The nobel salary

Talks have begun on raising the minimum wage in Colombia and amid a troubled political environment, the Nobel Prize for Economics is awarded to a triplet of economists whose contributions to experimental science are robust enough to achieve this distinction. .

One of the jobs for which David Card is awarded is related to the effects of salary variation in the labor market. Their conclusions support the thesis that a modest increase in the minimum wage has an insignificant impact on employment levels, a very careful argument to be considered within the framework of the consultation table in the country. Therefore, it would be important to offer a slightly broader context on the controversy of the result.

Card’s works were pioneers in exploiting social circumstances or changes in norms or policies in particular, to consolidate a natural experiment, which in the broad sense of the word seeks the construction of two similar groups between them whose only condition that makes them strictly different is linked to exposure to a treatment, where appropriate, reference was made to a positive variation in the minimum wage for employees in fast food establishments, to provide evidence on the existence of a causal rather than associative relationship between these two variables , labor compensation and employment.

His award is recognition of the rigor of the methodology, rather than the results achieved, which are equally valuable, especially for the state of New Jersey in the United States.

However, in economic science this type of methodologies must overcome two important challenges, one is internal validity, which is what allows us to conclude how the program or treatment is the cause of the observed impacts, and second, is validity. external, which refers to the need to be able to generalize the conclusions to other programs, populations, situations and moments in time.

This second challenge is much more complex to overcome and justifies the reason why we must carefully observe Card’s findings for its universalization, given that the sample used is not representative of the entire world population but of specific cities. at a given moment, with a conservative stimulus granted, with particular regulatory factors and determined working conditions.

Along these lines, the awarding of the Nobel Prize is an invitation to the academy to take advantage of the outstanding methodology approach proposed by Card to continue debating the causal effects of the monthly minimum wage on the creation or destruction of jobs in Colombia, for our times, and for our labor system that differs from the one considered by the Nobel in his document.

In Freeman’s words, Card’s work is a bet on empirical economics, and the ability to use statistics creatively to make inferences about the operation of the economy. Finally, thanks to the fact that we reward him for inspiring a sequence of works that try to do the same to explain the impact of public policy interventions on the well-being of the population.

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The nobel salary

Hank Gilbert