The Global Economy Needs Immigration Before
Automation
by Lant Pritchett
Nowhere is this outlook more
apparent than in the discussion of automation and its impact on jobs. My local
grocery store in rural Utah has hung, with no apparent
sense of irony, a sign proclaiming the company’s support for U.S. workers above
a self-checkout machine, a device that uses technology to replace the labor of
an employee with the labor of the customer. Much ink has been spilled in
explaining how automation threatens some low-skilled workers and what
governments should do to help: for instance, countries could support retraining
initiatives, revamp education systems, or invest in redistributive schemes. At
the same time, many governments hope that machines can save their economies
from the consequences of demographic decline and aging. Techno-optimists argue
that the United States and many other wealthy countries need automation to make
up for dwindling working-age populations and looming gaps in workforces.
Happily, they suggest, the advance of technology will sweep aside the troubles
of demography.
But these debates and arguments
miss a very simple point. As seismic as it may seem, technological change is not
a natural force but the work of human beings. Of course, technology has
radically improved human lives: no one wants to live without electricity, flush
toilets, or (in Utah) central heating. In other cases, however, it is new
policies, and not new technologies, that societies need most.
Automation is often a solution in
search of a problem. It is a choice people have made, not an inevitability and
certainly not a necessity. For instance, the United States faces a scarcity of
truck drivers. The American Trucking Association has estimated that in 2021
there were 80,000 fewer drivers than the total needed and that, given the age
of current drivers, over a million new ones will have to be recruited in the
coming decade. To deal with this deficit, many tech moguls, including Amazon
founder Jeff Bezos, have invested in the research and development of
self-driving vehicles, technology that would reduce the demand for drivers. For
Bezos, such technology makes corporate financial sense; Amazon relies on low
shipping costs to keep its prices down. But it does not make wider economic
sense because millions of people would be happy to drive trucks in the United
States — they just need to be allowed to work in the country.
There is no global scarcity of
people who would like to be long-haul truck drivers in the United States, where
the median wage for such work is $23 per hour. In the developing world, truck
drivers make
Automation is not
inevitable; it is a choice.
around $4 per hour. Yet firms
cannot recruit workers from abroad even at the higher wage because of
restrictions on immigration, so business leaders in the United States are
impelled to choose machines over people and eradicate jobs through the use of
technology. But if they could recruit globally, they would have less incentive
to destroy those jobs and replace people with machines. The implacable fact of
national borders steers businesses toward investing in technology that does not
respond to global scarcities — and that no one really needs.
What is true for truck driving is
also true for many other industries in the rich industrial world that require
nonprofessional workers in specific work environments. A 2021 report by the
financial services company Mercer estimated that, by 2025, the United States
would face a shortage of some 660,000 home health aides, lab technicians, and
nursing assistants.
To be sure, some social and
political concerns regarding the cross-national movement of economic migrants
are legitimate, including those about how such flows of people would be
managed, affect current domestic workers, and create social tensions. Advocates
are also right to worry about how migrant workers would be protected from
exploitation. From the perspective of individual firms and industries, it is
easier to figure out how to get artificial intelligence to drive a truck than
it is to lower the bureaucratic barriers of immigration restrictions.
But choosing devices over people
is a mistake. It leads the world to miss out on the real economic and
humanitarian gains that would come from letting people move to where they are
needed instead of trying to invent machines that can supplant humans. The
refusal to allow people to cross national borders as economic migrants,
especially to engage in jobs that require just core labor skills, massively
distorts the trajectory of technological change in ways that make everybody,
especially the world’s poor, worse off.
RISE OF THE MACHINES
A popular view in the West holds
that the governments of wealthy societies do not need to bring more workers
into their countries. If anything, they can comfortably raise barriers as
technological progress destroys so-called low-skill jobs. But this is just not
the case.
