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SD Minimum Wage Rises to $9.95 Jan. 1; Nobel-Winning Economics Research Says, No Problem!

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 Republicansanti-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.

11 Comments

  1. larry kurtz 2021-10-12

    Hey, Democrats: Santa Fe would love to have you come work. The minimum wage is $15/hour.

    In August Our Lady of the Arroyo and an interested party had breakfast on a Sunday morning at Chocolate Maven in Santa Fe. We learned from our twenty something woman server that she grew up in Sturgis, did her undergrad in Vermillion and plans to go the University of New Mexico Law School. She called Kristi Noem, Krusti Knob because she knows Republicanism isn’t self-reliance; it’s moral hazard.

  2. mike from iowa 2021-10-12

    magats have shown a consistent stubborn streak of following the economic musings of Prof. Chicken Little ( no doubt a Liberty U grad).

  3. Francis Schaffer 2021-10-12

    I have just realized that money is speech. What a business owner pays his/her employees for wages/benefits/health care speak to the value the owner places on the employee and the employees hear it loud and clear.

  4. Porter Lansing 2021-10-12

    Very good, Mr. Kurtz.
    Our Lady of the Arroyo? Perfect :)
    $15 is indeed a fine minimum wage.
    But, that’s Santa Fe; Albaqwirky and the rest of NM is $10.50
    CO is still only $12.32 but $15.00 is coming soon.

  5. bearcreekbat 2021-10-12

    The documented negation of South Dakota Republicans‘ anti-immigrant rhetoric regarding taking jobs away from citizens highlights what for me remains a mystery. The incentive to spread this lie is somewhat hard to grasp.

    First, rich folks and businesses don’t seem to benefit financially from such a lie since businesses do better with an available labor supply and it is documented that most immigrants come here to find work and improve the lives of their families.

    Second, there would be no reason for the Republican base to be anti-immigrant absent some source telling them this and other lies about immigrants. Thus, it seems unlikely that irrational hate of immigrants originates with the base.

    Third, while apparently political hacks can gain votes by ginning up hatred based on false claims, this also should alienate the big money business donors as anti-immigration policies are simply bad for business.

    Fourth, the Bible’s frequent admonition about how to behave toward immigrants and strangers would suggest that religious folks need to be sympathetic and helpful to immigrants if they want an eternal afterlife in heaven.

    So where in the world does this anti-immigrant nonsense come from anyway? How did Trump and the Steven Miller characters of the world discover they could somehow benefit from these lies?

  6. larry kurtz 2021-10-12

    She’s a spitfire, Mr. Lansing. Most of the time she’s a intermittent stream in a gorgeous complex canyon but at several times a year she’s a raging torrent.

  7. Porter Lansing 2021-10-12

    BCB asks,
    Q – So where in the world does this anti-immigrant nonsense come from anyway?
    A – Low self esteem which began as a parent or authority figure telling them, “You’re a worthless loser.” or something similar. It’s abuse and psychological abuse almost always gets passed on to a perceived weaker subject, in an attempt to lessen the superior person’s subconscious pain.
    Q – How did Trump and the Steven Miller characters of the world discover they could somehow benefit from these lies?
    A – Both Trump and Miller are avid readers and followers of the teachings of Adolph Hitler.

  8. bearcreekbat 2021-10-12

    Porter, I would agree that low self esteem would likely make people more susceptible to being led into hating other people, such as immigrants. That is indeed one of the themes to the book Caste. My question is what is the monetary reward for those who seek to exploit such low self esteem, like Trump and Miller, assuming that demonizing immigrants runs contrary to the financial interests of wealthy businesses that exploit their labor? While power sure is an attraction, it would seem that an anti-immigrant stand should put a damper on contribution from rich donors.

    larry, the above comments also apply to the cartoon you linked. What’s in it for old money bags?

  9. bearcreekbat 2021-10-12

    The Hitler comparison doesn’t quite work because Hilter and his goons were able to seize substantial assets from their victims, which constitutred a finacial incentive to spread hate against successful Jewish families. Here, however, the hatred is aimed at people who have virtually nothing to steal.

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