Immigration Before Automation

DAN KURTZ-PHELAN

Lant, thank you for doing this, and for the powerful essay in our current issue.

LANT PRITCHETT 

Thanks for inviting me. 

DAN KURTZ-PHELAN

I think you’re fairly unique among development economists in the focus you put on migration. What was your path to that focus? Tell me a bit about your path through development economics and how you came to see migration as so central to these questions.

LANT PRITCHETT 

So it gradually dawned on me that in the design of development organizations, at its foundations in the 1950s and 60s, we had a fundamentally wrong model of what was going to happen.

The vision was, once these countries were newly freed of colonial powers, and could guide their own destiny—the existing economic model of the time is something called the Solow model, named after Bob Solow—it assumed that your level of output was factors and technology, but it assumed technology was these blueprints. So if you think about that model, and you think blueprints are just in the air and going to diffuse very fast, then what was going to happen was, technology was going to converge, so the production possibilities of these countries was going to get very high, and what was going to limit their output was the ability to accumulate both physical and human capital. So in that kind of thinking—this is the thinking behind the World Bank, because in that kind of thinking, what was going to constrain the rapid growth process that was going to lead to a variety of benefits, including poverty reduction, was really how fast economies could accumulate capital. 

Turns out that was completely, totally wrong. The crazy thing about the world is that the reason why incomes have failed to converge is because productivity hasn’t converged. And so if you think of productivity as these technologies that are in there, like how to run a power plant, and how to, you know, put fertilizer on crops—that’s just bizarre, right? It’s like, well, why didn’t the technology converge? And it turns out, what really determines countries’ productivity isn’t technology at all. Haiti isn’t poor because there aren’t blueprints of how Haiti could build a power plant or a factory or grow crops better. It’s the nature of the economy, and the politics and the society and the history that interact to determine productivity.

So again, then, the way in which development was designed, it was designed to augment the pace at which countries could invest in building more machines faster, and educating people faster. And gradually, through my research—so I didn’t start off as you say, I worked 30 years in development before I really came around to seeing the importance of migration because in the old model, you know, people should want to move to these high productivity places. But what was really driving the lack of development was this failure, not of capital to converge or not have education levels to converge, but what was driving the persistent differences in per capita incomes, and hence in poverty, was the lack of convergence of productivity. And when productivity doesn’t converge, then the easiest way to make a poor person much, much richer is to move them from a low productivity place to a high productivity place.

DAN KURTZ-PHELAN

There’s a really striking statistic in the piece about education levels in poor countries. And the statistic you cite notes that the massive expansion of education in the developing world since the 1950s—I’m quoting you here—means that the average adult in Haiti today has had more schooling than the average adult in France had in 1970. So we have had lots of focus on building quote, unquote, human capital in these places. But as you see it, that just hasn’t had an effect on growth or development in a meaningful way. 

LANT PRITCHETT

Exactly. Because in our, in our model, we were thinking, the technological stuff was there, and we just needed to educate people to get to it. But I mean, you know, people in France thought they were a very advanced civilization in 1970. But, you know, the average adult in Haiti—in Haiti—today has a higher level of years of schooling than people in France did in 1970, which is just—again, I cite it all the time, because even to me, I’m well acquainted with the countries and the statistics, it really blew my mind of how rapid the expansion of education has been. And, you know, one of my other research endeavors is around improving the quality of education. But in the end, the experiment of let’s make people richer by putting them through more school is an experiment the world has done. You can’t say we didn’t try it. 

So, you know, often people say, well, why are you focused on migration instead of focusing on helping people be productive in their own country? The answer is we are, you know, the development community has been doing a whole variety of things to try and help countries become more productive. It’s not like, oh, we’ve ignored education, or we’ve ignored economic growth. We try. We—the development community—have succeeded in vastly expanding education, and have been trying to figure out how to make these countries rich. It just turns out, it’s really hard. It’s much harder than taking a blueprint from Miami, across the short bit of the water to Haiti, and it will work. And so we’ve gotten stuck in these quite large productivity differentials, which just means moving a person from this low productivity place to this high productivity place—same productivity of the individual, their wages go up by a factor of five.