Some technological changes are
driven by progress in basic science. Often, discussions of the future of labor
assume that the path and the pattern of technological change are already
determined and that the effects on jobs and workers are just natural
consequences of the inevitable progress of science. But economists have
developed increasingly nuanced understandings of how technological change has
reshaped labor markets and wages and how innovation is a consequence — not just
a cause — of the costs that firms face.
For decades, economic and policy
discussions about labor markets and technology had tended to focus on how
shifts in wages reflected the skills of workers, where “skill” was treated as
synonymous with “cognitive skill,” with a worker’s level of formal education as
a rough proxy for cognitive skill. The standard analysis was that advances in
information and communications technology have helped boost the incomes of
highly educated workers and reduced those of all less-educated, low-skilled
workers. But that is not what happened: although the wages of the highly
skilled have risen in the United States since 1979 relative to those in the
broad middle of earners, the wages in traditionally low-wage occupations also
rose in percentage terms more than those in the middle — and over some periods
by as much as those at the top.
Research by the economists David
Autor, David Dorn, and others shows that the demand for various occupations in
response to technology does not change in a simple linear relationship with
worker skill but depends on the nature of the tasks that that worker must
perform. Jobs in service occupations, such as food preparation, cleaning and
janitorial work, maintenance, in-person health assistance, and security,
involve manual and nonroutine tasks. Many manual nonroutine tasks are very
difficult to either automate or offshore, as they require the direct physical
presence of the worker, and so these jobs remain in demand, and their wages
have remained robust even in the wake of technological advances.
Undoubtedly, truly revolutionary
changes have occurred in how people communicate, seek information, organize and
process data, and entertain themselves. But the notion that the rapid
technological change in some sectors of the economy in recent decades has
accelerated the transformation of the entire economy is wildly off the mark. In
fact, the growth of economic productivity in industrial countries by the
standard measure of growth of “total factor productivity” (which assesses
productivity by dividing total production, or output, by its costs, or inputs)
has been considerably slower in recent decades than it was between the early
twentieth century and 1970. Nearly every developed country has experienced a
substantial deceleration in productivity growth since 1980.
Meanwhile, the supply of workers
for manual, nonroutine tasks has markedly decreased in rich industrialized
countries, thanks to dramatically lowered fertility and rising levels of
education. The number of open jobs is increasingly out of sync with the number
of domestic candidates available to fill those jobs.
The U.S. Bureau of Labor
Statistics Occupational Outlook Handbook
forecasts that, between 2021 and 2031, the occupational categories that require
less than a college degree and for which existing median earnings are less than
$40,000 will see a net rise of more than five million new jobs, with home
health and personal care aides adding around 924,000 jobs and cooks adding
419,000. But according to UN demographic projections, the number of people
between the ages of 20 and 40 in the United States (not factoring in any
migration) will fall by more than three million in the same period. The
medium-term demographic future of the native born in the rich industrial world
is already clear: by the 2040s, there will be millions too few native-born
people in developed countries available to perform all the essential,
nonroutine, manual tasks in the economy.
The more than trillionfold
increase in computing power over the last century has radically changed those
occupations in which people did routine and repetitive tasks. The African
American women who made the moon landing possible (and were made famous in the
movie Hidden Figures) worked for NASA as “computers,” busily making numerous
calculations that machines can now make in an instant. There are no more human
computers, and machines called computers are just markedly more effective than
humans at computing. But for many tasks, no increase in computing power will
make them more appropriate for machines to perform. Machines are not better at
personal care, machines are not better cooks, and machines will not necessarily
be better than people at driving trucks.
If self-driving trucks eventually
proliferate on American roads, it will not be evidence of the relentless march
of scientific progress.
Rather, their use will be a
demonstration of something else entirely: the consequences of barriers to the
movement of labor that create massive private financial incentives that, in
turn, drive powerful people and corporations to undertake enormous investments
of scarce human resources in technological innovation—with the wider result of
replacing people with machines. Ultimately, U.S. firms opt for automation because
it is far easier to solve even very hard technical problems, such as those that
self-checkout machines and driverless vehicles attempt to solve, than it has
been for countries to address the social and political obstacles that prevent
them from allowing foreigners to do those jobs.
