Immigration and the neoliberal imagination

Why "shouldn’t we look forward to a freer, more egalitarian world of tomorrow in which people are allowed to live where they want?" asks Matt Yglesias. If neoliberalism is about removing all barriers to market transactions then removing restrictions to migration should be top of the list.

According to Michael Clemens, restrictions on emigration from poor countries to rich countries is one of the greatest distortions to the global economy. Clemson suggests that the gains from the emigration of less that five per cent of the population of poor countries would exceed those from removing all policy barriers to the movement of goods and capital.

In a recent piece for the Drum, Jeff Sparrow wrote about the tensions between neoliberalism and conservatism. In rich countries, immigration is one of the major sources of tension. Conservatives worry that immigration will undermine social norms. Migrants will bring their own moral codes and will demand that the host country’s laws and institutions respect them. Conservatives fear that the difference between right and wrong will increasingly be seen as a matter of opinion. And without a strong moral framework to keep unruly passions in check, social order will break down.

There’s also resistance from the left. As a commenter on Yglesias’ blog put it: "This call for free immigration only serves to lower the standard of living developed countries, increased immigration only serves to depress wages, dilute union membership and strain the social safety net."

But even if that is true, the comment expresses a shocking disregard for the welfare of some of the world’s most disadvantaged people. According to Clemens, migration is one of the most effective ways of improving the welfare of people in the world’s poorest nations. On the issue of Hati he writes:

… migration and remittances have been responsible for almost all of the poverty reduction that has happened in the island country over the past few decades. They have done enormously more good than any policy intended to reduce poverty inside Haiti during that time. Any poverty-reduction strategy for Haiti going forward that does not include what has been Haitians’ most successful poverty-reduction strategy to date is not a serious one.

It’s not just the left who see a tension between freer migration and the welfare state. In 2004 Britain’s Telegraph declared: "the fundamentals of the immigration issue are straightforward. Milton Friedman, as is his habit, summed the whole problem up years ago, in just 10 words: ‘You cannot simultaneously have free immigration and a welfare state’."

The Telegraph’s solution is to allow migrants to come, but deny them access to welfare benefits. But carried to its logical conclusion, that might lead to a kind of welfare feudalism where migrants end up paying for the generous welfare entitlements of existing inhabitants of the host country. And that’s a debate we had here at Troppo a few years ago.

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23 Responses to Immigration and the neoliberal imagination

  1. wizofaus says:

    Friedman’s statement seems to assume that with free immigration the net demands on the public purse will necessary outweight the net benefits. The only way I can imagine that would be the case is if, say, families from much poorer countries with under-educated parents and not-yet-educated kids were making up a substantial portion of the intake. That might be true for some of the U.S. states bordering Mexico, but seems rather unlikely for any nation as a whole, and certainly for Australia, I can’t imagine there’d be any significant number of people willing to journey all the way here if they felt there was any likelihood they would end up on relying on welfare.
    And it’s not just a welfare state – it’s having governments responsible for urban planning, provision of instructure, policing etc. etc. Obviously there is *some* maximum rate of intake that a developed social democratic country can cope with, but I don’t doubt in the slightest it’s a good deal higher than what we have now – or at least would be if governments were properly resourced and prepared to deal with it.

  2. Peter Whiteford says:

    Tangentially related is the the discussion in July at http://crookedtimber.org/2011/07/19/out-of-the-blue-into-the-black/

    Over there I made a number of comments including that when you Google “distribution of the economic gains of immigration” this yields a substantial number of results, but at least in Australia the first result is a study by Ross Garnaut. He summarises the evidence for Australia and the USA as follows:

    “Amongst established Australians, immigration increases average incomes most
    for owners of assets that are used to produce goods and services that are not
    internationally tradeable, notably urban land, especially in the large cities, and shares in companies that produce such services, including through membership
    of superannuation funds. It does least to raise the incomes of Australians who
    do not own such assets and who need to purchase non-tradeable goods and services in the market.