DAN KURTZ-PHELAN

Right. So you bring that Haitian to Florida, rather than sending the technology the other way, and you suddenly get that development benefit. You cite this other paper in the piece—another effort, another kind of antipoverty program, another development program that transferred livestock to poor families. You know, that this was a successful program that spent about $4,500 per person, and had a benefit of about $350, and an annual household consumption, which is, you know—it’s successful by the standards of these initiatives, but still fairly modest. 

But the takeaway for you, and I’m again going to quote the piece here, is that “decades of well-intentioned development programs and aid initiatives cannot equal the benefit of permitting a person in a poor country to work in a wealthier, more productive one. If they want to help the world’s poor, citizens of rich countries should understand that all the worthy development projects, antipoverty programs, and foreign aid have an inconsequentially small effect compared with the benefit of just letting people move to the rich countries that need them and work for the going wage justified by their productivity.” So that’s the takeaway of these decades of work you’ve done on this. Give us a sense of—I mean, I think we have some intuitive feeling for why this is, but—how exactly is that so powerful? How do you get those gains that so completely outstrip what you get from development efforts focused on the countries themselves?

LANT PRITCHETT

The way you get the productivity gains is that there’s just higher value productivity in a sophisticated economy. So, you know, a lot of the talk in development these days is about inclusive growth. Well, what inclusive growth should mean is we include people into a sophisticated value chain, and we include people into a very sophisticated production process. So if you take someone and allow them to work in elder care in Miami, the value of that elder care is very high because it’s part of a sophisticated elder care process. Whereas, you know, if they’re just working, you know, trying to scramble around in the informal economy, which is where most of the employment in poor countries these days is, they’re not embedded in the sophisticated value chain. So one of the things we’ve learned about productivity is a lot of what makes productivity is people cooperating in very sophisticated ways. 

So one of the things is, one of the reasons why people can—the same intrinsic productivity person—can vastly increase their productivity is they move from unsophisticated, difficult to create effective cooperation and sophisticated value chain economy to an economy in which they’re a piece, and a needed piece, in a very sophisticated, high productivity endeavor. So one reason why productivity didn’t converge is, we’ve learned, it’s very hard to move the very sophisticated complex cooperation modalities that make a sophisticated economy like the U.S. or Germany or Japan—it’s hard to move those because you have to move all the pieces.

So moving up a person to a place where all these pieces are already in place, and the person can just slot in and be included in a high productivity economy—that’s inclusive growth. Whereas trying to move all of the pieces that are needed to a low productivity place is very hard. And I’m all for doing it; countries like Vietnam have had really rapid growth as they have gotten their act together, and created the possibilities of that. And so, you know, I’m not—I haven’t given up on being a development economist, I still do research on what would enable countries to have economic growth. But we’ve learned that it’s hard, much harder than we thought.

DAN KURTZ-PHELAN

One argument that you often hear in response to that kind of proposal is concerns about the effects on the home countries, right, the sending countries for migrants. And that could be brain drain—you have an outstanding line in the piece that the most compelling thing about the idea of brain drain is the two words rhyme, which is a fairly devastating critique. But to take it a little bit more seriously, you know, some of this could be kind of societal, right, the effects of large scale migration can be troubling for people; some it could be economic. What do you make of the effects on sending countries, on home countries?

LANT PRITCHETT

I think what these effects are depend on who the rich countries allow to move. So, a way a lot of countries have dealt with the need for more workers, and the benefits against the politics of wanting to limit migration, is they deliberately—it’s a global war for talent, they deliberately select to allow to come to Canada or Australia, but people who would if they stayed in their home country have the biggest impact. So to some extent, brain drain is built into selective immigration systems that are selecting on people with high skills. What I’m talking about is allowing people to move to do what I don’t—I don’t like to use the word low skill—what I call core skill jobs. And by a core skill job, I mean, you show up, you integrate yourself into the production process, you do the job you’re told to do, but which really don’t require large degrees of formal training. So these are core skill jobs.

