Immigrants and the Fallacy of Labour Scarcity
Sam Vaknin
UPI Senior Business Correspondent
Skopje, Macedonia
First Read:
Migration and Brain Drain
http://samvak.tripod.com/pp118.htmlJean-Marie Le Pen - France's dark horse presidential contender - is
clearly emotional about the issue of immigration and, according to him,
its correlates, crime and unemployment. His logic is dodgy at best and
his paranoid xenophobia ill-disguised. But Le Pen and his ilk - from
Carinthia to Copenhagen - succeeded to force upon European mainstream
discourse topics considered hitherto taboos. For decades, the European
far right has been asking all the right questions and proffering all the
far answers.
Consider the sacred cow of immigration and its emaciated twin, labour
scarcity, or labour shortage.
Immigrants can't be choosy. They do the dirty and dangerous menial
chores spurned by the native population. At the other extreme, highly
skilled and richly educated foreigners substitute for the dwindling,
unmotivated, and incompetent output of crumbling indigenous education
systems in the West. As sated and effete white populations decline and
age, immigrants gush forth like invigorated blood into a sclerotic
system.
According to the United Nations Population Division, the EU would need
to import 1.6 million migrant workers annually to maintain its current
level of working age population. But it would need to absorb almost 14
million new, working age, immigrants per year just to preserve a stable
ratio of workers to pensioners.
Similarly hysterical predictions of labour shortages and worker scarcity
abounded in each of the previous three historic economic revolutions.
As agriculture developed and required increasingly more advanced skills,
the extended family was brutally thrust from self-sufficiency to
insufficiency. Many of its functions - from shoemaking to education -
were farmed out to specialists. But such experts were in very short
supply. To overcome the perceived workforce deficiency, slave labour
was introduced and wars were fought to maintain precious sources of
"hands", skilled and unskilled alike.
Labour panics engulfed Britain - and later other industrialized nations
such as Germany - during the 19th century and the beginning of the
twentieth.
At first, industrialization seemed to be undermining the livelihood of
the people and the production of "real" (read: agricultural) goods.
There was fear of over-population and colonial immigration coupled with
mercantilism was considered to be the solution.
Yet, skill shortages erupted in the metropolitan areas, even as villages
were deserted in an accelerated process of mass urbanization and
overseas migration. A nascent education system tried to upgrade the
skills of the newcomers and to match labour supply with demand. Later,
automation usurped the place of the more expensive and fickle laborer.
But for a short while scarce labour was so strong as to be able to
unionize and dictate employment terms to employers the world over.
The services and knowledge revolutions seemed to demonstrate the
indispensability of immigration as an efficient market-orientated answer
to shortages of skilled labour. Foreign scientists were lured and
imported to form the backbone of the computer and Internet industries in
countries such as the USA. Desperate German politicians cried "Kinder,
not Inder" (children, not Indians) when chancellor Schroeder allowed a
miserly 20,000 foreigners to emigrate to Germany on computer-related
work visas.
Sporadic, skill-specific scarcities notwithstanding - all previous
apocalyptic Jeremiads regarding the economic implosion of rich countries
brought on by their own demographic erosion - have proven spectacularly
false.
Some prophets of doom fell prey to Malthusian fallacies. According to
these scenarios of ruination, state pension and health obligations grow
exponentially as the population grays. The number of active taxpayers -
those who underwrite these obligations - declines as more people retire
and others migrate. At a certain point in time, the graphs diverge,
leaving in their wake disgruntled and cheated pensioners and rebellious
workers who refuse to shoulder the inane burden much longer. The only
fix is to import taxable workers from the outside.
Other doomsayers gorge on "lumping fallacies". These postulate that the
quantities of all economic goods are fixed and conserved. There are
immutable amounts of labour (known as the "lump of labour fallacy"), of
pension benefits, and of taxpayers who support the increasingly
insupportable and tenuous system. Thus, any deviation from an
infinitesimally fine equilibrium threatens the very foundations of the
economy.
To maintain this equilibrium, certain replacement ratios are crucial.
The ratio of active workers to pensioners, for instance, must not fall
below 2 to 1. To maintain this ratio, many European countries (and
Japan) need to import millions of fresh tax-paying (i.e., legal)
immigrants per year.
Either way, according to these sages, immigration is both inevitable and
desirable. This squares nicely with politically correct - yet vague -
liberal ideals and so everyone in academe is content. A conventional
wisdom was born.