PRIDE OF PLACE
The arbitrary facts of birth,
nationality, and citizenship profoundly affect people’s lives. Where people are
born and where they can move fundamentally shape how much money they can earn
over the course of their life. Restricting the movement of people across
borders creates a massive price differential between equally productive
workers.
In research I did with
co-authors, we looked at the earnings of workers born and educated in 42
different countries. We compared the earnings of those who remained in their
home countries with those who worked in the United States. We adjusted these
earnings for the differences in the price of goods and services between
countries to take into account discrepancies in purchasing power. The wage
differential for equally productive workers between the 42 countries we studied
and the United States ranged from two to ten times as much in the United
States, averaging around four times as much. Such proportions are evident
across occupations (including those of waiters and truck drivers) and across
education and skill levels.
This gulf in the wages of equally
productive people in different countries is the largest policy-induced price
distortion in the world today (and probably in all of human history). Barriers
to migration generate an artificial scarcity of labor. Many industries in the
United States struggle to find workers at labor costs they can afford. That
deficit spurs companies to search for solutions through automation and other
technologies that are unnecessary and inefficient.
Experience shows that letting
more workers into a country would indeed change patterns of innovation. The
United States has run this experiment before, in reverse. In the middle of the
twentieth century, the United States allowed the seasonal migration of
agricultural guest workers from Mexico under the rubric of the Bracero Program.
The government eventually slowed the program and finally stopped it entirely in
1964. Researchers compared the patterns of employment and production between
those states that lost Bracero workers and those that never had them. They
found that eliminating these workers did not increase the employment of native
workers in the agricultural sector at all. Instead, farmers responded to the
newly created scarcity of workers by relying more on machines and technological
advances; for instance, they shifted to planting genetically modified products
that could be harvested by machines, such as tomatoes with thicker skins, and
away from crops such as asparagus and strawberries, for which options for
mechanized harvesting were limited.
Necessity may be the mother of
invention, but false necessity is the mother of dumb inventions. Prohibition in
the early twentieth century banned the importation, production, transportation,
and sales of alcoholic beverages in the United States. These restrictions were
an enormous boon to illegal distillers of moonshine, who saw demand for their
booze explode. But their product needed to be shipped to thirsty drinkers. Just
hiding flasks in boots (the origin of the term “bootlegger”) was insufficient.
To transport more moonshine, people built “moonshine runners”: vehicles that
could speedily carry heavy shipments of moonshine without drawing attention. The
development of moonshine runners required technological savvy and innovation,
but they still represented a dumb invention. The banning of a perfectly
ordinary economic transaction — buying alcohol — led not to better liquor
trucks but to the innovation of making a liquor truck look like a regular
vehicle, which was a pure waste of time and talent.
THE PATH OF LEAST RESISTANCE
Proponents of barriers to
migration insist that they are necessary to protect the wages of current
citizens, but that is not true. There have been times in the past century when
governments were concerned that their country could not provide sufficient jobs
for their citizenry, but the shifting demographics of the rich industrial world
have changed that logic completely. For the foreseeable future, the challenge
will be finding enough workers to fill available jobs. Even countries that have
traditionally not welcomed immigrants, such as Japan, are now aggressively
recruiting workers from abroad. They can do so with the knowledge that immigrants
do not necessarily hurt the wages of natives. A 2017 National Academy of
Sciences review found that the net impact of immigration on the average wages
of domestic workers in the United States was either zero or, more likely,
slightly positive. In economic terms, migrants are not substitutes for the
typical U.S. worker, but complements, so that more migrants actually raise the
average wage of citizens. Having more assistants, for instance, does not lower
but rather raises the wages of skilled workers, such as nurses, by freeing more
of their time for tasks that need their unique skills. Of course, some
particularly disadvantaged U.S. workers may compete directly for jobs with
migrants, but limitations on migration are neither an effective nor an efficient
way to help those native workers. Programs such as the Earned Income Tax Credit
are a vastly more cost-effective means of buttressing the wages of domestic
workers. I have done calculations to show that, even under more pessimistic
assumptions about the negative impact of migrants on the wages of disadvantaged
native workers, only a modest increase in the EITC is required to completely
offset those losses — and it is a tiny fraction compared with the economic loss
that would result from banning migrants in the first place.
