Book review. No, not THAT book.

Review:
“Let Their People Come: Breaking the Gridlock On Global Labor Mobility”, Lant Pritchett. 2006, Center for Global Development.

On Saturday, my house was silent, two armchairs occupied by women deep in concentration, rapidly working their way through the book that’s guaranteed to be this year’s best seller. I was reading as well, intent on completing a book that’s much less likely to be carried at your local bookstore: Lant Pritchett’s “Let Their People Come”.

(Okay, I was waiting for my turn at “Deathly Hallows”. There? Happy now?)

Pritchett is an economist, not a fantasy writer, but he managed to capture my attention for a few hours with a slim, smart, provocative book on globalization and labor mobility. (It’s available online, under creative commons, should you be Pottered out and ready for something a bit more controversial.) He offers a simple, but powerful, observation: When we talk about economic development, we’ve got to talk about migration.

There’s a “standard mantra” that most development economists offer when asked what policies are most important for helping poor nations become rich: “Fairer trade, better aid and debt relief.” Pritchett believes those factors are important, but that there’s a bigger factor they fail to address:

The principle way rich countries disadvantage the poor world is not through unfair trade, or through intrusive and ineffective aid, or by forcing repayment of debts. The primary policy pursued by every rich country is to prevent unskilled labor from moving into their countries. And because unskilled labor is the primary asset of the poor world, it is hard to even imagine a policy more directly inimical to a poverty reduction agenda or to ‘pro-poor growth’ than one limiting the demand for unskilled labor (and inducint labor-saving innovations.)

The heart of Pritchett’s argument is this:
– Rich countries give about $70 billion a year in development assistance to poor countries
– If rich countries allowed a 3% expansion in their labor force over a long time period through migration of workers from poorer countries, citizens of those poor countries would yield $300 billion in benefits
– Rich countries would benefit from this influx of labor as well, yielding estimated gains of $51 billion
– Instead of easing migration restrictions and letting both the rich and poor benefit, rich countries spend $17 billion a year enforcing migration restrictions

Pritchett doesn’t address the models behind these estimates in this book – those models are outlined in the World Bank’s 2006 Global Economic Prospects: Economic Implications of Remittances and Migration. (While not a very exciting title, it’s a much better read than the CEP 1997: No, The World Bank Can’t Lend You a Twenty Until Next Tuesday. And like Pritchett’s book, it’s available for download online. The 2006 one, that is, not the 1997 one, which I just made up.) The second chapter of the report focuses on the potential for an influx of non-native labor to damage local wages, and concludes that the model is much more complicated than “foreign workers come here and wages fall.” It’s possible that an influx of labor broadens a tax base and shores up medical and retirement benefits, and that an increased supply of low-skill labor may free up native workers in an economy for higher skill and higher paid jobs.

It’s unlikely that The Minutemen, Lou Dobbs, or the other charming voices in the current American debate are considering these World Bank models before contributing their points of view. But professional economists do, and Pritchett’s goal – I think – is to convince his compatriots that their prescriptions for development are missing a key ingredient if they’re not prepared to seriously consider increased labor mobility in their policy proposals.

This is an uphill battle. Dr. Nancy Birdsall, President of the Center for Global Development, where Pritchett is a non-resident fellow and which published “Let Their People Come”, notes in her introduction that this book is arriving at a time of increased scrutiny of migration in the US and Europe. This scrutiny comes from the anti-globalization left as well as from the right. And those in favor of increased mobility aren’t exactly natural allies:

…those from poor countries who move to higher wages; the richer part of the rich country population who benefit from lower wages for labor intensive services and whose wages are not threatened; and potentially labor intensive industries located in rich countries. This makes an odd political coalition. Development advocates may have joined with people of faith to support debt relief, but a “development friendly” coalition of Oxfam and meatpacking plants in the Midwest is harder to envision.

Pritchett believes it’s neccesary to fight this uphill battle. Increased migration is inevitable, he argues, for five reasons:

– Wage gaps between rich and poor nations are huge. A migrant from Guatemala to the US increases her income by a factor of six (PPP adjusted). From Kenya to the UK is a factor of seven; from Vietnam to Japan, a factor of nine. A hundred years ago, when transport and communications was more difficult, factors of three were sufficient to spark the waves of migration that helped build America’s booming economy and partially empty Ireland, Italy and Poland.

