It’s time to get working on labor mobility

By Felix Salmon
August 20, 2011

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 — the thing which came to the world’s attention in 2008 and which no amount of Panglossian dreaming of V-shaped recoveries can wish away — one of the key potential solutions has been left all but ignored from the outset of the crisis through the present day.

So it’s worth taking a big step back, and looking at the global economy from 30,000 feet. When you do that, you see 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. This is the 21st Century — the 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 population of Moses Lake, WA. The right people in the right place are worth more now than at any point in history — even as the total population of the planet, and therefore its gross human potential, has never been higher.

At the same time, however, the universe of people with the potential to really change the world is vastly smaller than it ought to be. 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.

Does the world have a shortage of good software engineers? Yes. Does Silicon Valley have an artificial shortage of good software engineers? Yes. 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 got your qualification at Stanford University, right in the heart of Silicon Valley, it’s decidedly non-trivial 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 gets in the way, and forces 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 in the US; 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 US citizens, it’s almost impossible for them to build the economy of the future in this way.

And Silicon Valley has historically been a very good place for immigrants — think Intel’s Andy Grove, or Google’s Sergei Brin. It’s no coincidence that the most vibrant areas of the economy are also the places with the highest immigration. 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. The US is a nation of immigrants; from the Statue of Liberty’s beaconed hand glows world-wide welcome, at least in theory. In practice, the US has shot itself in the foot in this regard, 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.

Take another step back, and the lack of mobility of the skilled global elite is a microcosm of a much larger problem, which is 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 is for people in Detroit to move to where jobs are more plentiful. Similarly across the US: one of the reasons why a single currency works well across 50 disparate states is precisely because there’s a decent amount of labor mobility between those states. But as a rule, the more labor mobility the better, and one way of ensuring that jobs get filled by the best-qualified people is to maximize the ease of moving geographically from one job to another.

Moving is always painful, of course, especially for families, but this is one area where homeownership is very much a bad thing. 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.

Improving labor mobility is not 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. The lack of labor mobility has been one of the biggest macroeconomic problems facing the Eurozone; again, the millions of unemployed people in the south are not filling 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.

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