cloudyn.png
Monday January 17th, 2022 11:00PM

3 US-based economists win Nobel for research on wages, jobs

By The Associated Press
Related Articles
  Contact Editor

STOCKHOLM (AP) — 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 don't lower pay for native-born workers. Two others shared the award for developing ways 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 of the Massachusetts Institute of Technology and Dutch-born Guido Imbens of 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 “completely reshaped empirical work in the economic sciences.”

Together, they helped rapidly expand the use of “natural experiments,” or studies based on observing 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 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 and Krueger's 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 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.

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 is a major employer in a particular area, it may be able to keep wages particularly low, so that it could afford to pay a higher minimum, when required to do so, without cutting jobs. The higher pay would also attract more applicants, boosting labor supply.

Their paper "has shaken up the field at a very fundamental level,” said Arindrajit Dube, an economics professor at the University of Massachusetts, Amherst. “And so for that reason, and all the following research that their work ignited, this is a richly deserved award.”

Krueger would almost certainly have shared in the award, Dube said, but the economics Nobel isn't given posthumously. Krueger, Imbens said, co-authored papers with all three winners.

Krueger, who died in 2019 at age 58, taught at Princeton for three decades and was chief Labor Department economist under President Bill Clinton. He also was Obama’s chairman of the Council of Economic Advisers.

Card and Krueger's paper made a huge impact on other economists. Lisa Cook, an economics professor at Michigan State University, said their paper was “a revelation” that helped crystallize her thinking for her research on racial violence in the late 19th and early 20th centuries and how it inhibited patent filings by Black Americans.

Card's research also found that an influx of immigrants into a city doesn't cost native workers jobs or lower their earnings, though earlier immigrants can be negatively affected.

Card studied the labor market in Miami in the wake of Cuba’s sudden decision to let people emigrate in 1980, leading 125,000 people to leave in what became known as the Mariel Boatlift. It resulted in a 7% increase in the city’s workforce. By comparing the evolution of wages and employment in four other cities, Card discovered no negative effects for Miami residents with low levels of education. Follow-up work showed that increased 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 solid conclusions about cause and effect even where they cannot carry out studies according to strict scientific methods.

Card's work on the minimum wage is one of the best-known natural experiments in economics. The problem with such experiments is that it can be difficult to isolate cause and effect. For example, if you want to figure out whether an extra year of education will increase a person’s income, you cannot simply compare the incomes of adults with one more year of schooling to those without.

That's because there are many other factors that might determine whether those who got an extra year of schooling are able to make more money. Perhaps they are harder workers or more diligent and would have done better than those without the extra year even if they did not stay in school. These kinds of issues cause economists and other social science researchers to say “correlation doesn’t prove causation.”

Imbens and Angrist, however, figured out how to isolate the effects of things like an extra year of school. Their methods enabled researchers to draw 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.

Imbens, in one paper, used a survey of lottery winners to evaluate the impact of a government-provided basic income, which has been proposed by left-leaning politicians in the U.S. and Europe. He found that a prize of $15,000 a year did not have much effect on a person's likelihood to work.

Card said he thought the voice message that came in at 2 a.m. from someone from Sweden was a prank until he saw the number on his phone really was from Sweden.

He said he and his co-author Kreuger faced disbelief from other economists about their findings. “At the time, the conclusions were somewhat controversial. Quite a few economists were skeptical of our results,” he said.

Imbens' wife, Susan Athey, is also an economist and president-elect of the AEA, and Imbens said they sometimes argue about economics in front of their three children.

“This means, I hope, they'll learn that they need to listen to me a little bit more,” he said. ”I'm afraid it probably won't work out that way."

At home in Brookline, Massachusetts, Angrist said: “I can hardly believe it. It's only been a few hours and I am still trying to absorb it."

He also missed the call from Nobel officials and awoke to a torrent of texts from friends. Fortunately, he said, he knew enough other Nobel Laureates that he got a callback number from them.

As a youth, Angrist dropped out of a master's program in economics at Hebrew University in Israel, although he did meet his future wife, Mira, there. He has dual U.S. and Israeli citizenship.

“I did have sort of a winding road,” he said. “I wasn't a precocious high school student.”

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.

—-

Rugaber reported from Washington and McHugh reported from Frankfurt, Germany.

