With the tide of finance running high, studies on labour economics are not fashionable. Globalisation and the spread of multinational corporations have reduced the power of labour. The lone ranger battling against the tide is the International Labour Organisation (ILO). Fortunately, we have departments in certain universities and some economists devoting time to labour economics. Prof. David Card, who has been awarded this year’s Nobel Prize in Economics, is one such.
He has a stellar record as an academic. A Canadian, he graduated from Queen’s University in 1978 and secured a PhD from Princeton in 1983. He taught at the latter from 1983 to 1996 and held visiting appointments at universities such as Columbia and Harvard. While awarding him the Jacob Mincer Award in 2019, the committee said that “he has been a major force and leader in the field of labour economics for more than three decades”.
One may wonder why Prof. Card chose labour economics as his career. He answered this in an interview given in December 2006 to the Federal Reserve Bank, Minnesota. He said he was more interested in the behaviour of humans than that of derivative assets. Unlike in finance, he found the labour markets more exciting as they have “... information issues, rigidities and a huge amount of heterogeneity…”. Naturally, his work “focussed on how the labour market works for the lower-skilled or less-able people”. He was keen to unravel why some people succeed and why others fail and whether they are relatable to the environment, institutions or the people themselves.
He applied these tenets to his research over long years on areas such as education, inequality and immigration. His early work that was closely related to the debates on minimum wages deserves special mention. All these issues are emotive or contentious politically and socially. Card is not swayed by a priori or ideological perceptions. He relies on dispassionate analysis of empirical data, their trends and correlation or causation before arriving at any conclusion. It is indeed this approach that has impressed the Nobel Committee that gave him the award.
Card is a prolific writer and has contributed over 100 journal articles and book chapters. He was Director of the Labor Studies Program at the National Bureau of Economic Research (NBER) from 2012 to 2017. He has several books to his credit and the Myth and Measurement: The New Economics of the Minimum Wage (1995) created waves. He has delivered prestigious lectures on his work. It is not practical to cover all his contributions. We take up a couple of them selectively.
America was a heaven for migrants from Europe and other parts of the world. The flood of people who escaped Nazi tyranny in the pre-World War 2 years is well recorded and celebrated. Sadly, in recent years, there is a backlash against immigrants there. America is now deeply polarised between those who favour migration and those against it. The election of Donald Trump as US President was the high point of the anti-immigration malaise. There are continuing and heated debates on immigration policy. Card has been steadfast in supporting immigration. He is of the view that arguments against immigration are unsound or untenable and those who oppose them, even economists, “are driven by concerns outside of the narrow realm of economics”. He is sanguine about the impact of immigration on the US labour markets, which are remarkably able to adapt to the changing composition of local labour forces. They are also absorbed quickly and easily. Moreover, his research on the impact of immigration on wages indicated that any reduction “is of the order of a couple of percents nationwide over 25 years”. Similarly, in his Ely Lecture on Immigration and Inequality (2009), he explained that “immigration has not had much effect on native inequality”.
On the question of minimum wage, he has held forth much to the chagrin of hoteliers and retail chain owners. He defends a higher minimum wage for unskilled workers. His research survey covered most of the American cities. He established that “employment losses associated with a modest rise in minimum wages are hardly detectable”. Later studies by other economists also confirmed this view.
Nobel awards in Economics have tended to favour economists who work on exotic, esoteric and algorithm-based areas that appear far removed from reality and the demands of the current times. By giving this year’s award to Card, the Nobel Committee has departed from this trend. For the economist, it is an award for love of labour.
Kandaswami Subramanian
Served in the Ministry of Finance, GOI, and retired as Joint Secretary
(subrabhama@gmail.com)