    …When immigrants on average have higher education levels than the established
    population, as they have had in recent years [in Australia], immigration is more likely to raise average incomes of relatively unskilled workers relative to better educated Australians. … immigration with a high skill component tends to raise employment and lower unemployment of lowskill established Australians.

    … The Australian experience with gains and distribution of costs and benefits
    from immigration contrasts sharply with that of the United States. Immigrants
    have less education relative to the average of the established population in the
    United States than they do in Australia. Immigration to the United States tends
    to depress the relative incomes of poor Americans. However, the more flexible
    United States labour markets cause this tendency to be reflected in lower wages
    rather than unemployment. High rates of employment assist the accretion of
    economically valuable skills, and reduce the depressing effects on incomes of
    low-skill workers over time…”

    For the UK, Dustmann et al (2008) find that each 1 percent increase in the share of migrants in the UK-born working age population leads to a 0.6 percent decline in the wages of the 5% lowest paid workers and to an increase in the wages of higher paid workers.

    http://www.migrationobservatory.ox.ac.uk/briefings/labour-market-effects-immigration

    In summary, in some countries, certain types of immigration make low wage workers worse-off, while in other countries different types of immigration make low wage workers better-off. This reflects the types of immigrants you select, the nature of country-specific labour markets and the types of social welfare system.

  3. Pedro says:

    And if you are selecting immigrants then it is not free.

  4. David Walker says:

    Don, the Troppo welfare feudalism link in your last para is a great one. It’s hard not to conclude that this is one of the really big questions that no-one wants to even talk about.

    I have a lot of sympathy with Milton Friedman’s argument that you can’t have two classes of people in a society. But it would be interesting to experiment with a system where new arrivals “earned” their welfare entitlements over a period of time.

    The current rules of the game force people to think about these welfare issues schizophrenically. One piece of our brains has great sympathy for the poor in our community; another piece of our brain knows that the poor in our community are rich by the standards of the Third World, and that we could help the Third World by bringing more of its people here.

    We try to keep these two thoughts away from each other. But in a world of increasing cross-border movement, we won’t forever have that luxury.

  5. Don Arthur says:

    David – I think you’re right when you say it’s an issue nobody wants to talk about. But in the end we’ll be forced to confront it.

    Denmark has moved in the direction you suggest. In a paper for the OECD Thomas Liebig writes:

    For recent arrivals, lower social assistance applies for seven years, and participation in a three-year introduction programme is obligatory for those migrants receiving social benefits after arrival.

  6. Pingback: Doing Away with Welfare Rodents – perspective « VARIEGATED VISION

  7. rog says:

    After considering the costs and condition of asylum seekers opinion remained evenly divided. With all the heat being applied to the issue it is difficult to see how a more considered approach be adopted.

  8. Persse says:

    So let me understand the argument. Part of the income of immigrants to the US, and therefore presumably lost to the US economy, is sent as remittances to relatives in Haiti, for those for those lucky enough to have the right relatives obviously. Haiti loses its better workers, the ones with the drive and ambition to get out of the country and find opportunity elsewhere, and conveniently, for the US, their dependants are all back in Haiti, so the US doesn’t have to provide schools and housing etc. The Haiti government loses tax revenue through payroll and income taxes, because the US gets those. The US, which has invaded Haiti 11 times, is not known for its generosity in humanitarian foreign aid, may be way in front on this deal.
    And the conclusion from all this is to do all on a bigger scale?. No wonder people become communists.

  9. Alfred Nock says:

    The neoclassical wing of the Australian-economics orthodoxy can be characterized by the following intellectual and character-flaws:

    1. They tended long ago to describe themselves as “libertarian” strictly for reasons of intellectual “street-cred.” Yet they have heaped such opprobrium on the term that the brand has gone bad, and they don’t appear to understand that the brand is now reflecting badly on them.

    2. They never see private debt that they don’t like.

    3. From a propaganda point of view they will readily agree to the concept of a level playing field in the Adam Smith mode. But their first love is cronyism. They love it. They love it. (THEY LOVE IT!!!) The neoclassical wing of Australian economics loves cronyism. They cannot get enough of it.

