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May 21, 2007

Cosmopolitan Considerations

This, by Dani Rodrik, is an important point:

the difference of views has nothing to do with the economics of immigration, on which I think we all agree. Expanded immigration is likely to exert downward pressure on workers' wages in the U.S. Where we disagree is on whether the gains to the rest of the world make this still a worthwhile effort (in the context, of course, of efforts to cushion the adverse effects on U.S.). As Alex Tabarrok points out in a recent post, the differences have to do with what we think is the relevant moral community for making public policy decisions. George thinks the purely national perspective is the right one, and he figures the aggregate gains for the U.S. are small relative to the distributional costs, which makes this bad policy. For my part, I believe cosmopolitan considerations should enter our calculus when the gains abroad (or to foreign nationals) are sufficiently large, which they would be with temporary labor flows.

The problem with cosmopolitan calculations is that they're relatively arbitrary. Whatever my intellectual thoughts on the subject, I don't, in policy analysis, give a dollar of gains to Bolivians the same weight I give a dollar of gains to Americans. So I wouldn't support a policy that raised aggregate happiness and economic well-being across the Americas by significantly eroding those metrics in the United States. But between those two extremes, I'm not precisely sure where the cut-off lies.

Thankfully, none of the immigration policies currently on the table will have a massive negative effect on Americans, and in fact may do quite the opposite. The immigration status quo is a worst-of-all-worlds for workers, as illegal immigrants exist outside the wage standards and labor laws that help level the playing field and avoid a high-speed race to the bottom. When these workers' rights can be enforced, they will no longer be so cheap relative to native-born workers, and thus native born workers may see their other advantages -- linguistic, cultural, etc -- win the day. If you really want to screw the low-income workforce though, keep the situation static, and force them to continually compete against a workforce that's paid less than minimum wage and isn't subject to the safety standards and sundry other regulations of legal workers.

May 21, 2007 | Permalink

Comments

Dani Rodrik is wrong if he thinks we all agree about the economics of immigration: "Expanded immigration is likely to exert downward pressure on workers' wages in the U.S." I'll look for citations, but studies looking at Algerians immigrating to France and Cubans arriving in the USA came to a different conclusion from Rodrik's.

Ezra is correct about the problem. It's the two-tiered structure of workers' rights that's harming wages. The lawlessnes of current immigration policy is the problem, not immigration in all its forms. This would be more quickly comprehended if that lawlessness extended to professionals: lawyers, doctors and teachers. But pretty much only laborers have to compete in an unregulated labor market.

Posted by: Rev Transit | May 21, 2007 12:15:35 PM

It is not enough to just legalize the underground workforce, although that is a necessary precendent. At the same time 1)the political will must be there to allow vigorous enforcement of the minimum labor standards and rights currently codified and 2)give the appropriate enforcement agencies (Dept. of Labor, NLRB, etc.) the resourses necessary to be a credible enforcment presence in the workplace. Neither 1) nor 2) is currently present so don't assume merely passing immigration reform will magically create labor law compliance. It won't.

Posted by: dmh | May 21, 2007 12:45:03 PM

This is exactly the point I make all the time on this issue. This is at base a simple matter of common sense economics. Employers choose illegal employees because they in effect are importing the lower labor standards of other countries into the US. The best outcome for the American worker is not the fools gold of eliminating illegal immigration. It's to bring the black market economy under the laws of the rest of the labor market in the US by so penalizing with draconian fines and fees that any employer who would dare break the law would become a) an example to others not to do this and b) would forse up the wages of all employees (including the illegals brought into the system understand guess worker status). The solution to immigration issues, at least economically, is employer base, but that will never happen because the debate is so fake.

Posted by: akaison | May 21, 2007 12:45:46 PM

There is no real teeth to the enforcement in the new bill. There will still be new illegal aliens which means there will still be a two tiered labor system.

Posted by: joeo | May 21, 2007 1:11:41 PM

Thankfully, none of the immigration policies currently on the table will have a massive negative effect on Americans, and in fact may do quite the opposite.

