Washington Post opinion columnist Jennifer Rubin has a piece about David Card of the University of California, Berkeley, who was one of three winners this week of the Nobel prize in Economics. Card, Rubin writes, earned recognition for challenging three popular articles of faith - that immigrants drive wages down and are not good for local workers, that an increased minimum wage causes businesses to lay off employees, and that government subsidies lead to people not going back to work.
Some excerpts from her piece:
• "Card’s work suggests that immigration may not be bad for workers already here. One of his studies on the 1980 Mariel boatlift "showed that a sudden influx of 125,000 Cubans had no negative effects on wages or employment for low-skilled Miami residents, even as it increased the city’s labor force by 7 percent … While immigration restrictionists still cling to the idea it is a zero-sum labor market in which every job 'taken' is 'lost' by someone else, it’s clear the research is mixed at best."
• "On the minimum wage, Card looked at the difference between New Jersey workers, whose state’s minimum wage increased, and Pennsylvania workers just across the border, where the minimum wage was not raised. It turned out that 'raising the minimum wage didn’t necessarily cause businesses to lay off workers and hurt employment. Before [Card’s] famous study, economists almost universally believed increasing the minimum wage cost jobs.
"Card told an interviewer that 'if you raise the minimum wage a little — not a huge amount, but a little — you won’t necessarily cause a big employment reduction. In some cases you could get an employment increase.' Since then, reputable economists have reached different conclusions on the impact of minimum wage hikes. It is now a legitimate subject of debate rather than an ironclad rule that any increase in minimum wages winds up hurting the people it is intended to help."
• "States that ended higher unemployment benefits showed little discernible bump in employment as compared with states that maintained the benefit. In early September, about 7.5 million Americans lost the entire federal subsidy, while 3 million had their unemployment checks cut $300 each week. Nevertheless, fewer than 200,000 jobs were added in September — less than what was projected for the month. Maybe generous safety net spending does not undermine work, but ending such benefits prematurely does inflict needless suffering on the most vulnerable."
- KC's View:
Here's the thing. Rubin suggests that while there is economic theory, it also is true that "real life is more complicated." Those five words are very important, especially as they are taken in the context of other phrases that appear in her column, like "the research is mixed at best," and "a legitimate subject of debate rather than an ironclad rule."
The important thing, is seems to me, is how businesses approach these issues. Mindset can be important, and it seems like a pretty good guess that some businesses worked on the premise that, say, raised wages won't lead to higher unemployment but rather will reflect an investment in workers that could pay off in higher productivity and maybe even more sales. Those businesses may have done better than those that thought the sky was falling.