– The ageing of rich nations. As nations like Japan and Italy age, their labor forces shrink and there’s an increasing burden on workers to support retirees. As these national workforces shrink, the workforce in nearby nations is booming.

– Capital, goods, ideas and services cross national borders. Not only does this raise the question of why labor is so immobile, it makes it easier to be a migrant, as you can eat food and watch movies from home, and call your family.

– Employment in “low-skill, hard-core nontradeables”. Yes, tech support jobs are getting outsourced to India. But Pritchett argues that 73% of the jobs likely to be created in the top 25 categories of job growth can’t be outsourced, as they require being physically present to carry them out.

– Some nations are being forced to support populations well beyond their carrying capacity. Pritchett calls these nations “zombies” – they would be ghost towns if their populations could leave, but instead they’re the walking dead. He offers Zambia as a key example – the economy boomed in the 1950s due to copper, peaked in 1964 and is now at 60% of 1964 levels in GDP per capita terms. If migration were possible, lots of Zambians would leave, and the country would have a much better chance of supporting its remaining population.

Standing in the way of these forces are “eight immoveable ideas”. Some of these ideas are familiar from Dobbs et. al. – culture clash, immigrants and crime, drain on social services, pressure on wages. Some are false – immigrants tend to commit crimes at a lower rate than the average citizens of a developed nation, in part because of fear of deportation, for instance – but some are probably true: an influx of foreign labor probably drives down wages, in certain sectors, in the short term.

Some of the ideas Pritchett identifies are much less familiar and more thought provoking. He argues that people are remarkably blind to the ways in which we let nationality become a “legitimate” basis for discrimination. We find ourselves up in arms, he argues, because people aren’t given equal opportunities because they are female, of a particular religion or of a specific race, but we rarely protest that someone is unfairly treated because they were born in a poor country rather than in a rich one. He argues that someone as poor as the average Haitian living in an American city would demand an enormous deployment of assistance, while the same Haitian a few hundred miles from our shores demands almost no response. This line of argument gets a little preachy: Pritchett is deeply offended by thinkers who argue that our current treatment of animals will look barbaric to future generations; he wonders how our treatment – or lack thereof – of fellow human beings will look.

One of the most interesting immobile ideas is that development is usually thought of in terms of nations, not of people. We talk about raising living standards in Liberia, not raising the living standards of Liberians. It’s hard to deny this simple piece of logic: let a Liberian move from Monrovia to Boston and you’re going to increase his standard of living. It’s possible that this migration will have benefits beyond remittance, especially if the laborer is able to accumulate capital, gain skills and return home to start a business.

This emphasis on short-term mobility becomes central to Pritchett’s proposals. He’s looking for solutions likely to be palatable in the wake of the eight immobile ideas, not in shifting those ideas, and he proposes a policy heavy on guest workers in a country for a fixed period of time, with penalties to sending nations if those workers don’t return home. In this, he’s looking to countries in the Persian Gulf who allow huge volumes of migrant workers to come into their countries, though under strict terms and without a clear path towards citizenship. In this sense, he’s proposing migration, not immigration – migrants are usually coming alone, not with families, and they’re coming to work, not to settle.

It’s easy to imagine how these policies could go wrong. If guest worker programs are structured without good protections of rights for these workers, it’s likely to enable situations of profound abuse. And even if rights are protected, the concept of creating a legally-constrained underclass brushes up against ideas of egalitarianism in an uncomfortable way. But it’s very difficult to challenge his arguments that immigration in America and Europe is broken and needs a realistic fix, not jingoistic nationalism and increased enforcement without considering the underlying economics.

I doubt that Pritchett’s book is going to sponsor a global pro-mobility movement… though I think it would be an excellent thing if it did. I also think it would make a lousy movie adaptation, though it would be interesting to see Daniel Radcliffe as the revolutionary economist, forced to calculate his spreadsheets barechested to tolerate the tropical World Bank heat. But it’s a provocative book that has some interesting answers for anyone who looks at efforts like the ONE campaign and wonders if aid, trade and debt relief will ever transform the developing world.

For further reading:

Interview with Pritchett at CGD on the release of “Let Their People Come”

“Rich Countries, Poor People: Should We Globalize Labor, Too?” Jason Deparle interviews Pritchett in the Sunday New York Times.