That's pretty funny. Let's deal with one specific example, the DREAMAct, which is included in the Senate bill. That would let IllegalAliens take discounted CollegeEducations from U.S. citizens. I'd say those U.S. citizens who can't go to college because of the DA might consider that a negative. And, if you actually think it through, you'll see that things like the DA undercut our entire political system. That's a pretty strong negative.

And, there's a reason why some employers favor illegal aliens. If you wave a magic wand and convert illegal aliens to legal workers, they may and almost certainly will seek others more to their liking. And, the infrastructure that would support that would be strengthened by "reform". Supporting "reform" gives power to those who will fight to weaken "reform" in the future.

If you really want to screw the low-income workforce though, keep the situation static, and force them to continually compete against a workforce that's paid less than minimum wage and isn't subject to the safety standards and sundry other regulations of legal workers.

A false choice: an unmentioned alternative is reducing the numbers of IllegalAliens here now through enforcement (rather than waving a magic wand).

Posted by: John Edwards: get ready to help us oppose amnesty | May 21, 2007 1:15:50 PM

Ezra writes:

The problem with cosmopolitan calculations is that they're relatively arbitrary. Whatever my intellectual thoughts on the subject, I don't, in policy analysis, give a dollar of gains to Bolivians the same weight I give a dollar of gains to Americans. So I wouldn't support a policy that raised aggregate happiness and economic well-being across the Americas by significantly eroding those metrics in the United States. But between those two extremes, I'm not precisely sure where the cut-off lies.

Of course, there is always the argument that the increasing wealth of Bolivia reciprocates back to us. They have more money to spend, so they start buying American goods. The zero-sum aspect of trade is only in the short-term shifts: American moving to a more high-skilled labor force, Bolivia satisfying America's previous low-skilled labor force. The net effect is a positive increase in wealth for both parties.

How we deal with those short-term shifts is an important question; but overall free trade benefits us (and let's not forget, it is the greatest anti-poverty tool in our power).

Posted by: Jason | May 21, 2007 3:14:16 PM

Nothing in life is free, and neither is trade that doesn't reflect the reality that we aren't increasing their wages, we are decreasing ours if all we do is eliminate trade barriers without understanding differentials in laws. \

Do you know what forum shopping is Jason under the law? I sense that you do not. It's where under different legal jurisdictions, one choose the jurisdiction with the most favorable laws. If Bolivia has the worst environmental, labor and wage laws so that they can attract businesses because these laws place no requirements on business- then the businesses according to forum shopping will choose Bolivia. This is, of course, also an economic idea, but here it's a falsely created one based on the company taking advantage of horrible labor laws that no one in their right mind would ever want see duplicated in the US.

The only way for US workers to compete in a real system of trade would be for the equalization of laws in both countries or to place. Otherwise, it is not the same market, and can not be.

Posted by: akaison | May 21, 2007 3:24:35 PM

"The only way for US workers to compete in a real system of trade would be for the equalization of laws in both countries or to place. Otherwise, it is not the same market, and can not be."

There is some truth to that statement, but foreign labor isn't cheap only because they don't have similar labor standards. Unless, of course, you want to guarantee them a $5.15 minimum wage; but then there is no reason to outsource in the first place, and foreign workers who would be willing to work for less lose that opportunity. Here is a situation where you are trying to help those workers, but you actually end up hurting them. This is the core conservative critique of liberal economic regulations.

Posted by: Jason | May 21, 2007 3:33:46 PM

I suspect what we need to do is to radically incentivize the export of American professionals, scientists, and high-skilled workers to the developing world. This would accelerate overseas development and equalization of social structures while promoting egalitarianism at home.

A 90% top marginal rate on incomes over $100k might do it. America was in part built during the 19th century with British capital.

Or war & conquest. Worked wonders for Gaul & India. Just kidding.

Posted by: bob mcmanus | May 21, 2007 3:36:50 PM

what was funny about your post bob is the crazy steps that would need to happen to make theories of free trade work as applied to the real world.