Yet, both ideas are wrong. These are fallacies because economics deals
in non-deterministic and open systems. At least nine forces countermand
the gloomy prognoses aforementioned and vitiate the alleged need for
immigration:
I. Labour Replacement
Labour is constantly being replaced by technology and automation. Even
very high skilled jobs are partially supplanted by artificial
intelligence, expert systems, smart agents, software authoring
applications, remotely manipulated devices, and the like. The need for
labour inputs is not constant. It decreases as technological
sophistication and penetration increases. Technology also influences
the composition of the work force and the profile of skills in demand.
As productivity grows, fewer workers produce more. American agriculture
is a fine example. Less than 3 percent of the population are now
engaged in agriculture in the USA. Yet, they produce many times the
output produced a century ago by 30 percent of the population. Per
capita the rise in productivity is even more impressive.
II. Chaotic Behaviour
All the Malthusian and Lumping models assume that pension and health
benefits adhere to some linear function with a few well-known,
actuarial, variables. This is not so. The actual benefits payable are
very sensitive to the assumptions and threshold conditions incorporated
in the predictive mathematical models used. Even a tiny change in one
of the assumptions can yield a huge difference in the quantitative
forecasts.
III. Incentive Structure
The doomsayers often assume a static and entropic social and economic
environment. That is rarely true, if ever. Governments invariably
influence economic outcomes by providing incentives and disincentives
and thus distorting the "ideal" and "efficient" market. The size of
unemployment benefits influences the size of the workforce. A higher or
lower pension age coupled with specific tax incentives or disincentives
can render the most rigorous mathematical model obsolete.
IV. Labour Force Participation
At a labour force participation rate of merely 60% (compared to the
USA's 70%) - Europe still has an enormous reservoir of manpower to draw
on. Add the unemployed - another 8% of the workforce - to these
gargantuan numbers - and Europe has no shortage of labour to talk of.
These workers are reluctant to work because the incentive structure is
titled against low-skilled, low-pay, work. But this is a matter of
policy. It can be changed. When push comes to shove, Europe will
respond by adapting, not by perishing, or by flooding itself with 150
million foreigners.
V. International Trade
The role of international trade - now a pervasive phenomenon - is
oft-neglected. Trade allows rich countries to purchase the fruits of
foreign labour - without importing the laborers themselves. Moreover,
according to economic theory, trade is preferable to immigration because
it embodies the comparative advantages of the trading parties. These
reflect local endowments.
VI. Virtual Space
Modern economies are comprised 70% of services and are sustained by vast
networks of telecommunications and transport. Advances in computing
allow to incorporate skilled foreign workers in local economic
activities - from afar. Distributed manufacturing, virtual teams (e.g.,
of designers or engineers or lawyers or medical doctors),
multinationals - are all part of this growing trend. Many Indian
programmers are employed by American firms without ever having crossed
the ocean or making it into the immigration statistics.
VII. Punctuated Demographic Equilibria
Demographic trends are not linear. They resemble the pattern, borrowed
from evolutionary biology, and known as "punctuated equilibrium". It is
a fits and starts affair. Baby booms follow wars or baby busts.
Demographic tendencies interact with economic realities, political
developments, and the environment.
VIII. Emergent Social Trends
Social trends are even more important than demographic ones. Yet,
because they are hard to identify, let alone quantify, they are scarcely
to be found in the models used by the assorted Cassandras and pundits of
international development agencies. Arguably, the emergence of second
and third careers, second families, part time work, flextime,
work-from-home, telecommuting, and unisex professions have had a more
decisive effect on our economic landscape than any single demographic
shift, however pronounced.
IX. The Dismal Science
Immigration may contribute to growing mutual tolerance, pluralism,
multiculturalism, and peace. But there is no definitive body of
evidence that links it to economic growth. It is easy to point at
immigration-free periods of unparalleled prosperity in the history of
nations - or, conversely, at recessionary times coupled with a flood of
immigrants.
So, is Le Pen right?
Only in stating the obvious: Europe can survive and thrive without mass
immigration. The EU may cope with its labour shortages by simply
increasing labour force participation. Or it may coerce its unemployed
(and women) into low-paid and 3-d (dirty, dangerous, and difficult)
jobs. Or it may prolong working life by postponing retirement. Or it
may do all the above - or none. But surely to present immigration as a
panacea to Europe's economic ills is as grotesque a caricature as Le Pen
has ever conjured.
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AUTHOR BIO:
Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited
and After the Rain - How the West Lost the East. He is a columnist for
Central Europe Review, United Press International (UPI) and eBookWeb and
the editor of mental health and Central East Europe categories in The
Open Directory, Suite101 and searcheurope.com.
Until recently, he served as the Economic Advisor to the Government of
Macedonia.
Visit Sam's Web site at
http://samvak.tripod.com
