A U.S.-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 one half of the prize for his research on how minimum wage, immigration and education affect the labour market, while 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.”
“Card’s studies of core questions for society and Angrist and Imbens’ methodological contributions have shown that natural experiments are a rich source of knowledge,” said Peter Fredriksson, chair of the Economic Sciences Committee. “Their research has substantially improved our ability to answer key causal questions, which has been of great benefit for society.”
Mr Card worked on research that used restaurants in New Jersey and in eastern Pennsylvania to measure the effects of increasing the minimum wage. He studied what happened when New Jersey raised its minimum wage from $4.25 to $5.05, using restaurants in bordering eastern Pennsylvania as a 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. Mr Card later did further work on the issue. Overall, the work concluded that the negative effects of increasing the minimum wage are small and significantly smaller than believed 30 years ago, the Nobel committee said.
Mr Card also found that incomes of those who are native born in a country can benefit from new immigrants, while immigrants who arrived earlier are the ones at risk of being negatively affected.
Mr Angrist and Mr Imbens won their half of the award for working out the methodological issues that allow economists to draw solid conclusions about cause and effect even where they cannot carry out studies according to strict scientific methods.
The award comes with a gold medal and 10 million Swedish kronor (over $1.14 million).
Unlike the other Nobel prizes, the economics award wasn’t established in the will of Alfred Nobel but by the Swedish central bank in his memory in 1968, with the first winner selected a year later. It is the last prize announced each year.