Glenn Reynolds of Instapundit fame has a column up on Tech Central Station which explores the question of whether robots will lead to mass unemployment (my guess: YES!). Along the way he points out that the rise of unemployment due to robotic automation may lead to an increase in anti-immigration sentiment.
First, lots of low-skill jobs are disappearing forever. Second, that trend is likely to accelerate. Third, even if (as I suspect) the economy generates new jobs to replace the old ones, the new jobs may not be as low-skill, and they won't magically appear in synchrony with the disappearance of the jobs they replace. The upshot is that there are likely to be both economic and political repercussions from technological change, and the technological change that drives them is likely to occur at an accelerating pace. That will produce both short-term and long-term consequences.
In the short-term, we're likely to see a swing toward protectionism and perhaps even a growth of anti-immigrant sentiment; the former is already beginning to show up in the 2004 election dialogue, and the latter may still appear before things are over. In the longer term the consequences are likely to be more significant than Brain thinks, though it's hard to say exactly how.
The part where he says "the new jobs may not be as low-skill" is the most important for setting immigration policy in the short and medium term. If automation is going to lead to unemployment among lower skilled workers first then it certainly makes sense to adjust immigration policy to keep out the lower skilled immigrants. The selective growth of the skilled part of the workforce would help delay the day when automation leads to the problem of mass unemployment.
Does it make sense to translate this growing sentiment against immigration into changes in public policy? Do technological trends provide a compelling argument for changing immigration policy? Reynolds points out that people have been predicting mass unemployment due to automation for decades and yet this has not yet come to pass. However, a very worrying trend in the United States and other Western nations has been the relative and absolute decline in wages of the lower skilled and unskilled workers. One of the causes of this trend is the large influx of low skilled immigrants.
UK workers in the bottom 10% of the income distribution have seen almost zero real growth in their wages over the last 20 years. In contrast, workers in the top 10% of the income distribution have had real wage increases of around 50%. Two potential causes have been cited for this widening wage gap: international trade and technical change.
An article from The Economist published in 2000 reports real wages for the least educated have been declining for at least 20 years.
As the demand for brains has risen relative to the demand for brawn, so wage differentials have widened in favour of the better-educated. Since 1979, average weekly earnings of college graduates in America have risen by more than 30% relative to those of high-school graduates (see chart 12), increasing the wage gap to its widest for at least 60 years. The wage gap between college graduates and high-school drop-outs has grown by twice as much. Since average real wages rose relatively slowly for much of this period, the real pay of the least educated has actually fallen over the past 20 years.
This paper confronts a CGE model to observed evolutions in France, between 1970 and 1992, through a structural decomposition analysis. The choice of the model and the assumption of constant elasticities over time enable the structural change of the economy between two equilibria to be summarised through a set of four types of state variables, reflecting the effect of technical change, changes in factor supplies, shifts in consumption patterns, and international trade. Simulations then allow the contribution of each of these shocks to be assessed. We find that technical change had a strong positive impact on the relative wage of skilled to unskilled workers, while the impact of changes in factor supplies is strongly negative. The effect of international trade is far less important. However, if we take into account a trade-induced effect on productivity, then we find that trade substantially increased wage inequalities.
In the United States, for example, wages of less-skilled workers have fallen steeply since the late 1970s relative to those of the more skilled. Between 1979 and 1988 the average wage of a college graduate relative to the average wage of a high school graduate rose by 20 percent and the average weekly earnings of males in their forties to average weekly earnings of males in their twenties rose by 25 percent. This growing inequality reverses a trend of previous decades (by some estimates going back as far as the 1910s) toward greater income equality between the more skilled and the less skilled. At the same time, the average real wage in the United States (that is, the average wage adjusted for inflation) has grown only slowly since the early 1970s and the real wage for unskilled workers has actually fallen. It has been estimated that male high school dropouts have suffered a 20 percent decline in real wages since the early 1970s.
In other countries, the impact of the demand shift has been on employment rather than on income. Except in the United Kingdom, the changes in wage differentials have generally been much less marked than in the United States. Countries with smaller increases in wage inequality suffered instead from higher rates of unemployment for less-skilled workers.
Technological advances in combination with a continuing large influx of low skilled immigrants will eventually combine to make the supply of unskilled labor so great in the United States that even the US minimum wage will be too high to prevent mass unemployment. In Europe the more regulated labor market is causing this effect already. Unemployment rates in many European countries are several points higher than US rates and this has been true since at least some time in the 1980s (see the graphs here where the unemployment gap between the US and Europe opens around 1984). America's labor market in the future will have many similarities to the current labor markets in Europe with high unemployment and high welfare payments to support the unemployed. A drastic reduction in unskilled immigration could delay the day when mass unemployment becomes common in the United States.
Update: Georges Vernez, then director (not sure if he still is) of Rand Corporation's Center for Research on Immigration Policy, testified to Congress on April 21, 1998 about the lack of job growth for unskilled jobs in California and the resulting flight of native born along with a decline of labor market participation among the least skilled.
On the cost side, however, the employment prospects and wages of less-educated workers have dropped steadily because a greater number of workers--both native-born and foreign-born--are competing for a fixed number of jobs. Of the 7 million new jobs created in California from 1960 to 1990, 85 percent were filled by workers with one or more years of college and 15 percent were filled by workers with only a high school degree. Since there has been no job growth in the unskilled sector, less-educated newcomers are now taking jobs vacated by retirees or by workers moving out of the state.
These immigrants are also taking jobs from native-born high school dropouts. The employment rate among these workers fell from 67 percent in 1970 to 47 percent in 1990. Although the main reasons for this decline are increased world-wide competition, technological advances, and the availability of cheap labor in developing countries, immigration to the state has also been a factor. We estimate that immigration has caused 15 to 25 percent of this decline. Employment among high school graduates has also declined, although not as sharply.
Overall, between 1960 and 1990, we estimate that between 130,000 to 190,000 native-born people were not working as a result of immigration. This figure represents about 3 to 5 percent of all those unemployed or out of the labor force.
Immigration has also had a downward effect on the wages of unskilled workers. Between 1970 and 1990, the real wages of native-born high school dropouts declined by 24 percent in California, with about one-tenth of this decline attributable to immigration. Foreign-born workers have also suffered wage erosion.
Labor market participation among the least educated and least skilled has declined quite dramatically. People are leaving California because their wages have declined due in part to immigration. The vast bulk of job growth is happening for the more highly educated. The future of declining availability of work for the less skilled is already here. It is already happening.
|Share |||By Randall Parker at 2003 December 08 04:20 PM Immigration Economics|