The Associated Press reports that the minimum wage study by Nobel Laureate Kader is a radical reversal of economists’ perceptions. Kader’s minimum wage study uses ‘natural experiments’, the problem with which is that it is sometimes difficult to distinguish between cause and effect. Economists often say of such problems that ‘correlation does not prove causation’. Angrist and Inbens have developed statistical methods to circumvent this problem and to determine the cause and effect of natural experiments more precisely.
The Economist magazine mentioned a 1992 survey of the American Economic Association, a group of American economists, which found that 79% of its members agreed that a minimum wage by law would increase unemployment among young, low-skilled workers. Their perceptions were largely based on traditional supply and demand concepts in economics.
However, by 2000, only 46% of the American Economic Association agreed that a minimum wage law would push up unemployment, largely because of research by Card and his late research partner Krueger.
Card also found that the arrival of new immigrants boosted the earnings of native-born workers. To study the impact of immigration on employment, Card looked at what happened to the labour market in Miami, Florida, when 125,000 people left Cuba in 1980 after the Cuban government suddenly decided to let those who wanted to emigrate leave the country. The event caused a 7 per cent increase in Miami’s labour force. Comparing wage and employment changes between Miami and four other cities, Card found that Miami’s low-education population was not negatively affected.
Card’s award-winning study was conducted in collaboration with Kruger. Krueger, who died in 2019 at the age of 58, taught at Princeton University for 30 years, was chief economist in the Department of Labor under former President Bill Clinton’s administration, and served in the Treasury Department under former President Barack Obama’s administration, later becoming chairman of Obama’s Council of Economic Advisers. The Nobel Prize is not awarded to a deceased person.