Canadian economist David Card’s research on minimum wage wins Nobel Prize

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David Card, a Canadian economist whose groundbreaking research challenged conventional wisdom on a number of labour issues, has won this year’s Nobel Memorial Prize in Economics.

The Royal Swedish Academy of Sciences announced on Monday that Prof. Card, born in Guelph, Ont., and a professor at the University of California at Berkeley, will receive half of this year’s prize. The other half of the 10-million-kronor ($1.42-million) prize will be awarded jointly to Joshua Angrist, an economist at the Massachusetts Institute of Technology, and Guido Imbens, an economics professor at Stanford University.

All three were honoured for pioneering “natural experiments” to show real-world economic effects. The academy said the three have “completely reshaped empirical work in the economic sciences.”

In the case of Prof. Card, the award cited research conducted in the early 1990s, which concluded that increasing a country’s minimum wage does not lead to reduced hiring, and that immigration does not harm the employment prospects of native-born workers.

In an interview with The Globe and Mail on Monday, Prof. Card, who is 65, joked that being praised for research done so long ago made him feel “old.”

“To tell you the honest truth, at the time the work was not so well received by many economists,” he said. “A few people thought it was interesting. It got published. It was not widely accepted.”

Prof. Card said winning the Nobel is unlikely to have a huge effect on his professional life at the University of California at Berkeley, where he is the director of the Center for Labor Economics.

“In the short run, I am going to have to do a lot of interviews and I’ll probably get invited to a lot of things I can’t do because I am teaching,” he said.

“Economics is a very strange profession. People are harsh on the stars,” he said, laughing. “Getting the Nobel Prize? That just means they are going to be harsher when they review your next proposal. That would be my guess.”

After graduating from Queen’s University in Kingston, Ont., Prof. Card went to Princeton in 1978 to earn his PhD. He taught for one year at the University of Chicago, then returned to Princeton, where he taught until 1996. He arrived at the University of California, Berkeley in 1997.

Prof. Card remains a Canadian citizen. His family still lives on the farm where he grew up.

“I got a Canada Council Fellowship when I was in grad school and have always been very grateful for that, and I believe I got a good education both in high school and college in Canada,” he said. “I’ve done a lot of research with Canadian data and have many Canadian friends and colleagues and former students, so I have great respect and fondness for Canada.”

In a study published in 1993, Prof. Card looked at what happened to jobs at Burger King, KFC, Wendy’s and Roy Rogers when New Jersey raised its minimum wage from US$4.25 to US$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.

Prof. Card and Prof. 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 per cent 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 per cent of the AEA’s members said minimum-wage laws increase unemployment, largely because of Prof. Card and Prof. Krueger’s research.

Prof. 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.

Prof. Card studied the labour 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-per-cent increase in the city’s work force. By comparing the evolution of wages and employment in four other cities, Prof. 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.

Prof. Angrist and Prof. 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.

Asked about the message his win sends other academics, especially those just starting out, Prof. Card gave the question a few moments of thought before answering.

“There’s one positive message, I guess,” he said. “I’ve had good luck in my career and support and stuff, but I don’t think, when I was a young person, I was ever considered a superstar. So there’s hope.”

With a report from Associated Press

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