On economic fallacies and the misunderstanding of people.

The New Yorker is my daily exercise reading these days, because there’s nothing quite like pretending to work out when you’re actually sitting down with a magazine and pedaling very, very slowly. It’s interesting, and it makes New York sound like even more of a dream than it already did (a good 5-6 pages of ‘What’s On’ before the articles start and I start swooning; are there really that many bands and theatre shows and amazing restaurants and artsy events there?!).

I was reading it today and came across this article, by one James Surowiecki, on immigration. Now of course he’s talking primarily about the States, but many of the things this article discusses are incredibly relevant (indeed, on a much wider and prominent scale) to the UK, and Europe as a whole. Now of course, I’m incredibly biased; I have an Indian passport but have never lived there; I live in Malaysia and have done for almost 17 years (18?). I yearn for adventure, dream of the exciting cosmopolis (which KL emphatically is not); I am too scared to venture India alone, because as much as I love the place, it is manic and it is simply not what I’m used to. But the world is effectively (o! very effectively!) closing its doors to me. The UK (for e.g.) has now closed 8 out of 13 of its previous Tier 1 work visa categories, which was by and large for highly skilled workers or graduates/people with university degrees (I think people who qualify as potentially skilled workers yet again?). The number of skilled workers (Tier 2 visas) has been capped.

This is to a large extent seems completely understandable. The world is going through a terrible economic time – the recession affects everybody, and even if it didn’t, Europe would still in the economic doldrums what with the EU and the PIGS etc. There are not many jobs. Especially in Europe. A look at job vacancies on Linkedin.com can throw up something like 157 vacancies in the States, and 7 in the UK (I know: I’ve looked). The masses consequently employ their flawed economics to say, “Well, more workers from outside means less jobs for us,” or, “The job market is bad enough already without extra competitiveness!” (To some extent these ideas are wrong, wrong, wrong – I’m not an economist, but even I can see some glaring problems with statements like this; for one example, isn’t competitiveness largely what drives innovation, industry, and consequently, economic growth?)

There is no doubt (in my possibly ill-informed mind, anyways – but whatever: you are reading a laywoman’s blog!) that immigration has become something of a scapegoat in many political discussions. What makes James Surowiecki’s article so very interesting is the fact that he effectively knocks down so many of the usual ‘reasons’ (if you will) against immigrants (and note: I am talking about skilled workers when I use the term ‘immigrants’. I am talking about people who are academically qualified, who are capable of getting good jobs and consequently of contributing to the economy with their taxes and whatnot. This is precisely the category of workers that countries like the UK, for example, are trying to ‘cap’ and cut the numbers of; the other big  and ‘easy-target’ demographic seems to be foreign students, as evinced by the recent appalling events at London Met. University). He points out that immigration drives competitiveness and that this is a good thing for technology, industries, and general job-creating innovation (he uses start-ups in Silicon Valley as his example); and most importantly, he knocks down the idea that there is a ‘fixed number of jobs’ in countries and for people. There are not. It’s called the ‘lump of labour fallacy’, and these ideas are almost universally acknowledged to be — well, just that: a fallacy.

Economies are not static, with a limited set of resources to go around. As the work of the economist Paul Romer has shown, economies grow faster when there is more innovation, and having more smart people in the workforce is a key driver of economies.

