Globalization and Labor Mobility:
Is more than POS,EBL Possible?
Lant Pritchett
Utah Council for Citizen Diplomacy’s
Ambassador John Price and Marcia Price World Affairs
Lecture Series
At Westminster College
March 24, 2008
What is driving me?
• Global poverty and the gap between the
haves and have nots is the issue that most
concerns me
• Allowing increased mobility of unskilled
labor may be the single best opportunity
for poverty reduction
• What prevents labor mobility are borders,
enforced at the will of rich country voters.
The Western boat, with my wife, my
son
The Indian boat on the same
river…wives, sons
Outline of the lecture
• How is the Pax Americana globalization different
from previous? Proliferation of Sovereigns,
Everything but Labor—the POSEBL
• What to do about the massive inequalities in
human well-being across countries that have
resulted? Mobility of labor dwarfs everything
else on the agenda.
• What was, was, what can be, could be--the
future of globalization is in our hands.
Keynes’s Description of Pax
Britannica Globalization: Goods
What an extraordinary episode in the
economic progress of man that age was
which came to an end in August 1914!
The inhabitant of London could order by
telephone, sipping his morning tea in bed,
the various products of the whole earth,
in such quantity as he might see fit, and
reasonably expect their early delivery
upon his doorstep;
Keynes’s Description of Pax
Britannica Globalization:
Investments
he could at the same moment and by the
same means adventure his wealth in the
natural resources and new enterprises
of any quarter of the world… or he could
decide to couple the security of his
fortunes with the good faith of the
townspeople of any substantial
municipality in any continent that fancy or
information might recommend.
Keynes’s Description of Pax
Britannica: Mobility
He could secure forthwith, if he wished it,
cheap and comfortable means of transit to
any country or climate without passport
or other formality...and could then
proceed abroad to foreign quarters,
without knowledge of their religion,
language, or customs, bearing coined
wealth upon his person, and would
consider himself greatly aggrieved and
much surprised at the least interference.
Keynes’s Description of Pax
Britannica Globalization:
The water we swim in
But, most important of all, he regarded this state of
affairs as normal, certain, and permanent, except in
the direction of further improvement, and any
deviation from it as aberrant, scandalous, and avoidable.
The projects and politics of militarism and imperialism, of
racial and cultural rivalries, of monopolies, restrictions,
and exclusion…appeared to exercise almost no
influence at all on the ordinary course of social and
economic life, the internationalization of which was
nearly complete in practice.
Globalization of the Pax Romana—Not
a single Roman emperor after 100 A.D.
was born in Italy
The Pax Britannica Globalization Ended
Badly, with 30 years of death, destruction
and economic chaos
World War I
Hyper-inflation in Germany, Austria
Rise of Fascism (N in Nazi is National)
Lenin/Stalin in USSR
Rise of trade protectionism, limits on imports
Great Depression—almost world wide
World War II
The current globalization is the post World
War II Pax Americana
International cooperation to avoid the
consequences of “losing the peace”:
• Agreement to limit trade restrictions on
goods (GATT—now WTO)
• Agreement to manage exchange rates
(IMF)
• Agreement to rebuild Europe (IBRD—now
World Bank)
• Agreement at UN to meditate disputes
For America, the Pax Americana
has worked brilliantly
• Restoration of the global economy, with
the US continually at the lead—trade,
foreign investment
• Uninterrupted economic prosperity in the
US—enormous increases in material wellbeing in every dimension
• The Cold War stayed Cold—and we won
• No major wars (lots of minor ones)
What was fundamentally different
about the Pax Americana
Globalization?
• Proliferation of Sovereigns (POS)—the end of
the previous empires (ours and theirs) meant
many more countries—and many more “nations”
and many more borders
• Everything But Labor (EBL)—While mobility of
capital and labor was restored—the mobility of
people was increasingly restricted
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16
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Pax Americana: the Proliferation of Sovereigns—
number of new countries each year since WW II—
from 50 to 200 countries
20
ssa
mena
eca
lac
eap
other
14
12
10
8
6
4
2
0
While flows of every kind between countries
have increased—trade, capital, ideas,
information—until recently, not people
Percentage of Foreign-Born Population in the Labor Force
14
12
10
Percentage
France
8
Germany
Italy
Japan
6
United Kingdom
United States
4
2
0
1989
1990
1991
1992
1993
1994
Year
1995
1996
1997
1998
Steady growth of the economic leaders has left the follower
countries far behind…comparing the historical path to
today’s countries—China is in the 19th century, India preCivil War, and Ethiopia in the middle ages.
GDP PPP per Capita
$40,000
$30,000
$20,000
$10,000
Mexico, $8165
$0
1851
1700
UK
1898
USA
1929
2000
China, $5332
India, $2990
Ethiopia, $688
~ Year 1250
On every indicator of material wellbeing there are massive gaps-between our poor and their rich
• Our “poor” (the 10th percentile) have an income of about
$10,000 per person, on the same scale India’s “rich” (the
90th percentile) have an income of about $5,000
• The comparisons of food consumption per person
• Infant mortality of African Americans in Detroit is about
17 per thousand, of the richest 20 percent in Uganda is
around 100
• Not to mention schooling, safety, infrastructure, housing,
etc.