    4. For people so wrongheaded, they are often disturbingly energetic. Yet one can interpolate an almost insulin-shock-like tiredness, that descends on them when it comes to the task of re-deriving the assumptions of their models, to see if the conclusions of their models, are relevant to the problem at hand.

    5. They practice “Conflationism.” I don’t mean that in a small and lovable way. I mean they practice conflationism in a huge, obsessive, unshakable and unforgivable way. They remember the CONCLUSIONS of their models but not the reasoning behind those models. So that they will conflate this crony-socialist manure-pile that we live in, with either their simplified models, or some sort of idealistic evenly-balanced capitalist setup. It is this last point that leads them to go in for this open borders insanity. Don’t get me wrong here! I want to put the policies in place such that taking huge numbers of refugees and migrants is in the interests of incumbents. I would QUICKLY like to do the right thing so that it BECOMES in Australias interest to do the right thing. But we aren’t there now.
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    “Friedman’s statement seems to assume that with free immigration the net demands on the public purse will necessary outweight the net benefits.”

    You cannot mean what you are implying wizofaus? You cannot mean that the contrary is true. Free immigration is not the same as more-generous immigration. Totally free immigration, under current policy-settings, would be a clear watering down of the capital-goods/per-capita ratio, in the context of a country, whose policy mix is so debauched, that we own less of our own nation every week, we are more in debt all the time, and we have stagnating living standards at the bottom end. You cannot mean what you are saying. You must have got hyped up on the (in the right context) excellent and inspiring Julian Simon findings.

  10. Don Arthur says:

    Persse – You say: “Haiti loses its better workers, the ones with the drive and ambition to get out of the country and find opportunity elsewhere”.

    Clemens and McKenzie respond to this criticism in an article for Foreign Policy:

    “This common idea that skilled emigration amounts to “stealing” requires a cartoonish set of assumptions about developing countries. First, it requires us to assume that developing countries possess a finite stock of skilled workers, a stock depleted by one for every departure. In fact, people respond to the incentives created by migration: Enormous numbers of skilled workers from developing countries have been induced to acquire their skills by the opportunity of high earnings abroad. This is why the Philippines, which sends more nurses abroad than any other developing country, still has more nurses per capita at home than Britain does. Recent research has also shown that a sudden, large increase in skilled emigration from a developing country to a skill-selective destination can cause a corresponding sudden increase in skill acquisition in the source country.

  11. conrad says:

    At least from what I get from that article (I can’t click right through), that’s a very biased view. There is a whole literature on doctors, who are group that you need and cost lots to train, and it’s basically the opposite of what that abstract suggests about nurses — they don’t get replaced. So if you substitute “doctors” for “nurses” the story is the opposite. For example, according to Wikipedia, the Phillipines has 1 doctor for each 800 citizen (not bad for a 3rd world country), but that’s far less than the UK (I believe there are also examples of countries with more medical staff working overseas than are in the country).

    I think (or seem to remember) the other really important variable is how big the country is in terms of it’s population. If you take medical staff from populous countries (China, India, the Phillipines), it doesn’t make much difference, but it does if you take them from small countries. Even for rich(er) countries this is important — the kiwis, for example, are always complaining about their doctors moving to Aus, since they cost almost a million dollars to train and it’s very hard to train enough of them (almost every country has this problem, which is why the rich ones are always looking OS for them).

  12. Alfred Nock says:

    The problem may be solved with excellence in regulation where we did away with the full doctor status as being necessary to deliver health services. Ultimately it is the small business (taken as an whole entity) that must be responsible for quality control. Quality control is not to be “RESTRICTED-IN” by recourse to the exclusion of participants without a medical degree. We pass on bad and wicked habits to the third world.

