Why do George and I disagree?

The disagreement between George Borjas and me on the desirability of guest workers is an interesting one to expand upon, not because this will change either one of our minds, but because it may help others evaluate their own views. So here are a few points.

1. First, George and I appear to be more or less in agreement about the basic economics. Our best point estimate has to be that guest workers will create a small net gain for the U.S. economy, with a large margin of uncertainty on both sides. They would also likely exert downward pressure on U.S. wages, especially in the short run. On the other hand, the gains to guest workers themselves is quite large. If you are in gross disagreement with any of these points, do not look to either one of us for support for your position.

2. Now assume you care only about the welfare of Americans, and that you put zero weight on the welfare of foreigners. In view of the small net gain and the distributional impact, whether you think a guest worker program is a good idea or not depends on how you weigh these two against each other. This is not an economic question per se. But here too I think George and I agree. Leaving foreigners out of the picture, the net gains are not worth the price to pay for the distributional "cost."

3. But, and here is where we begin to disagree, I do not find putting zero weight on foreigners to be an acceptable moral position.  I am willing to accept--and in fact would advocate--a weighting scheme that overweights our own citizens relative to other countries'. But a weight of zero is surely unacceptable.

4. This has bite precisely because the gains to foreign workers are so huge--given the big differences in labor productivity in sending countries. Given these large differences, you would have to put if not zero, a near-zero weight on foreigners to still think that a guest worker program is a lousy idea. See Notsneaky's illustrative computations.

5. If one difference with George seems to be the weight you put on foreigners, another is whether a guest worker program can work as advertised. George does not believe you can enforce return, through appropriate carrots and sticks. Note that this objection is largely immaterial unless once again you put near-zero weight on foreigners. The logic of the argument so far does not rely on the migration to be temporary. It relies on the gains to foreigners, relative to distributional effects at home--and the permanence or temporariness of the program does not affect this calculus much. 

6. Now I do think that a guest worker program where most people eventually return to their home countries, their place taken by new workers, is better than a once-off program because this spreads the gains around and also enhances the benefits to the home countries of the workers--it is the icing on the cake. As I said, George does not think this can be made to work. I believe it is worth a try. The role of the policy analyst is to design the incentive schemes and institutional arrangements that will allow the $100 bills left lying on the pavement to be picked up--it is not to say, "yeah, good idea in theory, but we cannot make it work in practice."  My guess is that George's take on this would be less categorical if he were to put a non-zero weight on foreigners.

To sum up, the key differences seems to be the weight we put on foreigners--near-zero versus something somewhat larger--which is a moral, not economic consideration. If you are willing to countenance a non-zero, but still small weight, then you will be in favor of the guest worker program and more likely to believe that it is worth experimenting with carrots and sticks to overcome the practical difficulties.  

Comments

[alex]

I wonder if you believe in completely open borders. After all, you could adopt the argument you have presented here to argue for that: if you allow anyone who wants it to come to America, the gains for them will be huge.

[Dani Rodrik]

Alex --

The reason that a small guest worker program is so attractive at this point is that the gains to foreigner come at a relatively low cost to workers at home. As you let more and more workers in, the trade-off becomes steeper (you can actually make this precise with some economic theory), so the moral arguments I used would not push for complete openness of the border. There is nothing contradictory about it--it is just a question of choosing the right point on the trade-off.

[Torben]

Prof. Dani:
I have little inconvenience with the Guest worker program. In the first place, under all the stated assumptions of return to source, it possibly aggravates inequality in the sending countries. Here is the tip. Mobility requires resource and knowledge and it is the richer( possibly the educated) section that will be beneficary than the poorest. Even country wise, it will be relatively well doing latinos that benefit than the poorest of south Asia or Africa.
Second, I am not sure whether this could help for development. I mean it is the spices ( like property rights, legal, and political institutions) instead of the fire( capital stock and human capital) that is really lacking in poor countries.

[dale]

When I consider buying a new electronics gadget or a new car or prepare a meal with more food than I need- should I rather be giving the money I spend on these things to the poor of the world? I don't think we need to limit our moral considerations to those who are able to enter the US. Our moral intuitions are not limited by proximity.

And of course, in the case of immigration, the cost of our moral behavior is more likely to be paid by those US citizens on the bottom of our social-economic scale. The more comfortable among us actually benefit from cheap labor- as well as from the moral satisfaction.

I think these sorts of considerations show that we are faced with some serious contradiction- conflicts- tensions- aporias here.

And I would add, if we are truely making a moral argument- then the consensus of those most affected within our conversation community- the unskilled workers, etc in the USA- would be needed to make this deal.

[gordon]

Further to Dale's comment, surely the costs/benefits of a guest worker program have to be compared not only with doing nothing but with alternative ways to eliminate poverty. How, for example, would reduction in US cotton subsidies rank against a guest worker program in terms of efficient reduction of world poverty? How would an expanded foreign aid program rank? There are lots of alternatives - which is best?

