<snip> One especially serious concern is that immigrant workers will be tied indefinitely to the company that sponsors them. Teresa Ghilarducci, an economist at Notre Dame, warns that this would give the company undue power over wages and other worker rights, and a result could be a permanent class of low-wage employees.
I think the 'could' should be amended to 'would' -- if firms can import an infinitely elastic supply of foreign workers at whatever the minimum wages are (and the US has few legislated fringe benefits or other social security programs) why would wages ever rise beyond 'subsistence'?
<snitp>
But economists of varying political views also say that the limited migration of skilled and unskilled workers, if properly harnessed, can be a vital source of economic growth in developed and developing nations.
Canada has a limited program of 'guest workers' in the agricultural area (mainly in Ontario for the tobacco and market vegetable crops) -- about 18,000 migrant workers per year. These workers are limited to 8 months work and then must return to Mexico or the Carribean. Employers must guarantee there return transportation and the workers must be paid the going wage for 'Canadian' workers in the industry or the Federal or Provincial minimum wage, whatever is highest. If I remember correctly, the current wage is $7+ per hour. Workers must pay unemployment insurance premiums but are not eligible for unemployment benefits though this is now under court challenge. <snip>
A team of British economists led by L. Alan Winters of the University of Sussex has developed a traditional model to estimate such gains. In general, the model assumes that developed nations generate higher profits and more investment as labor costs are saved. They also generate higher government revenues as the new immigrants pay payroll and income taxes, as well as sales taxes. As for developing nations, their migrant workers now make far more money and send a large part of it home.
"a traditional model"? Since all "traditional" models are based on unreal assumptions -- indeed assumptions that are contrary to fact, should we even bother to consider such estimates? The are undoubtedly wrong and perhaps wrong in the wrong direction.
<snip> But if the theory is convincing, the practical issues are considerable. Absorbing lower-wage workers in host nations means that domestic wages are at least somewhat undermined. More immigrants will also put pressure on already overburdened social programs. As for the sending nations, they in turn may not receive a fair share of the economic benefits if workers leave and never return.
It was estimated some years ago that $8 per hour was necessary before a worker actually became a drain on the Canadian social system in that the entitlement to social services exceeded the tax revenue from such workers. To some extent we have solved this problem by excluding these workers from being eligible for social wages. In the US, the social wage entitlement is perhaps sufficiently low that this is not the same concern.
A temporary limited migration program similar in principle but different in important details to what the Bush administration seems to have in mind can minimize such problems. By providing migrant workers legal status, including eligibility for domestic social programs, businesses could not easily pay wages below the going rate or ignore their payroll taxes and other benefits, as they now can for illegal immigrants. For these reasons, some labor unions are beginning to support such legalization.
With legal status, the immigrants will also be paying more taxes, including payroll taxes, to support social programs. In fact, the migration of young workers to Organization for Economic Cooperation and Development nations could be an ideal way to pay part of the rising costs of public pensions, including Social Security in the United States, as populations age.
On problem that this whole proposal does not address is the expropriation of investment in education and training that the lesser developed nations suffer when they lose educated and skilled labour to developed nations. We are literally robbing the lesser developed nations of human capital, capital that is necessary for their development.
As for benefits to developing nations, preliminary results of an incomplete survey by Mark Rosenzweig of the Kennedy School and his colleagues show that earnings increases for migrants over what they made in their home countries are steep. To give an idea, the average increase in annual wages for unskilled labor in 1996 was $7,400, and it was much higher for skilled labor.
Also, one fourth of the workers sent ample sums home.
Which means that 3/4s did not.
What is critical to the equitable distribution of benefits, however, is that workers return home after a few years. Cycling workers would allow more poor workers from a wider range of nations to migrate. Further, says Jagdish N. Bhagwati of Columbia University, these workers are often agents of change when they return, even if they are unskilled, because they bring back new attitudes, financial resources and knowledge.
But simply requiring workers to return home is not enough. Attractive incentives must be provided as well, and those in the Bush plan are inadequate. Devesh Kapur, a professor of government at Harvard, who with his colleagues has done comprehensive research in the field, suggests that one possibility is to have the United States retain part of the wages paid to new legal migrant workers in an investment account that is given back to the workers only when they return to their home countries.
Forced returning home is problematic. What of the children? Do they come for a couple of years and then go back. What happens to their education. Are they forced to stay at home so that the income taxed by the migrant workers is used to subsidize American workers and education system while the Mexican kids and dependents get only a fraction of what the exploited workers can save.
As for the power of businesses over their recruits in the Bush plan, Mr. Kapur says that employees should be required to work for their sponsoring company for only a limited time, and then be allowed to look for other jobs.
For all its benefits, however, greater labor mobility is no panacea in itself. In the United States, for example, a Bush-style immigration program would work best, in my view, in tandem with a reasonable increase in the minimum wage. As for sending nations, Mr. Rosenzweig points out that returning money in the form of remittances is most productive when the economy can adequately channel them to useful investment and social programs.
Without a strong increase in the minimum wage, such a program would be devastating for the low income earner in America.
Moreover, some older policies work at cross purposes. Mr. Kapur notes that one reason so many Mexicans flee to the United States is that the North American Free Trade Agreement subjected them to low-price American agricultural competition that is subsidized by the government.
More labor mobility, then, is an exciting potential source of growth for all, but it will work only in conjunction with proper safeguards and fair and productive social policies.
No, it is an exciting source of profits for corporations and for low cost services for the middle income.
------------------------ Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
Paul Phillips, Economics, University of Manitoba
