Economists criticize Escrivá and Díaz's attempt to use the Nobel Prize in Economics to justify the rise in the SMI

As popular culture affirms, the debate on the minimum wage happens the same as the Guadiana river, which "disappears" and "reappears" every time, although in reality the controversy has always been there. This happened again with a tweet published this Monday by the Minister of Inclusion, Jose Luis Escrivá, himself a graduate in Economics from the Complutense University and with several postgraduate degrees in Economic Analysis and Econometrics. In parallel, the Second Vice President of the Government and Minister of Labor Yolanda Diaz Canada's David Card congratulated the new Nobel Prize in Economics in a tweet: “Congratulations to Card, Angrist and Imbens for this well-deserved Nobel Prize in Economics. According to the jury's decision "and echoed

a part of the jury's ruling: "Contrary to the conventional view, they showed that the increase in the Minimum Wage does not translate into an increase in unemployment."

[Card, Angrist e Imbens, Nobel de Economía por su contribución a la extensión de los experimentos naturales]

Specifically, the head of Social Security has also shown his satisfaction with the award of the Nobel Prize in Economics to the researcher and professor at the University of California (Berkeley) David Card, to whom the jury recognized with this award "his empirical contributions to the economy of labor" and, specifically, his research in the mid-90s in which he came to demonstrate that a rise in the minimum wage did not have a negative impact about employment.

Specifically, Escrivá highlighted that among Card's many contributions, the Canadian economist “has contributed empirical evidence, which broke the mold at the time, on the positive effects in two very important dimensions for the Ministry of Inclusion: immigration and the minimum wage ”.

All of the above was done in reference to one of the best-known studies of the new Nobel. Specifically, the one he carried out together with the late economist Alan Krueger and in which he analyzed the effect on the employment of the rise in the minimum wage in New Jersey from $ 4.25 to $ 5.05 an hour between 1992 and 1995. They concluded that this rise had not had negative effects on employment. For this, both chose several restaurants located in the mentioned state and compared them with others located a few kilometers away, already in the state of Pennsylvania, where this measure was not in force. All this, in the midst of one of the longest growth stages in the history of the United States in the middle of the presidency of the Democrat Bill clinton.

The Spanish labor market and its circumstances

In this regard, the president of the General Council of Economists of Spain, Valentín Pich, asks for caution when translating this type of work to the situation of our labor market. Pich recalled that «Spain is a special case: we have a lot of youth unemployment, the incorporation to work is very late and there is a lot of unemployment in general ». For this expert, our country "has arrived late to the Welfare State, but we have done things very well such as health or pensions." In ours should be the housing policies (social rent) "that cannot be improvised in two days" and the welfare issue or assistance to families in which it includes the minimum wage as a strategy. In his opinion, for example, Spain does not have the same industrial sector as the United States.

The president of the economists also recalled that «In sophisticated services the SMI does not exist, since wages are much higher, but there are areas of very intensive work in which you have to be careful "and has asked that the aid go to those who need it most. In any case, he has warned, that any change must be made "with some planning and even if it is a matter of principle, here the rules of the game must be very clear."

Regarding the aforementioned study by Canadian David Card to which Pompeu Fabra University (UPF) professor José García Montalvo attributes the award of the Nobel Prize, he has recognized that «There are many factors that prevent isolating the minimum wage. For this reason, Card chose two states, one that had just introduced the minimum wage (New Jersey) and the other that had not (Pennsylvania), noting what was happening with hamburgers on the border, since they hired more at minimum wage. In his opinion, this type of "pseudo-experiments or natural experiments give it additional credibility." However, he has clarified that "The problem is finding natural experiments" and asks that "separate causality from correlation or coincidence."

A Nobel for method

For the economist Álvaro Lodares, «The left is selling that they have given it the Nobel for showing that the minimum wage never creates unemployment and, certain libertarians, they are selling they have been awarded the Nobel for exactly the opposite: to demonstrate that the minimum wage does create unemployment.

In his opinion, the members of the Nobel committee have awarded the award to David Card, Joshua D. Angrist and Guido W. Imbens “for working under what circumstances the minimum wage creates unemployment and under what circumstances it does not. They have been awarded the Nobel Prize in Economics for the methods and not for the results », has pointed out this economist who regrets that in this debate some try to bring the ember to their Nobel sardine by means of.

In a similar vein, the also advisor to the General Directorate of Economics, Statistics and Research of the Bank of Spain and associate professor at the University of Alcalá spoke, Juan Francisco Jimeno He wrote on Twitter: "The 2021 Nobel Prize in Economics is for the methods, not for the results." In this sense, the former editor of the prestigious blog 'Nothing is free' He added that "who says it is an award for showing that the minimum wage does not destroy jobs have not understood anything about the contributions of David Card (and the long-awaited Alan Krueger)."


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