Friday, August 10, 2012

The free movement of labor

Why do we let dollars, but not people, chase opportunity across borders?

In our globalized economy, financial capital flows freely across national borders.  A dollar of American savings, after seeping through the morass that is our financial system, might find itself spent for a Chinese factory, or for boring an African well, or for a piece of equipment in an Indonesian mine.

This globalization, while it has had controversial consequences, has undoubtedly been beneficial: One need only look at the experience of Japan, or the other East Asian Tigers, or China, or (even) India.  Even the dark continent is benefiting.  Every where (nonmilitary) capital goes, it ends up improving the general lot of the populace.  People who scratched out a living in an overfarmed countryside move to the city to find higher-paying factory jobs.  Incomes rise as the workforce becomes more productive.  Rising incomes let governments invest in better education and public services -- countries electrify, sanitize, pave -- and this attracts more investment.  Local firms sprout up, incorporating the latest foreign technology and management techniques.  Centuries of economic growth happen in the course of a few decades, and at the end of it --- modern.

We can't say we first-worlders don't benefit, either.  As well as more wealthy people to buy our exports and more people to make things we want, our pension funds and retirement money go, in part, to pulling the third world out of poverty.  With success come higher returns to support us in our old age.

Capital is one of the factors of production. What of the other two? Land, we easily see, is completely endowed by national borders. When land flows over borders -- well, borders flow over land -- we may infer that the broader economy is suffering.

Labor - ah, now labor.  Capital flows easily across borders, labor is stuck.  For instance, Wikipedia claims the United States naturalized about million citizens in 2008, and that was more than all the other countries in the world combined.

Net immigration of about one third of one percent, when US median wage, roughly $45,000 per year, is roughly 40 times median world income, $1200 per year?  When being an American means that you are almost certainly among the wealthiest 40% of the world?  What's going on here?  People all across the world should be jumping at the chance to move here!  In fact, a recent Gallup survey shows that, worldwide, 640 million people (13% of all humans alive!) would jump at the chance to permanently relocate, and 150 million of them would like to come to the United States.

A little bit of poking at the State Department's website indicates that there are substantial barriers to moving here: You need to be sponsored by a current citizen or lawful resident who is also a family member, or be sponsored by an employer.  There's plenty of paperwork, you pay a fee for processing, and then you wait for an interview.  Then you take a medical examination and wait for the State Department to process your visa.  Lots of time, some money, and you have to have enough connections to get a sponsor who can start the ball rolling.

And that's not all.  This website, apparently run by a law firm in Los Angeles specializing in immigration law, suggests that the number of new immigration visas each year is limited to several hundred thousand.  There are some 140,000 new employment visas available at the State Department each year, so up to 140,000 of employment visa applications processed by the US Citizen and Immigration Services are okayed for visas.  This is more or less verified by the State Department's documents --- some three to four hundred thousand new visas were issued in 2008.

400,000 new visas each year.  150,000,000 people would love to permanently move to the United States.

I am led to believe, on top of this, that the United States has the world's loosest immigration laws!

Of course, this is not surprising: The residents of the world's wealthy countries have no desire to actually share their wealth with the poor of the world.  If the world's poor could better themselves by moving to wealthy countries and finding jobs that pay ten, fifteen, twenty times what they could have earned at home --- why, they would.  The added competition, though, would drive down wages, leaving the "poor" in the country receiving migrants relatively worse off.  (I put "poor" in scare quotes because the poor of the first world are wealthier by far than the poor migrants we're describing.)  Of course, reduced labor supply would also drive up wages in the country losing migrants --- immigration is a win-win deal for the poor of the world!

Since the wealthy countries of the world are democracies, and democracies frequently beholden to labor interests, they enact laws that slow immigration to a trickle.  If you don't want competition and you hold the keys, you lock the door.

Is this right?  Is this just?  Obviously - since I'm asking - I don't think so.  It is not right, and it is not just, to restrict the opportunities of hundreds of millions of people languishing in poverty.  Why do we allow money to flow so freely across borders, buying capital and investing in people's lives, and yet we restrict the movement of people?  After all, financial capital flows are digits on people's bank accounts --- labor flows are people's lives.  Restricting immigration as we do is wrong.  It amounts to locking the poorest people of the world in poverty.

Instead of limiting visas to a mere handful of lucky, connected, wealthy people, we should open the floodgates.  Give people across the world the options that they want.  Stop putting up barriers to the poor bettering themselves and making the most of their lives.

Let's cut all requirements for visas (except possibly "don't have a history of associating with al Qaida or other known terrorist groups" or "don't have bird flu").  You get a visa, and in six months you're eligible to take the naturalization test.  Once you pass naturalization, you get a social security number and you're good to go.

It's fair to say that we can't handle increasing the country's population by half immediately.  Obviously that wouldn't happen, but just to be safe let's increase the number of visas we issue by a factor of two every year for ten years, and then in 2025, let's just throw the borders open.

How would it work?  If you decide to come to the US, you should get a permanent visa and the option to naturalize and receive a social security number in six months.  That's it.  Welcome to the US - go start a business, go find gainful employment, go seek your fortune!

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
"Keep, ancient lands, your storied pomp!" cries she
With silent lips.  "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!"

PS-  If we had kept a liberal immigration policy through the latter part of the twentieth century, wages would have fallen faster in the US, yes - but wages would have risen faster in the developing world.  Instead, we're dragging out the process of factor-price equalization.  Wages have stagnated everywhere in the first world, but most noticeably in the US, as jobs migrate to the developing world (instead of people migrating to the developed world).  But since labor competition is indirect, and the equalization is being caused by capital flows, gains are reaped by stockholders in the first world.  Labor chose to privilege capital in order to keep competition away, but they had to compete anyway, and in the process enriched the owners of financial capital.  Ironic, isn't it?


  1. A couple of points:

    1. You don't have to be a citizen to get a SSN.

    2. Politicians don't get elected by saying "we raised wages in 30 different countries!" Their constituents don't care; they want to know how the politician made their lives better. Welcoming in a horde of low-wage workers is not how a politician keeps their job, and thus is unlikely to occur. This isn't labor (unions) controlling the vote; it's people's pocketbooks.

    3. Fair is fair: if we throw open our doors, so should everyone else. Only about 1/4 of the people that want to relocate want to come to the US. What about the other 75%? Shouldn't they have the same opportunities?

    4. Spending money abroad carries less risk than bringing actual people here. You could lose the money, yes, but people do odd things. You can direct where money goes pretty well; it't not so easy to direct what large groups of people do.


  3. Andy -
    1. I should clarify - as a means to be entitled to all benefits of US citizens.
    2. Sadly. My argument is a moral one, not a pragmatic one. When I say "labor", I don't mean unions - I mean people to the extent they provide labor and not capital.
    3. Yes they should. But other wealthy countries' impingement on human rights should not affect our decision to open our borders.
    4. I don't think approaching this from the perspective of "how will I make this large mass of people do what I want?" is right. Of course you can't direct - that's what the invisible hand is for.

    Phil -
    Yes, Jim McClure sent that to me too :) I still think the proposition is win-win, even if we have some welfare in place, but it's a good illustration of why reforming to a sane, humane welfare system is so important.