RandomGuy
10-16-2021, 08:49 AM
been said here before. good to see it finally be widely discredited.
suck it.
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What do you think happens to unemployment when the minimum wage increases?
Does unemployment go up or down?
The question has plagued economists for generations.
On one hand, you might think the minimum wage should be lower, so businesses have more money to hire more workers.
But on the other hand, you might wonder if it would actually be better to increase the minimum wage so workers have more money to spend, because that would boost consumption and growth, and see businesses hiring more staff to meet the extra demand, which would feed a virtuous cycle.
Well, the winners of the Nobel Memorial Prize in Economic Sciences this year showed how to answer the question.
And they did it by looking at the real world.
It's all about 'natural experiments'
One of the big problems in social science is how to study cause and effect.
For example, what effect does immigration have on employment and wages?
It can be difficult to answer questions like that because, even though you know immigration's occurring, you can't say what would have happened to the economy if there had been less immigration, so you can't compare the situation to anything.
But David Card, professor of economics at the University of California, Berkeley, helped to solve the problem by using a novel approach.
Did we learn anything from our 'closed economy' experiment?
A sign reading "sorry we're closed" hangs in a window.
When we closed our borders, and pumped the economy with stimulus, the economic recovery was swifter than expected, writes Gareth Hutchens.
Read more
He demonstrated how you can answer questions about cause and effect by using "natural experiments".
Take the question of what happens to unemployment when the minimum wage is increased.
In the United States in the 1990s, the conventional wisdom was that any increase in the minimum wage would push unemployment higher because it would increase wage costs for businesses.
However, Card showed that's not necessarily the case.
With his friend economist Alan Krueger (who died in 2019, at 58), he found a way to test the idea.
What is a 'natural experiment'?
In 1992, the minimum wage in New Jersey was scheduled to increase from $US4.25 to $US5.05.
It was going to give New Jersey the highest state minimum wage rate in the United States, and it was strongly opposed by business leaders.
How could you record its impact?
Well, it wouldn't be good enough to study New Jersey's labour market alone, because too many variables can influence a single labour market over time.
But Card and Krueger found a way.
They knew that just across the border, in neighbouring Pennsylvania, the minimum wage wasn't going to increase.
They reasoned that, since eastern Pennsylvania had a very similar labour market to New Jersey's, they could run a natural experiment.
And this is how they did it.
https://live-production.wcms.abc-cdn.net.au/4030a9a27ea4c8d66acca95a36748ef5?src
https://live-production.wcms.abc-cdn.net.au/4030a9a27ea4c8d66acca95a36748ef5?src
suck it.
---------------------------------------------------------------------------------------
What do you think happens to unemployment when the minimum wage increases?
Does unemployment go up or down?
The question has plagued economists for generations.
On one hand, you might think the minimum wage should be lower, so businesses have more money to hire more workers.
But on the other hand, you might wonder if it would actually be better to increase the minimum wage so workers have more money to spend, because that would boost consumption and growth, and see businesses hiring more staff to meet the extra demand, which would feed a virtuous cycle.
Well, the winners of the Nobel Memorial Prize in Economic Sciences this year showed how to answer the question.
And they did it by looking at the real world.
It's all about 'natural experiments'
One of the big problems in social science is how to study cause and effect.
For example, what effect does immigration have on employment and wages?
It can be difficult to answer questions like that because, even though you know immigration's occurring, you can't say what would have happened to the economy if there had been less immigration, so you can't compare the situation to anything.
But David Card, professor of economics at the University of California, Berkeley, helped to solve the problem by using a novel approach.
Did we learn anything from our 'closed economy' experiment?
A sign reading "sorry we're closed" hangs in a window.
When we closed our borders, and pumped the economy with stimulus, the economic recovery was swifter than expected, writes Gareth Hutchens.
Read more
He demonstrated how you can answer questions about cause and effect by using "natural experiments".
Take the question of what happens to unemployment when the minimum wage is increased.
In the United States in the 1990s, the conventional wisdom was that any increase in the minimum wage would push unemployment higher because it would increase wage costs for businesses.
However, Card showed that's not necessarily the case.
With his friend economist Alan Krueger (who died in 2019, at 58), he found a way to test the idea.
What is a 'natural experiment'?
In 1992, the minimum wage in New Jersey was scheduled to increase from $US4.25 to $US5.05.
It was going to give New Jersey the highest state minimum wage rate in the United States, and it was strongly opposed by business leaders.
How could you record its impact?
Well, it wouldn't be good enough to study New Jersey's labour market alone, because too many variables can influence a single labour market over time.
But Card and Krueger found a way.
They knew that just across the border, in neighbouring Pennsylvania, the minimum wage wasn't going to increase.
They reasoned that, since eastern Pennsylvania had a very similar labour market to New Jersey's, they could run a natural experiment.
And this is how they did it.
https://live-production.wcms.abc-cdn.net.au/4030a9a27ea4c8d66acca95a36748ef5?src
https://live-production.wcms.abc-cdn.net.au/4030a9a27ea4c8d66acca95a36748ef5?src