Note: An article written by Jared Bernstein,
"Making a Living: How the living wage movement has prevailed,"
I’ve heard a lot of views
on the importance or lack of importance of economic research in
the success of Living Wage campaigns. As an economist, what do you
think is the connection between economic research and living wage
There’s a pretty obvious connection. The simplest kind of
Economics 101 textbooks predict that any wage mandate will have
fairly catastrophic effects on the labor market. Those kinds of
analyses assume a labor market are a sort of perfect text-book construction
of how labor markets work, so if you disrupt price signals you’ll
The real world doesn’t work that way, and since our job at
EPI is to empirically investigate the impact of policy along with
the validity of economic theory, we do a great deal of research
to test exactly these kinds of programs. And so, to the extent that
this research yields results that show either that a theory is correct
or it isn’t or is right to a point— whatever light that
the research shows on these empirically testable hypothesis are
obviously important to the debate. So we bring them into the debate,
and research has been brought to bear quite extensively on these
issues—probably more on minimum wage than living wage, just
because we have much more research on the former than the latter,
but there’s a fair bit of research on living wages that we’ve
done as well.
Many student activists I’ve
talked to argue that contemporary economic theory is inherently
conservative. Traditional economic theory tends, in addition, to
warn against polices like the Living Wage. What do you say to students
that are frustrated by the conservatism they see in economics?
I think you have to know the rules before you can understand how
they can be broken. Charlie Parker said learn everything you can
about music, and then when you go to play, forget it. But he learned
everything he could.
It’s the same thing with economics: you need to learn the
rules, and a certain amount of humility is what I’d recommend
to students interested in economics. The set of rules and methods
that are taught in economics (if it’s taught well) are a very
rigorous and well-organized set of methodologies worth learning
about. But I’m sympathetic to the viewpoint you’re representing:
I think that the world behaves much more unlike the neo-classical
model than like it, because the neo-classical model, at its root,
assumes a very rational type of behavior, profit-maximization, and
totally discounts the equity side of the equation which looms large
for lots of people—especially students that have that kind
of attitude. I would tell those students, be patient, learn the
rules, and then you’ll be much effective explaining why they
The Nobel laureate Amartya Sen had this same frustration early
on in his career. He is very sympathetic and very humanistic kind
of person, but he made it very: "I have to go understand what
these folks are talking about so I can argue successfully against
them." That said, at least the whole statistical analysis side
of economics is really very much worth learning, such as econometrics.
That is the best way to get to the quantitative truth of these issues.
I don’t think you should have any bones to pick about that;
I think econometrics is something you should just learn.
I think probably the most important thing would be for student
activists to learn both sides of all the arguments so that they
find themselves able to really cogently defend the policy, and articulate
its benefits and articulate why the attacks on it are incorrect
(to the extent that they are).
Where did your interest
in combining economics with social movements, such as Living Wage
For me, it was studying the history of social policy. It was all
about softening the edges of free-market capitalism. I think in
a typical economics education you don’t learn that much about
ways in which markets fail. You learn that market failures do occur,
and that they are somewhat irregular and they may have to do with
a monopolistic firm or some kind of negative spill-over, and that
there’s a set of mechanisms for taking care of that.
I learned more that on a pretty on-going basis there can be persistent
ways that the market doesn’t work so well, particularly for
groups that are disadvantaged or have less bargaining power. And
it was fortunate that I learned that.
At the same time, throughout my career, I’ve worked with
people who have been involved in movements that were at some level
targeted to intervene in the market and create political institutions
that help distribute the fruits of economic growth in a more equitable
way: people who were into the union movement, minimum wage movement,
workplace regulation, fair labor standards. Those were the kinds
of things that moved me.
What advice to you
have for the students working on Living Wage campaigns?
Educate yourself on the arguments, so that you’re an articulate
advocate for the policy, not simply on the basis of social justice
(which is key), but also on the basis of economic evidence. It’s
very important to educate yourself on those arguments.
But secondly, realize that ultimately it is a social justice argument,
and you should feel confident in pushing that side of the coin.
You can’t forget the other side because if it actually did
hurt people, you wouldn’t want to support it. But the economists
and the economic arguments ultimately not going to win the day here.
They can help dispose of irrelevant and incoherent arguments proffered
by the other side, but ultimately this is about equity and not wholly
about efficiency. Learn about the economic side of the argument
but don’t for a minute think that’s the whole story
because it is only part of it.