Posted by: akaison | May 21, 2007 3:43:30 PM

I'll take bob's plan over Jason's! Jason's plan is to offshore tens of millions of American jobs to help people in other countries raise their standards, without, of course, offering a plan to reemploy those millions left without work here.
bob's plan is much better, let's find a way to ship some of our top 10% to developing countries. I'll take the risks of bob's plan over Jason's. I have a sneaking feeling that the top 10% of income earners don't constitute any larger a percentage of the best and brightest than in our country's overall population. Sounds like a fairer bargin to me.

Posted by: Ricky | May 21, 2007 3:51:47 PM

I'll take bob's plan over Jason's! Jason's plan is to offshore tens of millions of American jobs to help people in other countries raise their standards, without, of course, offering a plan to reemploy those millions left without work here.

Classic case of (wrong) zero-sum economic thinking.

Those jobs may move overseas, but the increasing wealth of other countries + the increasing wealth of our own country (through cheaper goods, increasing capital) translates into new jobs. The "pie gets bigger" argument essentially.

The personal computer had obvious adverse effects: it destroyed many jobs and companies from the pre-computer era. But no one would argue that our economy actually regressed; in fact, we had one of the lowest unemployment rates in our entire history during the '90s boom. Globalization is no different.

It is easy to see the jobs move overseas; it is a lot harder to see the new ones being created from increased efficiency.

"A 90% top marginal rate on incomes over $100k might do it. America was in part built during the 19th century with British capital."

We would also beggar ourselves in the process.

Posted by: Jason | May 21, 2007 4:02:33 PM

the difference is that a computer isn't the same as a person or else we wouldn't have labor laws protecting workers. so long as that is true - any widge analysis from econ 101 is inappicable. and even you admit that we can't exactly be like competitors abroad since t hey do not care about things like say human rights in China- so of course they can have sweat shops while we can not. now if you are advocating american sweat shops then your argument at least makes more sense.

Posted by: akaison | May 21, 2007 4:08:50 PM

the difference is that a computer isn't the same as a person or else we wouldn't have labor laws protecting workers. so long as that is true - any widge analysis from econ 101 is inappicable. and even you admit that we can't exactly be like competitors abroad since t hey do not care about things like say human rights in China- so of course they can have sweat shops while we can not. now if you are advocating american sweat shops then your argument at least makes more sense.

I'm not advocating that a computer is the same as a person. I'm for some labor regulations. But not every labor regulation is a good one. The gauntlet that European employers have to go through in order to fire a worker, and the systemic unemployment it produces, is a perfect example of when regulation hurts more than it helps.

I'm for international standards on health and safety. I'm not for an international minimum wage, since that would only deprive workers of jobs they were willing to do less.

The example of the computer was to show how disruptive forces can create job losses, but in the net actually create more jobs than those lost. Globalization, once again, is no different.

China does have some human rights issues, and I would be wrong to say no company has ever cut corners. But even if we lived in a world of exact lawfulness, a Chinese worker would still be able to work for less than a American worker simply on the basis of a lower standard of living. Companies aren't always outsourcing to avoid our laws; they are outsourcing because people can work for less in other countries.

And the reason they work for less is that they are really poor. Which means any job we throw their way is a much welcomed opportunity. Likewise, any job we don't throw their way punishes them -- which is what would occur if we mandated something like an international minimum wage.

I agree, both situations -- free trade and fair trade -- suck. But free trade sucks just a little less. Until we can resolve the tension between strong labor standards and less growth, we need to look for alternative solutions.

Posted by: Jason | May 21, 2007 4:22:06 PM

There is no real teeth to the enforcement in the new bill.

What's this based on? Hugh Hewitt gives some details that seem to contradict this. The penalties on employers look real enough to me. (Hewitt treats the temporary cards as a loophole, but that's baloney: of course those in process won't be treated as illegal to hire. It's those trying to avoid the process who employers will no longer be able to hire without hefty penalties.)

