ECONOMY AUGUST 22, 2011
This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy'. Click here to read other contributions to the series.
One of the problems with the news cycle is that perennial issues—problems and solutions both—tend to get ignored in favor of things which have changed in the last few hours or days or weeks. As a result, when it comes to the global economic crisis now in its fourth year, one of the key potential solutions has been left all but ignored from the outset: making improvements to labor mobility.
If the issue has gone ignored, that may be because it confronts us with a paradox: We’re suffering from high unemployment, but that’s partly because people can’t get to those jobs that are currently available.
Consider the global economy from a height of 30,000 feet. We see, first off, a lot of wasted resources—in food, in energy, in water, and of course in war. But add them all together and they still don’t come close to the human resources that are wasted every day. In our age of information technology and service-sector value-addition, the two most valuable companies in the world, Apple and Exxon Mobil, both have fewer employees than the average attendance at a baseball game hosted by the struggling Washington Nationals.
And yet the right people in the right place are worth more now than at any point in history. Silicon Valley entrepreneur Marc Andreessen, writing in the WSJ on Saturday, complains with good reason:
Many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. This is a tragedy since every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high.
It’s clear that there’s a shortage of good software engineers in the world. But it’s important to understand that Silicon Valley is facing an artificial shortage of good software engineers. There are lots of highly-qualified software engineers from India, Russia, and elsewhere—even Canada—who would love to work in Silicon Valley but can’t, for visa reasons. Even if you’ve earned your degree at Stanford University, right in the heart of Silicon Valley, it’s decidedly non-trivial for a foreigner to get a job in Palo Alto or Cupertino upon graduation. You know the companies, you know the people, they know you, they would love to hire you—but the Bureau of Citizenship and Immigration Services often gets in the way, forcing you out of the country instead.
If you’re more ambitious than that, of course, the situation gets even worse. There are at least ways of getting a work visa for the United States; they’re far too onerous, and leave far too much to chance, but it’s possible. If you want to become an entrepreneur, on the other hand, there’s really no point in even trying. Recent graduates are perfectly positioned to build the great companies of the future: They’re bright, they’re hard-working, they’re up to speed on the state of the art, and they generally don’t yet have families which require job security and a steady income. But if they’re not American citizens, it’s almost impossible for them to build the economy of the future in this way.
Still, Silicon Valley has historically been a relatively good place for immigrants—think Intel’s Andy Grove, or Google’s Sergei Brin. And that’s no coincidence. The most vibrant areas of the economy always attracts the highest rates of immigrant workers. Immigrants—especially rich and well-educated immigrants — work hard, create jobs, pay much more in taxes than they take out in benefits, and tend to have overachieving children: They’re a recipe for economic growth and prosperity. But while the Statue of Liberty’s beaconed hand is said to cast a welcoming glow around the world, in practice the United States is no longer a welcoming place for immigrants, especially when compared to its Anglophone competitors like Canada and England. America would have an all but insurmountable competitive advantage in the fight for talented immigrants, were it only to bother competing.
The lack of mobility of the skilled global elite is a microcosm of a much larger problem—namely, the lack of labor mobility more generally, both between and also within countries. Detroit, for instance, has painfully high levels of unemployment just because there aren’t nearly enough jobs in the city, any more, to support its population. The solution should be obvious: People in Detroit should move to where jobs are more plentiful. In fact, our single national currency is premised on the idea that that sort of labor mobility between states will be relatively easy, and that geographic imbalances won’t remain permanent. Of course, one of the reasons people don’t just pick up and move is that changing one’s surroundings is an inherently difficult and painful process, especially for families.
But we should recognize that this is a problem compounded the prevalence in the United States of homeownership. Selling a house is difficult, expensive, and time-consuming—all the more so in today’s depressed market, when millions of homeowners are underwater on their mortgages. In the short term, the government should be doing everything it can to bring liquidity back to the real-estate market—and that means forcing banks to do principal reductions on underwater mortgages. In the long term, it should phase out the mortgage-interest tax deduction, which artificially increases homeownership and decreases labor mobility.
Finding lasting solutions to our labor mobility problems won’t be easy. Italy, for instance, has been a unified country with a single language and a single currency for 150 years, but it still has minimal labor mobility from the south to the north. And the lack of labor mobility has long been one of the biggest macroeconomic problems facing the Eurozone; again, the millions of unemployed people in the south of the continent are not moving to fill the jobs in the north. (There’s a bit more mobility from east to west, but not much more.) And globally, discrimination on the basis of one’s country of nationality is the one universally-condoned form of discrimination still in existence: Every country in the world puts up significant barriers to prevent foreign nationals from living and working within its borders.
This is not a problem which can or even should be fixed overnight. But it’s a huge problem all the same, and the world’s policymakers should be working on it rather than ignoring or exacerbating it, as they’re doing at the moment. If we want to maximize long-term growth, eradicate global poverty, and give everybody in the world the opportunity to achieve their potential, then a vast improvement in global labor mobility is top of the list of prescriptions.
Felix Salmon is a blogging editor at Reuters.