a more popular approach to economics epitomized by the blockbuster
bestseller “Freakonomics,” by Stephen Dubner and Steven Levitt.
In a study published in 1993, Card looked at what happened to jobs at fastfood restaurants Burger King, KFC, Wendy’s and Roy Rogers when New Jersey raised its minimum wage from $4.25 to $5.05, using restaurants in bordering eastern Pennsylvania as the control – or comparison – group.
Contrary to previous studies, he and his late research partner Alan Krueger found that an increase in the minimum wage had no effect on the number of employees.
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 lowerskilled workers. Those views were largely based on traditional economic notions 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 Card and Krueger’s research.
Their findings sparked interest in further research into why a higher minimum wouldn’t reduce employment.
Imbens and Angrist, figured out ways to isolate the effects of things like an extra year of school. Their methods enabled researchers to draw much clearer conclusions about cause and effect, even if they are unable to control who gets things like extra education, the way scientists in a lab can control their experiments.