  13. Persse says:

    Don – my point was not about skilled workers as I don’t think this applies much to the Haitian example. To say that an individual, from a poor country, is better off by getting work in a rich one is saying nothing of any value. As a social nation building policy, my view is that it is of vanishingly small value compared to active, competent, low corruption level government, good education, housing and social investment, as the means of developing a country.
    Yes, the Philipines has successfully exported maids and nurses, but have you been there? Why is a country where English is widely spoken, have hard working citizens prepared to travel the face of the earth for work, are an ex colony of a European power and the US, so backward in its development.
    After the second world war how much difference was there between The Philipines, Korea, Taiwan and Singapore? Not all that much.
    All I can gather from the post is that foreign remittances are better than nothing, so what?

  14. rog says:

    Haiti loses its better workers, the ones with the drive and ambition to get out of the country and find opportunity elsewhere

    This is not unique to Haiti, it is those with the “get up and go” gene that immigrate enriching the host country and leaving the less aspiring and less creative to fill the gap in the country of origin.

  15. Peter Whiteford says:

    Persse

    I’m certainly not an expert on the Philipines but my understanding is that the reason why Japan, Korea and Taiwan were much more successful earlier on was due to land reform, whereas the Philipines has maintained what amounts to a semi-feudal structure.

    Whether outward migration advances or retards progress in this context is an entirely different issue.

  16. Yobbo says:

    I have a lot of sympathy with Milton Friedman’s argument that you can’t have two classes of people in a society. But it would be interesting to experiment with a system where new arrivals “earned” their welfare entitlements over a period of time.

    The LDP addresses this by by way of an immigration tariff. The fee would be high enough that coming here just to get welfare would not be worthwhile.

  17. Patrick says:

    Land reform certainly seems to get a lot of attention as critical.

  18. Don Arthur said:

    the comment expresses a shocking disregard for the welfare of some of the world’s most disadvantaged people. According to Clemens, migration is one of the most effective ways of improving the welfare of people in the world’s poorest nations.

    Global income redistribution through open borders immigration is unaccountable and a travesty of national democracy. If citizens wish to transfer resources to other oountries then they can do so privately by charity or publicly through aid.

    The way open-borders normally works is that poorer people in rich countries make sacrifices for richer people in poor countries. I can’t see much to recommend this procedure from an ethical point of view.

    The welfare state is in the nature of a trust fund established and paid for by senior native born for the community service and income support needs of their descendants. Our ancestors always thought of their posterity. we, by contrast, squander it wantonly for “a pocket full of mumbles”.

    Open borders immigration would dilute the average benefit available to native-born descendants, implying cuts accross the board for all or two-tiered access for adoptives. We see the predictable political results of this in the US, where the development of the New Deal-Great Society welfare state was stopped dead in its tracks by the double-barrell blast of the 1964/5 Civil Rights-Immigration Act. Liberalism has never recovered from the subsequent overload and back-lash.

    More generally the prosperity of Anglo-settler societies depends on cheapness of plentiful land and the scarcity value of skilled labour. Open borders would, and in fact is, crushing the living standards of native born citizens, sending accommodation costs through the roof and driving wages through the floor.

    If liberals want to destroy their own nations, patrimony our ancestors, then by all means state your aim and put it to a vote. But please dont pretend to the high moral ground.

  19. Don Arthur said:

    According to Michael Clemens, restrictions on emigration from poor countries to rich countries is one of the greatest distortions to the global economy. Clemson suggests that the gains from the emigration of less that five per cent of the population of poor countries would exceed those from removing all policy barriers to the movement of goods and capital.

    A nation is not a “distortion” from some contrived abstraction – this is rationalism in economics. It is an organic evolution, based on national ethnic characteristics, typically race, religion and ruler. It is designed to benefit citizens who have a presumptive “birthright”.

    Immigration is a privilege, not a right. By all means lets have controlled immigration, but it should be conferred according to the national interest of native-born citizens.

    Why should open-borders stop at nations, those dreadful “distorters of the global economy”. What about family homes. Dwellings have closed borders cruelly excluding non-family members from sharing the benefits of patrimony. Families tend to leave their assets to their blood descendants – what rotten racists!