Posted by: Sanpete | May 21, 2007 4:37:31 PM

"The immigration status quo is a worst-of-all-worlds for workers, as illegal immigrants exist outside the wage standards and labor laws that help level the playing field and avoid a high-speed race to the bottom. When these workers' rights can be enforced, they will no longer be so cheap relative to native-born workers, and thus native born workers may see their other advantages -- linguistic, cultural, etc -- win the day."

Wait just a minute. That entire argument depends on the premise that the USA is actually going to enforce immigration laws once we get this guest worker program and amnesty package passed. You know what that means right? Massive border patrol, massive numbers of border agents deporting people. Stripping families apart to deport the illegal parents while the american born kids stay here.

Unless you do those things, illegal immigration wont be reduced, ever. YOu can pass all the guest worker and protection programs you want, but they will still be undercut by the (cheaper) flood of illegals coming across.

Lets get real here ezra. You dont want the kind of enforcement thats required for your goal to work. YOu are a bleeidng heart liberal, and the first time the new era in enforcment stops, you'll start bitching on here about how its "inhumane" to deport illegal parents back to Mexico while their american born children get shipped to relatives.

Posted by: joe blow | May 21, 2007 4:41:28 PM

"There is no real teeth to the enforcement in the new bill. There will still be new illegal aliens which means there will still be a two tiered labor system."


Exactly. Regardless of what bill passes Congress, the flood of illegals is NOT going to change until we start enforcing the law. The US govt will not do it, and the courts wont allow the state/locals to do it.

There were all sorts of new enforcement regs in the 1986 amnesty bill, but guess how many of them were actually enforced and taken seriously?

Posted by: joe blow | May 21, 2007 4:44:58 PM

why do you think that is joe- who does that advantage?

Posted by: akaison | May 21, 2007 4:52:53 PM

It gives advantage to our idiot pandering politicians on BOTH SIDES of hte political divide:

1) Repubs want illegals to boost business profits

2) Dems want illegals as a future voting block

Dems will come out ahead in the long run, the voting block will push the pubs out of govt FOREVER

Posted by: joe blow | May 21, 2007 5:13:08 PM

actual joe- the chief benefactors of the system are small businesses- its your neighbors.

Posted by: akaison | May 21, 2007 5:28:46 PM

actual joe- the chief benefactors of the system are small businesses- its your neighbors.

Uh oh businesses are benefiting. Stop the train now.

Posted by: Jason | May 21, 2007 5:50:51 PM

actual jason - i would be happier if you just stop talking out of both sides of your mouths. ie, joe there is doing it and so are you. let me go meta on you here- you argue a position- and then when confront with the underlying factual flaws in your argument, you then can be counted on to ignore it, argue some absurdity, say its an attack or do what you are doing now. the point if you have not figured it out- is that if businesses by joe's neighbors are advantaged by it- then it is probably the same reasons why nothing will be done about it rather than as joe is doing trying to externalize it from something other than joe's own community.

Posted by: akaison | May 21, 2007 6:16:47 PM

1) Where are these so-called factual flaws?

2) I tend to argue for a process, not a result. I don't think freedom of speech is a bad thing just because sometimes it gets abused. Why? Because overall it is a positive force, and without it would do more damage than the few abuses we have to tolerate.

Are there businesses that cut corners? Of course. Does that mean free enterprise is a bad thing? Absolutely not.

Posted by: Jason | May 21, 2007 6:24:39 PM

a) Factual flaws- pointed out one above- the differentials between laws of country x and country y.

b) process- no you are not. You argue conclusion.I'm arguine process because I ask do these assertions you make work? I also ask the same of assertions on the other side. Indeed, in terms of this debate I used to be you until I became a true process person and thought through what concepts in actual application mean.

Posted by: akaison | May 21, 2007 6:51:11 PM

To you, factual flaws are anything that doesn't fit in your ideology.

If you make an assertion, I'll give you a real world analysis of why I disagree.

If I make an assertion, you call me a right-wing pundit who can't think outside of ideology, and that my argument is full of "factal flaws." Oh, and you won't contradict any of my points.

Is this a debate?

Posted by: Jason | May 22, 2007 9:20:58 AM

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