COMMENT | Raising minimum wage will lead to unemployment?

COMMENT | When David Card got the phone call that he won the Nobel Peace Prize, he was in his pajamas. He came home from a late flight, showered and was ready for bed, but a man from Sweden, named Adam Smith (similar to the pioneering economist who died 232 years ago), left him a message. This must be a joke, he thought to himself.

Card won the Nobel for revolutionising how economics was done. In the past, economists “prove” a theory by observations rather than experiments. If a government reduced spending and increased taxes and the economy prospered, was it because of any of the two policies or a dozen others or just plain luck?

But Card thought an evidence-based approach was possible for some theories, and one of them was minimum wage. Economists have long held onto the gospel truth that raising the minimum wage will lead to unemployment. This is founded on the highly simplistic theory of supply and...