The South Dakota Department of Labor and Regulation has announced that this year’s inflation adjustment will add 50 cents to South Dakota’s minimum wage: on January 1, 2022, the least you can pay most workers in South Dakota will rise from $9.45 to $9.95 an hour. That matches the projection I offered back in July based on economic data.
Get ready to hear South Dakota Republicans repeat their unscientific complaints that the minimum wage hurts employment.
But we know the Republican complaints about the minimum wage are unscientific, because the Nobel Prize Committee says so.
This year’s Nobel Prize for Economics goes to economists David Card of UC Berkeley, Joshua Angrist of MIT, and Guido Imbens of Stanford for their pioneering work in “natural experiments”:
Unlike in medicine or other sciences, economists cannot conduct rigidly controlled clinical trials. Instead, natural experiments use real-life situations to study impacts on the world, an approach that has spread to other social sciences.
“Their research has substantially improved our ability to answer key causal questions, which has been of great benefit to society,” says Peter Fredriksson, chair of the Economic Sciences Prize Committee [Simon Johnson and Niklas Pollard, “Economics Nobel Honours ‘Natural Experiments’, from Minimum Wage to Migration,” Reuters, 2021.10.12].
Professor Card won the Nobel Committee’s attention for natural-experiment research that South Dakota Republicans have ignored for decades. In 1993, Card and colleague Alan Krueger upended incorrect assumptions about minimum wages:
Card and Krueger compared the employment rates at 410 fast-food restaurants, including Burger King, KFC, and Wendy’s, in New Jersey and nearby Pennsylvania. They compared employment, wages, and prices at stores in New Jersey, which had raised its minimum wage, a year before, from $4.25 to $5.05 per hour a year and Pennsylvania, which hadn’t changed its minimum wage. The researchers found the changes in one state’s minimum wage made no difference in employment between the two states.
…Card and Krueger’s paper would go on to influence policies globally. The former UK prime minister Gordon Brown and his Labour Party economic advisor Ed Balls used the research to justify their plan for a UK national minimum wage, which was introduced in 1999. Minimum wage was initially opposed by the Conservative Party on the grounds that it would cost jobs, but the policy now has support across both parties [Michelle Cheng, “The Nobel Prize Winner in Economics Revolutionized Thinking About the Minimum Wage,” Quartz, 2021.10.11].
More than twenty years after Card’s seminal minimum-wage paper, South Dakota Republicans were running around ignoring Card’s research and subsequent confirmatory data and monging baseless fear over proposed increases in South Dakota’s minimum wage. Since 2014 voters approved raising South Dakota’s minimum wage from $7.25 to $8.50 in 2015 (a 17% increase, a bit smaller than the 19% increase Card and Krueger studied in New Jersey) and adjusting the minimum wage upward for inflation annually, South Dakota’s employment rates have remained as rosy as ever.
Card’s research has also negated South Dakota Republicans‘ anti-immigrant rhetoric. In 1990, he treated the 1980 Mariel boat lift from Cuba as a natural experiment and found the massive influx of Cuban refugees to Miami did not hurt wages or jobs:
Card’s work provides two conclusions: first, the Mariel boatlift’s economic shock to the Miami labor market did not negatively affect wages or employment outcomes for workers in Miami; second, although the Mariel immigrants were almost entirely low-skilled, their arrival did not affect the overall wages of low-skilled workers. At least within the bounds of this shock (a seven percent increase in low-skilled labor), immigration appears to not threaten native workers. Since Card published this work in 1990, much work has been done to explain mechanisms for how this is possible.
While these results serve well to those advocating for more immigrant-friendly policies, limitations for this study must also be addressed. Miami had the highest immigrant population in the nation, as well as many industries favorable to low-skilled workers, both of which may have eased the transition and acceptance of the Mariel cohort. Nevertheless, Card’s seminal study on immigration labor shocks has held up under subsequent research and continues to be heavily referenced in literature and debates on immigration economics [Nicholas Pellow, “Immigration and Jobs: David Card’s Influential Study,” Chicago Policy Review, 2017.06.16].
Once again, real, award-winning science shows South Dakota Republicans don’t understand how the world works.