[Roy Haddad]

Would you and Borjas be able to agree on a compromise measure that allows a certain number of immigrants, but taxes them slightly, or exacts a toll, with the proceeds going to the native poor?

Since the gains to immigrants are large, this would not dissuade many of them from immigrating, but would counteract the cost to native unskilled workers.

[alex]

gordon: "the costs/benefits of a guest worker program have to be compared not only with doing nothing but with alternative ways to eliminate poverty"

Well said.

While Notsneaky's calculations using a diminishing marginal return for income make sense, they are being selectively applied to this issue. Why not apply them to all policies?

Undoubtedly if there was a call to increase foreign aid via an income tax surcharge on the richest 1% (or, egads, eliminating capital gains rates), the news would be full of stories about being over-taxed. But any opposition to guest workers or illegal aliens (a form of "foreign aid" paid for by the working poor) gets criticized as selfishness.

The hypocrisy is rank.

[Roy Haddad]

Not true. The guest-worker program does not exclude any other anti-poverty programs I can imagine, so it need not be compared with them. One could implement it with the others.

[DRR]

If we're talking about moral arguments than the only moral arguments is to let those who wish to seek work seek it. Period.

[Bruce Webb]

Well a whole dimension is being missed here.

People who support guest workers by and large do not do so because they are seeking to maximize welfare, they do so because they are seeking to maximize profits. To ignore this and shift the guilt down to workers is a typical gambit.

You see this in minimum wage. In real world business labor is a cost to be managed and where possible reduced, minimum wage makes this cost containment that much more difficult. Does the issue ever get discussed this way? No almost always it gets moved to jobs potentially lost. I call this the Jimmy the Stockboy move, everyone should forego a raise because otherwise Jimmy will lose his job. Well when Jimmy gets a new job he will get better pay. Only if you can demonstrate a net loss of jobs should workers even consider opposing minimum wage increase and even then they would need to examine net income.

Similarly framing the guest worker debate in a way that ignores how US farms and corporations profit from cheap labor is to make the same rhetorical move. The question is not whether I should discount welfare of foreign workers to zero, the question is whether I should subordinate my interest to the foreign worker when most of the net gain is going to Capital.

It is not that we are begruding Manuel the sliver of Pie he is securing, we are just noticing that most of Manuel's productivity is showing up in the form of a bigger pie slice somwhere else than either mine or Manuel's plate. Guilt tripping workers without examining who really benefits is typical of all free trade arguments, whether in goods or in labor and goes a long way to explaining the Orthodox Heterodox divide.

Cui Bono? That is the question we should start with. If it turns out that most of the benefits are flowing to a small minority, then we should ask why that is equitable given the inputs involved. If all of the effects of cheap labor actually flowed through to price then maybe we could have some discussion about maximizing welfare worldwide. As it is the bulk of the net gains are sticking to the top end.

'What's in it for me?' is not only a valid question, it is an operating principle of capitalism. Ignoring the role Profit is playing in the immigration debate is not really playing fair.

[dissent]

I have never gotten a response to my idea on immigration. My question: why won't this work?

Tie the amount of low skilled or guest labor immigration allowed to the wages of low income workers, and the rate of wage growth of such wages.

If there is really a demand for such workers, the rate of wage growth should show it.

If it doesn't: zero guest workers, zero low skilled immigration.

A form of indexing in other words.

Otherwise I totally oppose the guest worker program, and utterly reject the notion that this country has the will to come up with some effective anti-poverty programs. We have only one, really: the job market. Take away that and basically all is lost. The poor have taken a huge hit already, esp black men, with the illegal immigrant influx. The economists who want to devastate the job market further for low income workers are indeed toying with harming our country.

[DRR]

"It is not that we are begruding Manuel the sliver of Pie he is securing, we are just noticing that most of Manuel's productivity is showing up in the form of a bigger pie slice somwhere else than either mine or Manuel's plate."

In that case you should consult Manuel about the situation, inform him that he doesen't get enough pay for the work he does, inform him about how much his boss is making, perhaps bring up the possibility of unionization to him? All wonderful stuff.

But none of that is a sound justification for denying Manuel the chance at employment in the first place.

"Sorry Manuel, I know you are looking for work in the U.S. & whatever job you get will be a real wage improvement for you but gosh, it just seems to me that you aren't getting paid enough for your work & your boss is reaping a lot of gain from you, so I think it would be best if you didn't come over here to work. You know, so you won't get exploited. Yeah, that's the ticket.

[dissent]

"In that case you should consult Manuel about the situation..."

No, consult with the worker whom Manuel would displace, at a lower wage.

