“Economists should look at the international situation,” says David Card, a co-winner of this year’s Nobel Memorial Prize in Economic Sciences. “It is helpful to have good people in the country, but also to have an outside perspective; self-centered research cannot help a lot.”
Card, a Canadian-American labour economist and professor of economics at the University of California, Berkeley, won the prize along with Joshua Angrist and Guido Imbens.
In announcing the prize, the Royal Swedish Academy of Sciences said that the laureates had demonstrated that many of society’s big questions can be answered using “natural experiments—situations arising in real life that resemble randomised experiments.”
Card’s research interests include immigration, wages, education, and gender-and race-related differences in the labour market. Topics he has explored through natural experiments include the impact of immigrants on local economies.
In an interview with Al-Fanar Media, Card talked about his research and its implications for the Arab world. He also shared with young scholars his ideas on the importance of having a global perspective.
Your main interest is minimum wage and labour economics and you challenged the orthodox theories on that. Why this subject in particular?
That was the work I did 30 years ago. In the late 1980s, there had not been much research on minimum wage. There started to be some new opportunities to study the question. One thing was that the government made some monthly surveys on wages available. It enabled us to study the effect of minimum wages on wages.
“Lots of economists, especially back then, were basically paper-and-pencil theorists, more like philosophers.”
The second opportunity came when some individual states like California and New Jersey decided to have their own minimum wages higher than the federal minimum wage.
The third thing was the interest at the time to make economics a little bit of a scientific field than a rhetorical field. Lots of economists, especially back then, were basically paper-and-pencil theorists, more like philosophers.
Did you challenge the orthodox economic theory on this?
Those who take one class in economics think that there is a standard orthodox theory on minimum wage. Actually, that is not true. Back in the 1930s, there was a development of an economic theory using more mathematics to make things get straight.
A famous British economist named Joan Violet Robinson started to think, What would happen if instead of setting wages by the market—which is the standard story economists like to think about, which is sort of true in pricing rice and things associated with farm markets—what would happen if employers set wages? When they set wages, they actually have to decide if I have to pay more for a worker, then I have to pay more for other workers. So that’s why you can have vacancies, as in the United States now.
“Those who take one class in economics think that there is a standard orthodox theory on minimum wage. Actually, that is not true.”
In your work with Alan Krueger, you said that minimum wage boosts economic growth. Some suggest that if minimum wage forms pressure on capitalists, they can move their firms to other countries.
Obviously, that’s true if you talk about companies with big factories who can move anywhere. They have to set a wage, nevertheless, wherever they are, even if for a few dollars a day. …
That was not the work we covered, Krueger and I were working on restaurants. Those cannot move out of the country. Some argue that there is an important distinction between local producers of things and big firms.
Personal success is related to the institution, environment, and people themselves. Which factor is the most important?
For sure, all of them. We can think of famous examples of well-organized countries that fall apart, like Germany in the 1920s and early 1930s. We do need a strong sensible institutional factor, besides an individual and group high level of education. Society as a whole benefits greatly from that. If a company thinks of making an investment in a certain area, where only one or two persons are highly educated, that’s no good. Investors need an educated workforce.
You have studied the impact of immigration, namely the wave of Cuban refugees to the United States in the 1980s, and said that refugees were not a burden despite the increase of unskilled workforce in Miami. However, the Syrian refugee crisis causes a rise in anti-immigrant sentiments in Turkey, Jordan, and Lebanon. What do you think?
Well, the problem with the Cuban refugees is not really the same as the massive waves of Syrians. The Syrian war did not mess up just the Middle East alone but also Europe. I do not think we really have much to learn from the Miami experience; that was a well-organized labour market, with an already existing Cuban population. …
Still, it was a 7 percent rise in the workforce, which is big, but not as huge as that on the borders with Turkey. The MENA region also has no capacity to absorb those people. There are many smart Turkish businessmen who might take advantage and build factories on the borders, but that would not happen overnight.
You have also studied the underrepresentation of low-income and minority children in educational programs for gifted and talented students in the United States. Do you support racial quotas or setting a number of seats rather than merit-based admission requirements?[The situations in those studies] did not create special seats or change the rules. What they did is say, “OK, we will test all the children. If we find gifted ones, they will be put in the programs.” Before, many of the minority children were not being identified. They did not lower the bar, they just went to see if there were missing children who would be qualified.
Sometimes, the requirements of scholarships aimed at disadvantaged students are beyond their reach. Is this a chronic problem?
The chronic problem is fundamentally the tiny number of elite schools, almost the same as it was 50 years ago, that are incredibly well-funded and spend hundreds of thousands of dollars on each student. The competition to join them is so fierce. Everyone wants to go there, with those fantastic dorms and meals at Yale, while most state universities are really very crappy and under-funded. Same with King’s College in the U.K. that has been beautiful for hundreds of years, while the typical schools most people go to are not like that. Once universities were just for the rich.
“The problem with the Cuban refugees is not really the same as the massive waves of Syrians. The Syrian war did not mess up just the Middle East alone but also Europe.”
The MENA region has high graduate unemployment rates. Do we need less higher education, or to guide students to new majors, or focus on vocational education?
I grew up on a farm in a small part of Canada. There was no need for a Ph.D. in economics there. So, I moved to bigger cities. Some families educate their kids to get them to have a job in other countries, like the U.K. This is obvious for the Persian community in Los Angeles and millions of successful Armenians around the world.
Vocational education is not well-perceived in the MENA region; how can we change such attitudes?
This is interesting. All Germanic countries, like Germany, Austria, and even Denmark, and Sweden, have an apprenticeship system, which is a fancy version of vocational education. When you finish high school, you go to college and work for a firm at the same time, while earning nothing. That system is pretty good; it has been successful throughout the post-war period. They do not think it is a dead-end choice. My colleagues in the U.S. see vocational education as a dead-end job. They want their children to be doctors or lawyers and never a person who wears a suit every day.
Do we need to import this Germanic system?
I do not know whether anybody has been successful in doing that. It would require a fundamental change. First of all, the elite have to buy it. If they don’t, others will not. You cannot force people to do something you do not do. If the leaders and intellectuals say this is good, but not for my children, that’s not a very good thing for success.
Card’s advice to young people in the Arab region: “Try to get to Britain and United States and have a broader education, and hopefully some of them would go back to influence the next generation.”
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What is your advice to young people in the region to have a better future?
Try to get to Britain and United States and have a broader education, and hopefully some of them would go back to influence the next generation. That system worked pretty well in Canada. Many were going to study abroad and come back to teach. It takes a long time to establish independent research capacities in small countries. For economists, having a look at the international situation is important. It is helpful to have good people in the country, but also to have an outside perspective. In the U.S., self-centered research is still a problem. For the attempts to fix the U.S. vocational system, we can learn from places with successful experiences.
This interview has been edited for brevity and clarity.
- “Syrian Refugees Are Often Steered Into Illegal Jobs”.
- “Helping Refugees Rebuild Their Lives in Host Countries”.
- “Graduates of Egyptian Vocational Programs Find Job Prospects Slim”.
- “Wider Lessons From Vocational Education for Refugees”.
- “As Refugees’ Plight Worsens, School Becomes a Luxury”.