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October 11, 2005

Comments

rjw

I agree with much of that, except for the rather bizarre statement that:

"And what happens to these higher profits and to the money that wealthy people save? It gets spent elsewhere, thus creating jobs and driving up wages"

Sorry - but are you really saying that paying lower wages creates net jobs because the well off spend their gains and thus boost demand? That's nonsense. The additional benefits of having more people being employed do not come from the fact that this suppresses wages and allows rich people to be a bit richer and spend more money 'creating jobs'. The macroeconomic benefit comes from the fact there are more people employed. Period.

Under the right conditions this macro benefit could come about without any significant reduction in wages at the lower end of the market - if the new workers take hard to fill jobs rather than competing down wages in the lower segments of the labour market (as you note). The responsiveness of wages to the rise in labour supply determine the distribution of this additional output and income.

If (equilibrium) wages did not fall much with the rise in labour supply, then instead of the relatively rich spending more and "creating jobs" because their real incomes were rising, it would be the relatively poor doing the spending out of their additional income and they would be the ones "creating jobs" (in accounting terms).

Where PT has half a point is to say that a rise in labour supply could conceivably lower wages at the bottom end of the market, and this may be an issue of genuine concern. Where she seems to be wrong is on not checking whether this has or not happened, or is terribly likely - and how one should react.

Paddy Carter

It's hard to shake the notion that if you are a nurse, for instance, then you life is made more difficult by an influx of nurses from overseas who are prepared to work for much lower wages. And macro arguments about lower costs to the consumer are of little comfort.

Is it possible to differentiate between jobs that are filled by immigrant workers because the vacancy was too hard to fill with a domestic worker, and jobs that are filled by immigrant workers because they are prepared to take a lower wage?

Adam

I get bothered by the sentiment that wealthy countries should keep immigrants out in order to protect job access. That attitude combines a weird notion that there are jobs (positions given to workers by employers) that rightfully BELONG to the workers. When this attitude is adopted by "not-too-bright" folk, we have a proto-fascism. Essentially, it is the idea that all economic enterprises are the property of the nation as a whole.

This is just some of the weird behavior that occurs when one person is dependent upon another person for his survival.

Innocent Abroad

There is also the point that the Philippines or wherever have trained the nurse or whoever and so free movement of peoples discourages investment in human resources by nations...

Within a national economy, industries have overcome this "poaching" problem by (shock horror) training cartels.

dearieme

All reminiscent of the Tory MP who said, during the Thatcher years, "I'll believe in unemployment when I see an English waiter".

Curious

Yes Chris, I agree completely agree with your explanation. As regards Polly's stance, I am glad that you have put it out there like it is;

"Polly is just combining racism with economic illiteracy."

I have personally come across economic illiterate and morally questionable articles in "the economist" that my colleagues and I have often wondered about.

Even the FT, every now and again, wrongfully interprets economic data and misleads the unwitting readership.

Seeing as it has comfortably become a trend for non-economists or pseudo-economists to discuss economics like experts simply because they can identify basic economics, like supply and demand, I have resigned myself to accepting that the pseudo-economists are here to stay. For them, they look more intelligent to those who know less and in their jobs if they are seen to cover a broad range of issues. The irony, of course, being that it is the lack thereof (causality).


See a few cited examples from the Economist here:
http://culturefusion.blogspot.com/2005/10/economist-magazine-blunders.html

Paddy Carter

http://www.cgdev.org/content/publications/detail/4415

looks like a highly relevant book

[come on CD, enable those html commands! I have just remembered how to href and was raring to go there]

EU Serf

I love the idea that we keep hearing about how third world countries should own those they trained. In most of these countries, politicians are corrupt fat cats whilst doctors earn less than street sellers.

Neil Harding

Polly is certainly not a racist. I think all Polly was saying was we should ask ourselves; why when we have the people to fill these skilled vacancies are we letting them rot on the dole rather than training them? Why is our education and training failing to equip these people to fill these skilled vacancies we need filling?

If companies had a responsibility to train workers themselves rather than poaching them from countries that can ill afford it, maybe they would pay better wages as well. The money that is being saved by paying low wages is not benefiting the poor of this country. To cite the BNP/Nazis etc in response to Polly's argument is in poor taste and completely wrong.

Also importing skilled workers from poorer countries does them no favours.

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