Weekly food for a family in
Bargteheide, Germany, $525 per
person/month
Source: Hungry Planet
Food for a family in Chad, 86 cents
per person per month
Source: Hungry Planet
Weekly food for a family in Tingo
Ecuador, $14.72 per person per
month
Source: Hungry Planet
Weekly food for a family Shingkey
Bhutan, $1.76 per person per
month
Source: Hungry Planet
Weekly food for a family in Cairo,
$23.99 per person/month
Source: Hungry Planet
•
•
•
•
Most reliable way to make a poor person
much richer—let them cross the border,
some simple math
US worker, 9th grade=$8.87/hr
Worker from Guatemala in USA, 9th grade,
$8.70/hr
Worker from Guatemala, in Guatemala, 9th
grade, $2.95/hr
Annual gains to the worker from moving:
(52 weeks*40 hours/week)*(8.70/hr2.95/hr)=$11,960 /year
25000
20000
15000
In home
10000
In USA
5000
al
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m
G
ua
Ba
ng
l
ad
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sh
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In
d
G
ha
H
na
0
ai
ti
Annual eanrings (in PPP)
Differences in annual wages of equivalent
workers—same nationality, education, age,
gender--on different sides of the USA border
Source: Montenegro, Clemens, Pritchett, forthcoming
Haiti: What are the approaches to
poverty reduction?
• About 8.5 million Haitians—7.9 mn in Haiti,
600,000 in US.
• Of those in Haiti only 20 percent are not poor (at
2$/day) while 96 percent of those in US are not
poor—26 percent of Haitian non-poor are in the
US
• At a global poverty line (10$/day) only 1.4
percent of Haitians in Haiti are not poor, while 81
percent of Haitians in US are not poor, so 82
percent of all non-poor Haitians are in the US.
Why not something
else?…anything else besides
moving people
• More help to individuals
– Micro-credit
– Schooling
– Protecting workers (e.g. anti-sweatshop movement)
•
•
•
•
More and Better aid
Fairer Trade
Debt Relief
Policy Reform for faster growth
The total present value of access to a
lifetime of micro-credit is the wage difference
of 8 weeks work of the same worker in USA
versus in Bangladesh
14000.0
12000.0
PPP $
10000.0
8000.0
6000.0
4000.0
2000.0
0.0
Annual gain,
micro-credit
Monthly gain,
Net present
migration
Value, lifetime
of micro-credit
Annual gain,
migration
Source: Gains estimated from Pitt and Khandker for micro-credit
(annual gain of 14 percent of per capita HH consumption, CMP (forthcoming) for wages
Anti-sweatshop movement to
improve conditions of workers
producing for export
• Estimates were that workers in the
affected industries gained 8 cents an hour
from the movement in Indonesia
• The annual gain to a worker benefiting
from the anti-sweatshop movement is
equal to three days of the wage differential
between Indonesia and the USA
Rally for debt relief for Africa
• Lead by Bono and others a huge activist cause
to give broader, deeper debt relief to African
countries
• Annual gain in foregone interest and principal
repayments in Africa—around 3 billion
• Annual remittances to Africa: 7.3 billion.
• Unskilled workers to work in OECD to produce 3
billion in gains to Africans is about 150,000
(OECD labor force is about 300 million)
Debt Relief? How about more aid?
Fairer/freer trade? Total gains versus a
small increase in labor mobility
Debt Relief to Africa
305
Billions
Doubling net ODA
79.5
3
86
Net gains to developing
countries from
liberalization in Doha
round
Value of welfare gains to
current developing country
residents (including gains
to movers)from 3% of
OECD labor force increase
Column 6
Why not?
• Where is the Muhammad Yunus of labor
mobility?
• Where is the Bono of more migration?
• Where are the students chanting “hey ho,
borders have got to go?
• Where is the Millennium Moving Goal?
• Where are the agencies pushing for freer
labor mobility?
What stops labor mobility?
• In the first instance, coercion plain and
simple.
• That coercion is under the complete
control of voters.
• It is the ideas of rich country voters that
prevent labor mobility
Why is greater mobility not on the
table as one of the options to help
poor people?
• The net impact on the US economy are
positive—we get cheaper, better services
• Is it “bad for our workers”?
• Are the costs to the taxpayer too high?
Stagnating wages of low-skill workers
in the USA is a huge problem—but is
migration the issue?
Is the face of the problem with
stagnating wages in the US…
This face?
Or this face?
Who is “taking jobs”?
Technology
and me
Displacing labor and capital and
our labor
Annual wages of a
Haitian in Haiti:
$1825
What about the tax costs? Won’t
“they” use our schools? Two
distinct questions
• Who do we (as voters of rich countries) want to
gain access to citizenship?
• What are the terms and conditions on which we
(as voters of rich countries) will allow nonnationals access to our labor markets?
– Generous terms, but few workers (Germany)
– Clear, but limiting terms, but many more workers
(Singapore)
Voters in rich countries can choose
capital or people: are the nurses of
the future Robots or Rosalie?
Singapore
• Seven percent of the labor force are foreign workers
working as “domestics”
• Very limited access to public benefits, strictly temporary,
cannot have children, marry Singaporeans
• Increases female labor force participation of skilled
women
• Increases taxes (as more skilled women enter labor
force with high wages)
• Doesn’t displace labor market work (few Singaporeans
would do this) displaces home production—positive
distributional effects
• Welfare gain to Singapore of 1.2 percent of GDP
(Kremer and Watt).
Wage ratios of equivalent workers, in home
and in USA
C
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M
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X
G
TM
ZA
F
Br C
az HL
il,
18
78
EC
U
Ja
m
ai JO
ca R
,1
81
0
Estimates of the wage differentials of
equivalent workers across the US border—
and the wage impact of slavery
14
12
10
8
Slavery in Virginia,
1840-1860, ratio rental
to subsistence: 3.8
6
4
2
TI
H
LK
A
ID
N
0
When Europe, USA, Japan flip to be like
Singapore or the Gulf? Who knows, if ever, John
Brown was a lunatic, right up until he was a hero…