An Interview with Jared Bernstein,
Senior Economist at the Economic Policy Institute

Conflicting economic research is often at the heart of debates over the living wage. As an economist, Jared Bernstein explains what economics can, and cannot, contribute to the living wage debate, and how he became interested in progressive economic policies.

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 activism?

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 create distortions.

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 don’t apply.

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 campaigns, begin?

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.

Wow, great interview. How can I read them all?

All the interviews from this project have been collected into a report on campus labor rights campaigns. It is available below for easy reading, printing, and sharing.

The Campus Living Wage Project:
Interviews with Student Activists, Organizers, and Researchers