Global Development: Views from the Center

Michael - I enjoyed reading your blog entry. I wanted to add the following reflections, which are largely drawn from my own observations and experiences running growing retail businesses in the UK and in the Russian Federation. I have seen some of the results of immigration first hand.

1. Why does this debate get mired in principle discussions ?

Isn't the main question simply whether we are more interested in better outcomes or want to uphold some form of principles beyond their sell-by date ? Immigration debates should to be informed by "Realpolitik" rather than polemic and principles beyond which the market has moved.

In the EU - which is not really known for dynamism.. - labour mobility in 2004 was created for 80m + citizens of lower-income neighbouring countries and recently extended to new countries : why is it that europe has moved beyond discussions and taken action to legalize and therefore encourage immigration on a mass scale ? I believe fundamentally, because however worried people are about immigration, they also feel that it is better to legalize than to accept the consequences of a grey market in human beings. Admittedly is in one of the most controversial issues within the EU but it is also interesting that following huge inflows of persons since liberlization the debate has now turned to new countries bordering the EU from where there is growing illegal or unregulated immigration.

2. Who are the immigrants ?

In one of my UK businesses we employ 90% non UK citizens and we recently calculated that upwards of 50% of our employees are university graduates even though these are low wage jobs - this must be a benefit to the UK economy in the long run. Immigrants do appear to be more qualified and harder working and more determined that they are commonly given credit in recent debates - strange debates really given the historic romantization of immigration stories in the US.

3. Economic Benefits

Our Slovak contractor in London tells me that back home he is re-building his house with Ukrainian labour (illegal probably because Ukraine is not part of the EU) because the Slovaks have moved west. In Moscow, our Armenian contractor tells me that they now need to look for Uzbek and Tajik labour (and anecdotally you really do see vast numbers of Asian faces on construction sites in Moscow even though most of these do not have work permits) because Ukrainians have moved west to work and are no longer available. Migration is a global reality and even labour over time will move to where the marginal returns are higher whether or not this is legal - note that immigration of Slovaks to the UK is legal, but Ukrainians to Slovakia is not legal and Tajiks to Moscow is also generally not completely legal.

4. How big does the lifeboat need to be - how far must the thinking on this topic go ?

I do not agree that this is analogous to having a lifeboat with 10 people when 100 are waiting to be saved.

This is analogous to the re-designs in transatlantic ships after the Titanic disaster. They then made sure that there were always enough lifeboats available. They planned ahead.

The only thing we can know for sure is that immigration will continue growing at unprecendented rates in absolute and perhaps also in relative terms - how much larger will growth be if legalized? One cannot say for sure but look at eastern and western Europe and you will see that it is not the case that countries have emptied out; however many highly skilled professions have been hard hit, to the benefit of the host countries.

Capital tends to re-allocate itself and when there are barriers to entry, brokers take a cut and sometimes investors have to accept lower returns on capital to the point that returns are equlibriated. The "cut" is the exploitative behaviour of employers and fixers who bring in illegal workers and which then pay workers less than they are due. The investors are the immigrants themselves who become part of our society one way or another but end up part of a feudal subset of society rather than becoming fully contributing members - if we do not have lifeboats available for 100 people.

Ian Zilberkweit

Yes Michael, you are right.
No need to propose to "globalize labor" because it's already happening, since many decades ago. People migrate to other lands for many reasons -- to study, pursue adventure, love and romance, reunite with family members and relatives, to work, to learn new culture, etc. In the process, people work where they have newly settled in.

Some interest groups of rich countries are paranoid of big migration from other countries because they are afraid of labor and entrepreneurial competition that the migrants will bring in. While many politicians and bureaucrats of rich countries are paranoid of big migration from other countries because of fear of further strain in their welfare system.

But a household with both parents working and have kids, will experience instant welfare improvements if they can find skilled and reliable nannies from other countries who can help them take care of their kids. And such kind of instant welfare improvement requires no additional taxes from them and from other people. Such is one beauty of allowing big migration.

LANT PRICHETT TALKS ABOUT REAL PROBLEMS, REAL SOLUTIONS

I am not surprised at all that part of the western media is putting Lant out of context by twisting his words, thoughts and great ideas. Lant is talking about something the western media and world does not want to hear. The solution for development in Africa and other poor countries lies in some of the ideas that Lant is putting forward.

We have globalised the markets, and labour from developed countries has free and unlimited access to the poor countries to work as expatriates. Rwanda for instance after discovering that many so-called 'expatriates' were college students, demanded that this procedure must stop or else the INGOs, Multilaterals and Agencies using such 'skilled' labour must withdraw from Rwanda and it worked. To be plain, compare ceteris peribus, what two staff with same age bracket, qualifications and experience, doing the same job but from a developed country and a developing country. Ultimately the one from a developed country will earn thousands of dollars or pounds, the other usually called 'local staff' will earn 10-15 times less. At this point, does Lant's arguements hold substance?. During the 16th and 17th to 18th centuries, till the time of 1948 Marshal plan, many people in poor western Europe moved to Eastern Europe and the U.S.A. Does the current developement of western Europe and Asia has a bearing on these labour movements?. At the moment, US is struggling with the Mexican migrants to the extent of building a perimeter fence. Europe is struggling with the same from parts of Asia and Africa.
The global economy must be forced open in terms of labour mobility where Mexicans, Africans and Asians plus other South Americans are rationed and offered temporary opportunities for like 4 months. Countrol meausres can be taken to ensure that this lot does not come again in either 2/3 years.The would be migrants would hold patience since they know their turn is coming. This will save the destination countries lots of money in terms of detention costs, meals, medical care and deportation. Besides, the migrants will prepare themselves, meet their legally accepted travel costs that will bring revenue to the developed countries. Many developed countries like the US practice labour policies like 'a foreigner is not needed where local manpower can be available'. Why can't we reciprocate the same practice in the countries where International Agencies are working?

Lant will face much criticism for going on board and advising the crew that other people can come on ship and clean it when you anchor and offload.

Paul Mayende,
Student, M.A International Relations
Makerere University, Kampala.

Always enjoy reading the thought-provoking posts here.

While I applaud the interest in opening labor markets, I hesitate to get too enthusiastic about guest-worker programs. While they increase low-skill labor mobility (a good thing because we all benefit from cheaper prices for the services low-wage workers provide), they may also produce a permanent group of low wage workers without political rights (a bad thing). The difference between earlier waves of immigration and a massive guest worker program is that the children of the low wage immigrants in a guest worker program do not become citizens. Creating a permanent large supply of low-wage workers with no political rights is a recipe for even larger increases in inequality in this country.

Second, should we not benefit from freeing the labor market for high-skill workers as well? Increasing the supply of foreign doctors, for example, by making it much easier for them to obtain US licensing should compete down the wages of doctors and lower the cost of their services (a good thing because we all benefit from lower prices). Lowering the cost of entry for foreign high-skill labor to work in the US/richworld would send a signal for poorcountry residents to invest in the skills to enter the US/richworld. This would decrease the domestic price of the immobile services (e.g. doctors, lawyers, economists/financial industry) high-skill workers provide in the rich world.

The NYT doesn't appear to be too interested in talking about this latter possibility, perhaps because their high-skill readers benefit from an increase in low-skill workers (particularly ones with no political rights) but would be hurt by lowering the cost of entry for high-skill workers.