The main economic losers from the
restrictions rich countries place on labor mobility are the world’s poor.
Decades of well-intentioned development programs and aid initiatives cannot
equal the benefit of permitting a person in a poor country to work in a
wealthier, more productive one. If they want to help the world’s poor, citizens
of rich countries should understand that all the worthy development projects,
antipoverty programs, and foreign aid to poor countries have an inconsequentially
small effect compared with the benefits of just letting people move to the rich
countries that need them and work for the going wage justified by their
productivity.
For instance, a widely cited 2015
paper published in Science considered the effects of an antipoverty program
that transferred livestock across six poor countries, with the goal of
increasing the income of chronically poor households.
The program spent $4,545 per
household in its first two years. By the third year, annual household
consumption was higher by just $344 on average across five of the six countries
where the program produced positive results — Ethiopia, Ghana, India, Pakistan,
and Peru. (In Honduras, nearly all the livestock died.) And, given that so many
attempts through similar projects to raise the incomes of the poor had failed,
this modest gain of $344 in annual household consumption by spending $4,545 was
regarded by the authors as a major success.
By contrast, my research suggests
that workers without a high school degree would make, on average, as much as
$13,119 more per year in the United States than would their counterparts in the
five countries studied. Even if ten percent of the wage differential is
absorbed in the travel costs of moving back and forth for a year, allowing the
same low-skilled workers to be employed in the United States, rather than
consigning them to their home country, would produce a boost in income 35 times
larger than that enabled by an effective, well-designed, and well-implemented
antipoverty program.
The phenomenon of global poverty
today is not one of “poor people” but of people trapped in “poor places,”
unable to leave because of barriers limiting their movement. The derisive
caricature of poverty has it that people are poor because they lack “human
capital,” but the reality is that the massive expansion of education in the
developing world since the 1950s means that the average adult in Haiti today
has had more schooling than the average adult in France had in 1970. But Haiti
is a chaotic and low-productivity place to use any type of capital, including
human capital; hence, most Haitians who have escaped poverty have done so by
leaving their country. Some may fret about “brain drain,” the spurious notion
that a poor country will be further immiserated by losing its best and
brightest overseas. The principal attraction of arguments regarding “brain
drain” seems to be that the words rhyme, as there has never been any evidence
that outward migration in general has harmed a country’s prospects. It is worth
remembering that many of the richest countries in the world today — including
Denmark, Italy, Norway, Spain, and Sweden — had some of the highest emigration
rates in the late nineteenth and early twentieth centuries.
Wage differentials create a deep
desire to traverse national borders. Between 2015 and 2017, Gallup asked people
around the world whether they would move permanently to another country if they
could and, if so, to which country they would move. From these samples, one can
estimate that around 750 million people would choose to leave their home
countries permanently if they could (and even more people would be willing to
move temporarily). Based on the survey, 158 million additional migrants would
want to come to the United States; Australia, Canada, France, Germany, and the
United Kingdom would each receive around 30 million more migrants. This is not
to say that these countries should or would accommodate so many migrants, but
it does suggest that there is no shortage of people ready to come and work in
rich countries.
