The Myth of Breaking the Minimum Wage The Enlightenment of the Nobel Prize in Economics to Hong Kong

The results of this year's Nobel Prize in Economics will be announced on Monday (11th). American citizens David Card, Joshua D. Angrist and Guido Imbens will share the award.

Card won the award for "empirical contribution to labor economics", and Angrist and Inbens won the award for "contribution to the methodology of analyzing causality."

For Hong Kong society, the biggest revelation of the three winners is to face up to the benefits of the minimum wage and don't be deterred by pretexts that are taken for granted.

What the three people have in common is to drive economic research forward, by only judging the degree of correlation between factors, and stepping into judging the causal relationship between factors.

Generally speaking, to determine the causal relationship, the ideal way is to conduct sample control experiments to exclude other elements that interfere with the results.

But the trio’s research projects are about minimum wages, school education, and immigration. These projects cannot be carried out in a laboratory like physical or chemical experiments.

They not only succeeded in distinguishing the group research data affected by the measures and those not affected by the measures in real life, but the conclusions challenged the mainstream judgments at that time, and the contributions of their specific policies and research methodology have influenced them to this day.

"Nature Research" is a pioneer

Card's award-winning research comes from the minimum wage research in the United States in the early 1990s.

Prior to this, most economists believed that the minimum wage reduced employment opportunities and increased the unemployment rate. However, Card and his partners took advantage of the increase in the minimum wage in New Jersey in 1992 while the neighboring Pennsylvania remained unchanged, and carried out natural experiments, targeting fast-food restaurants. entry level employee.

The two believe that there is no other reason for the difference in employment trends in the two states, so they believe that the increase or decrease in employment in New Jersey must come from raising the minimum wage.

It turns out that the number of employed people has not decreased.

This research challenged the ideas at the time and led to follow-up research, including why the minimum wage has no negative effects.

The Director of the Bureau of Labor and Welfare, Luo Zhiguang, earlier used the mainstream opinion of the Minimum Wage Committee as an excuse to freeze the minimum wage.

Card's other research on American immigrants also found that new immigrants can even increase the income of locals, but they may suffer negative effects on those who immigrated to the local area earlier.

As for the research of Angrist and Inbens, which explored the relationship between education and income, through real-world research, they confirmed that an extra year of education can increase income by 9%.

The impact of the minimum wage does not necessarily harm society

The focus of the awarding of the Economics Prize this time is on a pioneering method in methodology, which inspired the design of natural experiments in later social sciences, and it is not only for academic circles, but also for Hong Kong society.

In the field of minimum wages, as the article congratulated Carter from the University of Chicago stated, his and his partners’ research has a huge impact on labor economics. Economists reconsider the social value of minimum wages and the relationship between wage increases and unemployment.

Recall that when Hong Kong was negotiating minimum wage legislation nearly 20 years ago, many opponents would distort the free market to deny the minimum wage. Government officials even criticized the minimum wage for “weakening the working population’s enthusiasm for improving and enhancing the quality of work”, leading to delays. It took many years to finally be able to legislate.

Up to now, members of the Minimum Wage Committee still hold negative opinions on the minimum wage, claiming that raising the statutory minimum wage will result in the loss of more low-paid jobs.

If they had read Carter's research, they might have a different view.

Regarding the broader policy debate, the trio’s research challenged the prevailing ideas at the time, and they are reminding all sectors to put aside their inherent ideas first, and don’t assume that unproven ideas must be correct. The most obvious example is universal retirement protection.

The previous government commissioned Zhou Yongxin, a social policy scholar, to study retirement protection. Zhou Yongxin and his team formulated an old-age pension plan, which was funded by the government and shared by employers and employees. The elderly in Hong Kong benefited from the plan and the plan can be sustained in the long run.

However, the government rejected it all and wasted the scholars' efforts. So far, only public funds have been used to meet the expenditures of an aging population, which has also weakened the financial foundation.

The Royal Swedish Academy of Sciences mentioned in a document introducing the Nobel Prize winners that the three winners "renovated empirical research in economic sciences". Their research methods have been followed by other social sciences, and their inquiry skills have also promoted economic and social policies.

In Hong Kong, the government has also claimed to promote evidence-based policy research, but whether this is the case is not without doubt.

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