TCA Srinivasa-Raghavan: No immigrants, please, we are developed

OKONOMOS

Labour surplus countries have rejoiced at the prospect of cheaper capital. But capital surplus economies have been dismayed at the prospect of cheaper labour.

It has been evident for some time now that for the first time in history, labour and capital are both in excess supply, not just in local markets but on global scale.

However, while global capital flows have been aggressively sought and obtained by the owners of capital, the owners of labour have not been able to exports workers on the same scale. So they have had to import jobs.

Also, while labour surplus countries have rejoiced at the prospect of cheaper capital, capital surplus economies have been dismayed at the prospect of cheaper labour.

The first manifestations of this had been seen "" in France, where else? "" in Jean Marie Le Penn's election campaigns in the late 1980s. But he had merely been protesting at the import of labour. Intellectuals "" amongst whom I must reluctantly include economists "" had poured scorn on such an unfashionable view.

But fashions change and going by some stirrings amongst them, the Le Penn view may be acquiring respectability "" with knobs on, because the view is gathering ground that stopping the import of labour is not good enough. The export of capital must also be stopped.

In an article in The Guardian (UK), Andrew Glyn* of Corpus Christi College, Oxford argues that "there is another, more ominous, possibility. What if there was a major drain of capital spending, from the rich countries to China and the rest of the south? It is not too far-fetched to imagine a long period of investment stagnation in the industrialised countries, with 'emerging markets' being so much more profitable. This could bring intense pressure on jobs and working conditions in Britain and elsewhere."

That is not all. Glyn says that as jobs in manufacturing vanish to India and China, even in sectors where relocation is not possible, job seekers would flood in. "The bargaining chips would be in the hands of capital to a degree not seen since the industrial revolution... with Marx's rising rate of exploitation re-emerging, a century and a half after he first predicted it."

Well, if Glyn is worried about workers, that is, the lower end of the labour market, George J Borjas**, as befits a Professor of Economics and Social Policy at Harvard, is worried about the impact on the earnings of people with doctorates.

Why? Because he says it seems immigrants with PhDs are willing to accept low-pay postdoctoral appointments.

"The rapid growth in the number of ... newly minted doctorates (who) remain in the US ... shows that a foreign student influx into a particular doctoral field at a particular time had a significant and adverse effect on the earnings of doctorates in that field who graduated at roughly the same time. A 10 per cent immigration-induced increase in the supply of doctorates lowers the wage of competing workers by about 3 to 4 per cent."

He is careful to clarify that "competing workers" can be either native-born or foreign born. But there are very few of the former.

Then, just as Glyn says that displacement from manufacturing will lead to an oversupply in sectors like retailing and education, Borjas says displacement from jobs that were previously high paying but are now not because of immigrants, will result in native-born Americans to look for jobs in other areas, and that will depress wages there as well.

What's worse, according to him, is that "the low wage paid to postdoctoral workers in these biology labs, however, still offers a very attractive opportunity when contrasted to the compensation available in other countries, so that the incentives for even more foreign students to enter the United States are not greatly reduced." In short, keep out immigrants.

The learned professor says these finding have important implications for policy. "This study, along with other recent empirical work, seems to suggest that the supply-demand textbook model is correct after all: increases in labor supply do move the labor market along the demand curve and lead to lower wages for competing workers."

I need a Harvard professor to tell me that?

*Marx's reserve army of labour going global, The Guardian
**Immigration in High-Skill Labor Markets: The Impact of Foreign Students on the Earnings of Doctorates, NBER Working Paper No. 12085, March 2006