The restrictions on mobility that
create labor scarcity in rich countries perpetuate poverty for millions of
people who are willing and able to work productively — but are prohibited from
doing so. And the scarcity propels businesses to invest wastefully in
technology that need not exist. Automation, in other words, is not inevitable
but driven by the artificial scarcity of labor. Companies perceive a financial
incentive to choose machines over people. Without such an incentive, businesses
and households would make different choices. Walmart is not making you ring up
your own purchases on self-checkout machines because it thinks you always had a
hankering to work for the company but because it cannot find all the workers it
needs at viable costs. And households, too, can make different decisions that
benefit everyone involved. Research in Singapore shows that highly skilled
women are much more likely to be in the labor force when care workers are
available to take up tasks in the home. The availability of home aide workers
also allows the elderly to stay out of institutionalized care longer and leads
to greater quality of life at a much lower cost. False necessity is the mother
of dumb inventions.
DOORS IN THE WALLS
It would be no small thing, of
course, to figure out how countries could realize the potential of available
labor in the world. The major mechanisms for global cooperation — chiefly those
institutions that emerged after World War II, such as the United Nations, the
International Monetary Fund, and the World Bank — set in motion the
globalization of markets for goods and capital. But they did not put in place
any meaningful infrastructure to support and promote the movement of labor.
Money and shipping containers flowed freely across borders, but people did not.
Today, every country unilaterally
sets whatever restrictions it wants on the entry of foreign nationals. Belying
the facile right-wing talking point that the United States maintains “open
borders” or similarly dubious claims that the world is “flat,” all rich
countries have transformed their borders into cliffs, with the threshold for
legal entry high and often altogether unreachable. At great expense and with
mixed results, countries enforce these restrictions. In 2022, the United States
allotted $26 billion to border enforcement, more than it has devoted in most
years to its international development agency, USAID.
Instead of funneling resources
into the quixotic pursuit of job-killing technology, countries should pursue
international cooperation with regard to labor mobility. The potential gains
for the countries from which people emigrate, the migrants themselves, and the
countries that receive migrants are enormous. Rich countries should allow more
people to live and work in their countries not out of altruism but to reckon
with a growing demographic necessity.
The solution is the creation of a
global mechanism for labor mobility. It should recruit workers fairly without
excessive costs and, based on reliable information and contracts, place them in
jobs that suit their abilities, protect them from abuse while they are away
from their home countries, and, with time-limited mobility agreements,
facilitate their orderly return home. Larger flows of economic migrants will
require an industry to handle the key functions of recruitment, training,
placement, protection, and return. The trucking industry, the health-care
industry, and the hospitality industry cannot be expected to manage the
international movement of labor to meet their needs. Instead, the task of
moving people must be taken up by a globally connected and networked group of
organizations and individuals. Of course, such an industry should be carefully
regulated and monitored, as the risks of abuse are immense. But a well-functioning,
ethical global industry that moves workers can be a huge force for good by
matching people who want jobs with the enterprises that need them.
Political obstacles stand in the
way of the orderly cross-border movement of people to work. Countries are stuck
in a Catch-22. Politicians are reluctant to create the laws, policies, and
regulations that would allow labor mobility programs to flourish until such
programs have been demonstrated to be safe, effective, and beneficial. But
existing wage differentials between rich and poor countries, as well as the
undeniable demand for workers, means that the movement of people happens
anyway, but without legal sanction and with the complicity of employers.
Invariably, such movement is unsafe, migrants are exploited and abused, and
they cannot easily return home. As a result, the very idea of labor mobility is
tainted.
It may seem paradoxical, but the
pitfalls of labor mobility in the present are reasons to facilitate even more
movement, only through legal and well-devised channels. The benefits of
allowing people to move where their labor is needed are huge for all concerned.
Rich and democratic societies need to stop blindly pursuing technological
advances that economize on precisely what is abundant around the world. Wealthy
countries have created strong incentives for their firms and innovators to
choose machines over people. It is time to make the bet on a future built by
and for people.
in Foreign
Affairs, 1 Mar 2023