So the core skill jobs, like allowing people to come work in home health care and take care of the elderly in Miami, that’s not causing brain drain, because it’s not the best and brightest of Haiti that are going to move to take those jobs. It’s the people with average skill sets. So I do, in some sense, take seriously the challenge that if rich countries are left to their own devices, they’ll kind of pursue their own best interests and say, well, it’s a global war for talent, we need the best software engineers from India, we need the bio—we need the doctors, you know, what few doctors Africa creates, let’s get them to move because we don’t want to expand our own medical schools. So yes, the rich world has, in fact, been doing things, almost by deliberate design, to maximize brain drain. What I’m talking about is the opposite end of the skill spectrum. 

So I’m not at all concerned that if we opened up pathways—legal pathways—for core skilled workers to move on a rotational basis, that that would cause brain drain, it doesn’t cause brain drain. Existing policies are, in some sense, maximizing brain drain.

DAN KURTZ-PHELAN

And by rotational basis, you mean coming temporarily, working, and then going back home? 

LANT PRITCHETT

Yeah, I mean, coming, working—or temporary… where this gets, this is a very highly charged issue, because, you know, we have this sense of what’s fair, and we don’t want to violate people’s sense of what’s fair. And I think most people find it unfair to let someone come work in your country for 35 years, and then when they’re done being a worker say: no, no, no, you can’t stay, you need to go back to your home country. Which—most of our ideas would have some path to citizenship through rotational, but it wouldn’t be expected or immediate. So you would come on a one year or a two year or three year contract, you would be expected to return, you might return at a future date and engage in another contract. And maybe if you successfully did a series of those, you would, you know, acquire points towards some citizenship pool. 

But we would focus on the rotation because I think there’s a large demand for it. Lots and lots of people would love the opportunity to work in the U.S. or Germany, but don’t want to move there. They don’t want to be there permanently. And, you know, when you do interview views of youth, the fraction of youth who say they would like to move temporarily is often twice as high as those who say they would like to move permanently. So there’s a huge, pent-up demand of people who say, well, no, no; you know, people have strong reasons for often wanting to live where they were born and raised, and where they understand the culture, and it’s their culture, and they own the place. But at the same time, would love to come and work, you know, one year, three years, five years; or maybe two, three year stints or whatever, in a high productivity place. It would give them savings, it would provide them, you know, opportunities to launch as adults in a much more propitious way than trying to scramble around in the current conditions. 

DAN KURTZ-PHELAN 

Is there any way to estimate what the gains in terms of growth and antipoverty would be if we had the level of migration that you think is warranted, given the differences in productivity? Is there any way to capture that? 

LANT PRITCHETT

By our calculations, for the first world to maintain its current ratio of workers to aged, by 2050 you’re going to need 400 million foreign-born workers in the rich world. The total stock right now, from poor countries in the rich world, is on the order of 150. So, a massive expansion. Okay, let’s say of that incremental 400 million, half of them come on path to citizenship and half of them come temporary. That’s still 200 million people kind of on a rotational basis each year as a flow. And you multiply that—we have quite good rigorous estimates of the typical wage gain, and the typical wage gain is about $15,000. If you multiply those two numbers together, it’s in the trillions.

Our rough guess is the additional productivity added by having 200 million people move from poor countries to rich countries on a rotational basis, which would mostly accrue to the people who moved, the workers, is on the order of the economy of France. France is one of the world’s largest economies. By allowing this, and its incremental productivity, it pays for itself. This is why I call it the least you can do. This isn’t charity, to let someone come work in a nursing home; America needs people working in nursing homes. They’d only get paid the going wage, because their productivity in the U.S. justifies it. So the least you could do: we could generate to the global economy something the size of the trillion dollars on the order of the economy—the entire economy—of France, and it would go to the people who moved, who—you know, I don’t know, depending on how you define poverty—are mostly going to be moderately poor people. So yes, it’s pretty easy to do back-of-the-envelope calculations, and the gains just dwarf anything anybody’s talking about.

