I would like to focus on Dani Rodrik’s scheme to combat the dark side of “social dumping.” His idea is, according to Naidu, Rodrik, and Zucman, “indicative of the commitments of many of the members of EfIP: a willingness to subordinate textbook economic efficiency to other values, such as democratic rule and egalitarian relationships among citizens.” Rodrik contends that, to ensure U.S. workers compete on a level playing field without being undercut by practices that would be illegal here, we could restrict trade with countries that violate minimum labor or environmental standards. He proposes public hearings to debate and determine what constitutes unfair trade. These protections, Rodrik argues, would allow us to maintain high standards while at the same time making U.S. businesses more competitive, thus safeguarding jobs. This scheme is unlikely to succeed on some of its central aims. It probably would not protect U.S. jobs, and it would likely hurt the world’s poorest countries.
Regarding U.S. jobs, since the end of World War II, governments have made it easier and easier to trade goods and to locate production in any country. Technological development has also made it easier for businesses to replace workers with machines. It is this combination of free trade and automation that has led to steep U.S. job losses in manufacturing.
Along the way, businesses have become less supportive of low-skill immigration. Because many firms can easily move production overseas, immigrant labor at home becomes less important to them. Why would business leaders worry about bringing Mexican workers to the United States when they can take their factories to Mexico? Similarly, businesses that automate production no longer need as many workers, so they too become less invested in immigration. Finally, firms that close due to overseas competition are the ones that tend to employ low-skill workers, including many immigrants, but they are no longer around to support immigration.
This pattern has severely eroded business support for low-skill immigration. Less support, in turn, strengthens the hand of immigration opponents, and policymakers then restrict immigration to appease these groups. Trade restrictions such as those Rodrik proposes could reverse this trend, creating more jobs in U.S. manufacturing. But businesses would not necessarily hire U.S. workers. Instead they are likely to increase their use of technology or lobby for increased immigration and use immigrant workers instead. This is what happened in the United States 150 years ago when Congress enacted tariffs to grow U.S. businesses. Instead of hiring expensive native labor, these businesses were often early adopters of labor-saving technologies and major proponents of relatively open borders. Rodrik’s proposal, in short, may boost U.S. manufacturing, but not U.S. jobs.
A major downside of Rodrik’s proposal is that, instead of incentivizing governments to increase labor and environmental standards, these protections would likely keep foreign firms from investing in developing nations. Foreign investors do not like uncertainty, and trade barriers with the U.S. would increase uncertainty. This is a problem because many of trade’s labor abuses come not with foreign firms but with domestically owned firms that supply global production. International businesses tend to be the most productive businesses that can afford to pay higher wages and follow regulations. Once invested in a developing country, international businesses often push for economic reforms. Domestic firms do not want reform—because they cannot compete if labor costs more—and are often deeply tied to the ruling party, especially in autocracies. Instead of increasing labor standards to attract international capital, many states are likely to protect domestic businesses and let the international firms go elsewhere.
The downside of this situation is that industrialization through globalization has lifted billions of people out of poverty in developing countries in the last fifty years. As countries such as China and India are now becoming middle income, low-skill industries are increasingly picking up and moving to poorer nations such as Indonesia and Bangladesh. They are even beginning to move to some of the least developed nations, as in sub-Saharan Africa. However well intentioned, then, the protections Rodrik proposes are likely to target the least-developed nations by decreasing foreign investment, and may unintentionally harm those who are worse off in the world.
What is the alternative? Instead of implementing trade restrictions, we could welcome more low-skill immigration. This would help protect our high labor standards and spread them abroad.
First, a wealth of evidence has shown that immigrants do not compete with low-skill Americans for jobs; instead, they complement native workers. Most jobs require both routine or manual tasks and tasks that need country-specific knowledge, such as language facility or cultural understanding. Immigrants rarely have the country-specific knowledge to outcompete natives for such jobs.
Second, as Rodrik suggests, many of the labor abuses that come with immigration occur because immigrants have precarious legal status. When their visas depend on their employers (or when they are undocumented), immigrants are unlikely to complain about their employers’ violations of labor laws and other regulations. Giving low-skill immigrants more secure status would help combat this problem.
More immigrants are likely to provide more employment for natives, too. Immigrants spend money on housing, food, clothing, health care, and the like. Such spending increases demand for goods and services provided here in the United States. More immigrants would also make U.S.-produced goods cheaper for export, since expensive native labor could be deployed more effectively. This would come at a relatively low cost for the nation: legal immigration would increase the nation’s coffers, as it would help ensure employers would withhold taxes. (Even now, 50 to 75 percent of undocumented immigrants pay their income taxes.)
Low-skill immigration is also good for immigrants themselves and for their communities. Immigrants are able to earn more money than they would at home and often share that prosperity back home through remittances. Money is not the only thing they share, either. They also learn democratic values, including support for labor unions, which help ensure labor standards at home. As I show in a paper with Michael Miller, greater immigration to the United States can lead to democratization, and more protection for labor, back home.
The one thing that more immigration may not do is to solve the cultural problem of globalization. U.S. attitudes toward free trade are often based on enthocentrism. Many Americans, including those that Rodrik is worried about, object to trade precisely because it is associated with foreigners. More low-skill immigration may exacerbate these tensions, at least in the short run.
And yet, U.S. attitudes toward immigrants are changing. More and more people view immigrants and immigration, and by extension foreigners, positively. This is especially true for young people who have grown up around many first- and second-generation immigrants. More immigration, then, may get us to think more as world citizens than only as U.S. citizens. Likewise it may provoke more mass participation, regionally and globally, that will advance the fight for global labor standards.