[DRR]

Uhh, no. If the issue is whether or not Manuel is recieving an optimum amount of compensation for the productivity of his labor, then yes you consult Manuel.

That we should "consult the worker that Manuel displaces" is confused as Manuel will likely be entering employment deemed too strenuous, with compensation unsatisfying enough to attract a native worker in the first place. At the very least, the chance that Manuel will actually be "displacing" a native worker is pretty slim.

In one sense this is clarifying as it demonstrates once again, that the primary concern is not the potential exploitation of "Manuel" no matter how much they pretend, but instead the prospect of him entering the labor pool & how that will affect other workers. Those who wish to keep their jobs more secure & their wages more cushy by excluding large swathes of the population from the labor pool should admit as much & stop the charade that they really care for the plight of immigrant laborers. Unless you're actively trying to get Manuel naturalized & unionized, I think what's good for Manuel is best left up to Manuel.

[Alex F]

"George does not believe you can enforce return, through appropriate carrots and sticks. Note that this objection is largely immaterial unless once again you put near-zero weight on foreigners. The logic of the argument so far does not rely on the migration to be temporary. It relies on the gains to foreigners, relative to distributional effects at home--and the permanence or temporariness of the program does not affect this calculus much. "

As I read this, your moral argument for a temporary guest worker program isn't necessarily reliant on the workers' being temporary (although I understand that you support this feature).

You might not agree with their points, but a lot of people think that there's something destructive about the *temporary* aspect of these guest workers. For example, difficulty in enforcement; political issues with a nonvoting working class; employment issues in which companies may have too much power over workers, since workers can be deported if they lose their jobs.

So even if you don't agree with these arguments, wouldn't you grant that it's a morally acceptable compromise to insist that we bring in workers who have the option to become permanent residents or citizens, rather than insisting on a temporary worker program?

But nobody's arguing that we should get rid of immigration or work visas. The question is of the scale of these programs. As you write above, the issue is what the right trade-off is -- to a large extent, this is (or should be) an empirical question.

I don't understand why you think that someone who supports immigration but not guest workers is on the wrong side of your moral argument. Even Borjas supports some immigration, right?

[gordon]

First: I'm not sure what other anti-poverty programmes Roy Haddad has in mind. I'm happy to agree that a "guest-worker programme" need not stand alone, but what are the others?

Second: If we are really only talking about poverty in Mexico, why aren't we asking why there are so many poor people in Mexico to start with? Or don't we want to re-evaluate NAFTA again?

[Bruce Webb]

"In that case you should consult Manuel about the situation, inform him that he doesen't get enough pay for the work he does, inform him about how much his boss is making, perhaps bring up the possibility of unionization to him?"

Hmm, unless the boss says "La Migra?" It is not all about asymmetrical information it is about asymmetrical power. Good luck with that card check off plan in the typical midwestern packing plant. Homeland Security boasted about their big sweep and subsequent deportations in Iowa. Didn't exactly end up with a bunch a Hormel Anglo plant managers in jail. As for the workers: "Heck we ran the documents through the database, how did we know this guy's name wasn't really Thurston Pierce Howell VI"

You need to do better than that. The Republicans successfully busted the unions in an already existing set of agencies that made up Homeland Security, the notion that the power imbalance in the fields and packing plants is going to be made up by union organization among either illegals or people on Z class visas is so naive as to wonder whether the Harvard Club knows you are out without a minder.

When Mickey Rooney and Judy Garland concluded that the solution to the problem at hand was "Let's put on a Show!" they were being a little more realistic than you are here.

Not everybody has forgotten the United Farm Workers and Cesar Chavez in the 60's. It's not that easy.

[dissent]

"Uhh, no. If the issue is whether or not Manuel is recieving an optimum amount of compensation for the productivity of his labor, then yes you consult Manuel."

Uhh, this is not the issue. How many immigrants we allow, whether we have guest workers: these are political decisions, made with the input not only of business interests, but by voters. Voters, uhh, include the workers Manuel displaces. Why is this hard to get?

"In one sense this is clarifying as it demonstrates once again, that the primary concern is not the potential exploitation of "Manuel" no matter how much they pretend, but instead the prospect of him entering the labor pool & how that will affect other workers. Those who wish to keep their jobs more secure & their wages more cushy..."

For heaven's sake, of course American workers are concerned about American workers. It's idiotic for you to rail against this concern. If illegals are exploited and abused, it changes the labor market for the worse for tens of millions. We live in an era of stagnant to declining wages, especially for the lowest paid workers. Maybe you are one of the secure highly paid elite who have nothing but contempt for those who struggle to make it in this country - in that case, quit sounding off on immigration policy that hurts those less fortunate than yourself. "Cushy" indeed - sounds like you've never been through a job crisis, lucky you. That hardly qualifies you to try to trash the job market for others in this country.