—-

Read more about Nobel Prizes past and present by The Associated Press at https://www.apnews.com/NobelPrizes

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, Top General short headlines, AP World News, AP Business, AP Business - Economy
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
3 US-based economists win Nobel for research on wages, jobs
A U.S.-based economist has won the Nobel prize for economics for pioneering research that showed an increase in minimum wage doesn't lead to less hiring and immigrants don't lower pay for native-born workers, challenging commonly held ideas
8:49AM ( 6 minutes ago )
UK police won't act against Prince Andrew over abuse claim
British police will not be taking any further action against Prince Andrew after a review prompted by a Jeffrey Epstein accuser who claims that he sexually assaulted her
8:44AM ( 12 minutes ago )
Austria swears in new chancellor after Kurz steps aside
Austria has a new chancellor, two days after former leader Sebastian Kurz resigned amid corruption allegations
8:41AM ( 15 minutes ago )
Associated Press (AP)
Boston Marathon set to begin after pandemic hiatus
Runners are gearing up for the Boston Marathon
7:29AM ( 1 hour ago )
Tornadoes cause damage in Oklahoma; storms rock central US
Several reported tornadoes have ripped through Oklahoma, causing damage late Sunday into early Monday morning
7:24AM ( 1 hour ago )
Early results show record low turnout in Iraq's election
Iraq's electoral committee says preliminary results show turnout from Sunday’s election was 41 percent
7:22AM ( 1 hour ago )
AP National News
Murano glassblowing model shattered by methane price surge
The glassblowers of Murano have survived plagues and pandemics
2:39AM ( 6 hours ago )
New Zealand's doctors and teachers must soon be vaccinated
Most of New Zealand’s health care workers and teachers will soon be legally required to get vaccinated against the coronavirus
1:46AM ( 7 hours ago )
India, China army talks to defuse border tensions fail
Talks between Indian and Chinese army commanders to disengage troops from key friction areas along their border have ended in a stalemate and failed to ease a 17-month standoff
1:29AM ( 7 hours ago )
Top General short headlines
Climate activists block intersection near Dutch parliament
Hundreds of protesters from climate activist group Extinction Rebellion have blocked a busy intersection near the temporary home of the Netherlands’ parliament
7:43AM ( 1 hour ago )
Official says journalist's Nobel Prize not a slap on Duterte
Philippine President Rodrigo Duterte’s administration has belatedly congratulated journalist Maria Ressa for being one of two winners of this year’s Nobel Peace Prize
7:35AM ( 1 hour ago )
Fire-hit Greek island races to fix damage before next storm
Authorities on the Greek island of Evia say more than 200 homes were damaged by weekend flooding, with most of the affected areas left unprotected in the wake of huge summer wildfires
7:32AM ( 1 hour ago )
AP World News
Southwest Airlines flight cancellations continue into Monday
Southwest Airlines canceled hundreds more flights Monday following a weekend of major service disruptions
7:49AM ( 1 hour ago )
Bing Crosby's heirs sell stake in estate to boost his work
It's not just old rock stars benefiting from the current trend of artists selling off rights to their work
6:00AM ( 2 hours ago )
Global shares mixed on energy worries, weak US jobs data
Global shares are mixed amid persisting worries about energy shortages and weaker than expected jobs growth in the U.S.  Shares fell in Paris, Frankfurt and Sydney but rose in Tokyo and London
5:27AM ( 3 hours ago )
AP Business
Taliban say they won't work with US to contain Islamic State
The Taliban have ruled out cooperation with the U.S. to contain extremist groups in Afghanistan
4:36PM ( 1 day ago )
McConnell seizes on debt standoff to undermine Biden agenda
During the recent standoff over the nation's debt limit, Senate Republican leader Mitch McConnell showed just how far he'll go to stop President Joe Biden’s agenda
3:00PM ( 1 day ago )
EXPLAINER: How global deal stems corporate use of tax havens
Complex global talks have forged a deal on sweeping changes in how multinational companies are taxed
7:58AM ( 2 days ago )
AP Business - Economy
UK police won't act against Prince Andrew over abuse claim
British police will not be taking any further action against Prince Andrew after a review prompted by a Jeffrey Epstein accuser who claims that he sexually assaulted her
8:44AM ( 13 minutes ago )
EU, Ukraine to discuss military training and cyber threats
The European Union is considering providing a training military mission to Ukraine amid lingering tensions between Russia and the Soviet ex-republic
8:37AM ( 19 minutes ago )
Cyberattacks concerning to most in US: Pearson/AP-NORC poll
Most Americans across party lines have serious concerns about cyberattacks on U.S. computer systems and view China and Russia as major threats
8:31AM ( 26 minutes ago )
4 detained during massive pro-EU protest in Poland
Police in Warsaw say four people, including a nephew of the prime minister, were detained during a massive protest against government policy that critics say could cost Poland its European Union membership
8:10AM ( 46 minutes ago )
Huge fire extinguished at oil facility in southern Lebanon
Firefighters have extinguished a huge blaze that broke out in a storage tank at one of Lebanon’s main oil facilities in the country’s south
8:04AM ( 52 minutes ago )