Admittedly, the dismissal of ‘a limited set of resources to go around’ seems like less of a problem for the States, which after all, doesn’t have a welfare state support system, which subsidizes everything from education to healthcare. Er, right? But these support systems are so gravely under duress and threat in the UK, as the increase of fees last year or those ambiguous ‘NHS cuts’ that surface in the papers every now and then. Actually, immigrants who pay a lot of tax are probably exactly what the UK needs – they have no recourse to state benefits or public funds, as the UKBA website so clearly states, which means they don’t (as is commonly said) put a ‘strain’ on the NHS or on the wider welfare system. What you seem to have, in effect and a nutshell, is a demographic that pays fairly high taxes (on a globally-comparative scale) and gets none of what they’re paying towards (the welfare state). I just don’t get why anyone would be complaining about that. Equally needed are the international students who pay almost triple the amount in fees that UK/EU students do. This is how institutions make their money, and it’s odd that this very mode of income is coming under fire when it’s needed so badly. It’s really odd, because it’s just not — economics. It’s not even common sense, as far as I can see.  People might say, idealistically or otherwise, that such institutions ought not be profit-making or make such decisions based on money, but the fact of the matter is – the government has cut its funding. These institutions do exist in a wider context, right now of the global recession and Europe’s particularly dire economic situation. And logically it follows that they do need the money, from somewhere!

I like the metaphor Surowiecki uses in his article, expressing the idea that the “presence [of skilled immigrants] makes the pie bigger for everyone“. I don’t think it’s a question of somebody’s piece of the pie being eaten; I really do agree with this statement – it’s about expanding the pie, so that everyone can eat it, and more of it.

Edit: If there are any glaring flaws in my argument/reasonings, and I’m sure there will be since I am no specialist, nor do I know much about economics and even its base principles, please do let me know. I’m curious to hear, and I’d be equally interested to hear different perspectives on the issue (which seems to be quite a polarizing one).

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2 comments
  1. I live in NY and have done so since moving here from my native Canada in 1989. I’ve also weathered THREE freaking recessions here. The American economy is in tremendous flux right now and it’s generating a lot of fear. I’m a career journalist with no advanced degree or other skill set to automatically switch over into to make lots more $$$, so there is a visceral fear for many of us that even MORE people will come and compete with us for the badly slivered pie. Some 24,000 (!!) journalists lost their jobs in one year, 2008. Many will never again find work in that field.

    But this economy’s needs are very dependent on your field and specialty. The US desperately needs math, science, computer science and engineering grads…fields which many Americans eschew, esp. women. So where else are employers to find these people? And, at the very bottom, with truly awful jobs (like killing and cutting up meat), immigrants will do what Americans will not.

    No economy can function efficiently or well without immigration. But fine-tuning it, quickly and equitably? Hah.

    The New Yorker, while smart, is also such an elitist rag. I read it, but with a jaundiced eye.

    • There is no denying the NY’s elitism, though I’m surprised it took me so long to get to read it (I only properly read it for the first time a few months ago, when I was on an NYRB – EVEN MORE ELITIST! – high). That being said, it does have very interesting articles though – I love how it can suck you in even if you know nothing about the subject. I am less in love with their fiction/poetry, which is seems to be elitist beyond belief and has little room for new voices (new voices could use the publicity of the NYer; Joyce Carol Oates does not need it!).

      I completely agree with you about economies and needs/specialities. I did English Lit. at uni (somehow, twice), and I can completely understand why I’m finding it so hard to [a] find a job and [b] find a job in another country. Knowing English is hardly a qualification in many parts of the world. It sucks for me, though I can’t deny the logic and reason behind my situation at all (though I wonder if it would have been better if we were not in a recession!). I suppose I should have been more clear about that in my blog post, though I guess I got a bit too caught in the celebratory moment – someone’s actually saying nice things about immigrants, in a public forum??!?! Glee!

      You’re right too about the jobs at the bottom thing, which in a particular sense I have such a large bone with – the people who whine incessantly about call-centers and how they’re outsourced. They’re outsourced because there are people out there who will work for peanuts when many won’t, and the fault really fundamentally lies with evil capitalist employers who want to get the work done, any old how, for peanuts. It really upsets me when I hear the insults and rudeness hurled at call center workers who are, after all, just doing what anybody wants to do – earn some money and make a living!

      I’ve heard journalism is particularly facing a bad time, not just with the recession but with the whole digital/online for free business – this is really sad, though I had no idea the figures were that high. That’s awful.

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