    Morally there is no difference between a boundary between homes and boundaries between nations. But well-heeled liberals dont much care for the latter because they reap the benefits of inclusion whilst shifting the costs to disadvantaged natives, despised “rednecks”, “chavs” and “bogans”.

  20. hc says:

    The argument Jack is that there are uncompensated gains from free migration in the absence of any common property arguments or externalities. It is exactly the same as the argument for free trade – it’s just that labour is being internationally traded.

    Of course the assumption of no common property public goods and no external costs (population-related congestion and pollution)is strong. Even then the argument is that these should be addressed and then you go open door.

    It’s purely an efficiency based argument since wages in a country like Australia would collapse. But there would be larger offsetting increases to the owners of capital assets who could, in a libertarian nirvana, compensate the losers.

    I don’t buy this view though I once came close to doing so. The difficulties of pricing are extreme and the tax-transfer redistributions utterly impractical. More than that the argument is not only an economic one. I just don’t want Australia being dominated by certain religious and political groups. I favor our liberal democracy and our sense of national identity.

  21. hc @ #20 said:

    The argument Jack is that there are uncompensated gains from free migration in the absence of any common property arguments or externalities…Of course the assumption of no common property public goods and no external costs (population-related congestion and pollution)is strong.

    Even the so-called economic benefits of immigration are vastly over-stated. The Productivity Commission’s 2006 report modelled a high-immigration future and found that it barely increased disposable incomes to the average person. Of course most income increases would be captured by immigrants. The native born have to stump up most of the capital servicing costs for extra infrastructure.

    And thats without going into common property and externality arguments. I would call these “simplifying assumptions” heroic, on the same scale as “assume you have a can-opener” for economists stranded on a desert island with a pallet of tinned food.

    Of course common property is the essence of national community. They don’t call it the “Commonwealth” for nothing. It is an inheritance bequeathed to us by our ancestors, the nation builders. I suggest that retired persons be given two votes when the immigration issue comes up, they built the country, they should decide who gets into it.

    And externalities, whether physical or financial, are what makes the world go round. Or not. Currently the biggest problem in the world is global warming, which is an externality alright.

    Australia used to be a much more pleasant place to live. Now that its packed to the rafters its turning into a rat-race. Do I really have to spell out in chapter and verse the endless inconveniences of an over-crowded country where the struggle for positional goods is now life-or-death?

    The queues for everything – traffic jams, sardine-packed public transport, over-priced good schools, elective surgery waiting lists. The steadily diminishing green space, the hideous condominium blocks plunked willy-nilly in heritage suburbs. Housing Affordability crisis for routine private accommodation in middle-suburbs. The native born children never born due to endlessly delayed family formation. And of course the environmental devastation, top-soil stripped land, water-restricted reservoirs, carbon-saturated air.

    And don’t hold your breath for winners to compensate losers. Marshallian optimal trade-offs are not the rule in a winner-take-all political culture.

    I am and have been an economist of sorts, both personally and for the public sector. But I have always had trouble keeping a straight face when economists start to wander onto the political reservation. Your good self excluded, of course.

    Open Borders immigration is just a con-job bought to you by the same firm that built the GFC and multiculturalism.

  22. hc says:

    The PC got it wrong Jack.they relied on poor work by some external economists who got results inconsistent with basic economics. I wrote a paper pointing out the error in People and Place a few years back. In fact they found that increased skilled migration reduced welfare for preexisting populations which is silly. If accepted this would suggest no economic argument for migration at all and that is plainly wrong.

    Many of the external costs you mention can be priced.

    If prefer children of the native born to population increase induced by migration. It’s called nationalism. I value being Australian.

  23. Don Arthur says:

    Morally there is no difference between a boundary between homes and boundaries between nations.

    Jack – What’s the moral status of Indigenous peoples’ ownership of land? Do non-Indigenous people have a moral obligation to compensate the descendents of the original inhabitants of Australia?

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