[Paco Wové]

"I am willing to accept--and in fact would advocate--a weighting scheme that overweights our own citizens relative to other countries'. But a weight of zero is surely unacceptable."

Much of what is written on this subject seems on the order of, "In theory, this will put you out of a job. But in theory, you shouldn't mind...". I'm going to be a bit of a jerk here; given the huge imbalance in wealth between you, Dani Rodrik, and some random set of impoverished 3rd-worlders, it seems as though the huge gains those people would realize if you were to liquidate your assets, send them overseas, and go live in a cardboard box are so huge that you have no reason not to take this course of action right now. I mean, even in a box your quality of life would still be better than some group of impoverished Burundians. How can you bear the burden of all that immoral wealth?

[DRR]

"Uhh, this is not the issue. How many immigrants we allow, whether we have guest workers: these are political decisions, made with the input not only of business interests, but by voters. Voters, uhh, include the workers Manuel displaces. Why is this hard to get?"

Uhh, no. I'm not denying that immigration is a political issue, and our immigration policy is what we collectively decide it to be in a democratic field. That has almost nothing to do with whether Manuel is getting a big enough paycheck, and even while given above, the decision on whether Manuel gets a shot to improve his life & the life of his family is not solely determined by that omnipotent "worker" he isn't even really replacing. Most definitely what Manuel ends up making and whether that is enough is a lot more Manuel's business than anyone elses.

"For heaven's sake, of course American workers are concerned about American workers."

In the sense that Bob is an American worker and Bob is concerned about Bob, than yes, American workers are concerned about American workers. Not to say that the altruism above doesen't exist but it has a substantial self-interested dimension.

"If illegals are exploited and abused, it changes the labor market for the worse for tens of millions."

Translation: If we let the Mexicans in, and they end up working for less than we would ever indignify ourselves earning, that affects our wages, ergo fuck you Manuel, this here is the US of A.

[Idaho_Spud]

I'm not certain that the US should be in the business of being either a global cop or a global job provider.

When it comes down to it, most in the US wouldn't claim that foreign lives are any less valuable than US lives.

The guilt occasioned by even asking that question is a bit revolting. The US has (at least in the previous century) a stellar record of helping other countries, even those who previously had declared war on the US.

Now of course we are helping other countries about as much as we are helping New Orleans, so this isn't a US vs the rest of the world thing... The current admin just doesn't give a damn about anyone. Tough love, I guess.

The question (as I see it) is whether we should allow poverty-level, disenfranchised, easily exploited people into this county?

I don't see a great deal of up side to this. Surely there is a better way to assist foriegn workers besides further marginalizing our own lowest-paid wage earners?

[Sami B]

Prof. Rodrik,
Both you and Dr. Borjas have not yet commented much on the emerging evidence from Prof. Peri's (at UCSD) research on the positive effects of migration on natives' wages in California. This seems to be sound research with nontrivial implications for the way we think about this crucial issue in the migration debate. I believe Prof. Borjas commented on one of Prof. Peri's earlier papers but not this more recent paper which employs a more defensible identification strategy. What are your thoughts? Many thanks.

[Justin Rietz]

Last I checked, unemployment in the U.S. has been hovering around 5% for almost two decades with a general downward trend, even given the million+ legal and illegal immigrants who enter the country each year. (graph: http://www.thinkinboutstuff.com/images/Unemployment%20Rates.jpg)

Moreover, huge immigration has been a fact of life in the U.S. since the founding of the country. Yet, again, our unemployment rate is one of the lowest in the world.

So I have a hard time believing the argument that immigrants have more than a negligible impact on employment in the U.S.

[Dean Baker]

What's wrong with eliminating all the barriers that make it difficult for highly educated foreign workers (e.g. doctors and lawyers) from working in the United States. This would both increase economic growth and have positive distributional effects. We could also impose a tax on their work, which could be repatriated to their countries of origin to ensure that they can educate 2 or 3 professionals for everyone that came to the United States.

This would seem the obvious economist solution to this situation. Just as it is cheaper to manufacture clothes and cars in the developing world, it's also far cheaper to educate doctors, lawyers, and economists.

[Ktwdawg]

Late to class...
Ok, so the economics seem as convincing as economics can be, but when you move your argument into real-world politics, as you must, you soon realize that to simply argue the cost-benefit analysis is not enough. For starters, I would wager that a great deal of Americans are Huge Jerks, at least as far as welfare nationalism is concerned. I would also be willing to bet that if you were to run a similar calculation on the cost/benefit ratio of lives lost to security gained in the Iraq war, you would find out just how much Americans care about foreigners, or foreign affairs whatsoever.
One thing I would love feedback on is the possibility of supporting the guest-worker program legislatively by including a reduction in direct foreign aid to those home countries, and/or what kinds of quid pro quo trade implications this could create?
In American Politics, for better or worse, you don't get something for nothing.