[AD BREAK]

DAN KURTZ-PHELAN 

I want to make what is going to seem like a very abrupt shift to any listeners who don’t know the essay already, but everyone will soon get what we’re doing here. So let’s shift gears and talk about technology. The common view is that automation, and especially automation that replaces human labor, is a kind of inexorable, organic force driven by technological change. You argue in the piece that that view of technology is wrong, that it’s much more a choice, much more a response to incentives. Tell us what is wrong about the kind of common myth of how this happens and what the right way of understanding this is.

LANT PRITCHETT

Well, I think most people’s sense in America who haven’t really looked at the data is that technology has just happened. In the sense that, you know, Moore’s Law is just some kind of natural process, that we’ve come to understand how to put more and more bits and bytes and information in the same space—and that that leads naturally to automating things with machines that were formerly done by humans. I mean, after all, there’s a recent movie about the African American women who were computers for the NASA program—they called them computers, right.

But, you know, the natural change of Moore’s Law made computing a machine activity and not a human activity. But—and then the assumption is that’s mostly caused a loss in low skilled jobs and gains to high skilled people, because high skilled people now command, the technology augments their skills, but substitutes for low skills—that view is wrong. What’s really happened is the labor market in the U.S. and every other OECD country has polarized: the technology has hit the middle of the distribution, but the change in demand for labor, and the change in the wages, is U shaped, not linear. 

So at the bottom 20 or 30 percent of the 1970s are, you know, distribution of occupations by wages, which are, again, these low skill or core skill jobs. Those haven’t been destroyed by technology. And the reason they haven’t been is, what technology did is it made things that were routine automatable. But lots of things like taking care of an elderly person, helping an elderly person get out of bed, helping an elderly person get dressed, is not a routine function that is easily amenable to algorithms and computing power. 

So the real choice we face is, you know, do we attack the bottom half of the U with technology in the way that technology attacked or had negative effects on the middle of the distribution. But the point is, this isn’t a natural thing. These jobs that have yet to be automated are not easily automatable, or they would have been automated. You want to point out to people that Moore’s Law has improved computing power by 10 to the 11th.

I like to—to deal with that, such an imaginably large number, the difference between the speed you drive on the freeway, and the speed of light, is 10 to the seventh. So the difference in computing power is, you know, 1000 times bigger than the difference between your freeway speed and the speed of light. So it’s just an unimaginably large number.

If that increase in computing power hasn’t displaced these jobs, it’s because they’re not really amenable to it, right. And so to some extent, a lot of what’s happened now about robots is people are trying to attack the low end jobs that aren’t routine, aren’t easily amenable to automated automation, with more technological research into how they do them. And there’s just no reason to do that. That’s a completely false necessity. You know, we say necessity is the mother of invention. But false necessity is the mother of stupid inventions. We’re inventing stuff to displace the world’s most abundant resource; the world’s most abundant resource is core skilled labor. It’s all over the world. It just doesn’t happen to be able to be in the U.S. because of our laws and policies. And that’s inducing people to create what from a global point of view are just completely nutty technologies.

DAN KURTZ-PHELAN 

I think most of us moving through the world, what you see as the wrong view feels intuitive to us, right? You see the self checkout machines at your grocery store, we hear about self driving cars, ChatGPT and the ways that that’s going to change labor. But you point to a number of examples that you think are examples of stupid inventions responding to false necessity. How should we understand all this automation that we see around us as a response to false necessity in that way? 

LANT PRITCHETT

People respond to the environment they’re in. So I had an earlier blog post—why are the richest people in the world destroying jobs in Uganda? Because I had gone to Uganda, and they had instituted, the Ugandan airport had adopted, you know, self-pay parking lots. And I was like, wait a second, why have we—why, where Uganda, where their main problem is providing any kind of remunerative employment to the most of their population—why have we adopted this technology that was developed in places where it was very hard at going wages to attract people to sit in a parking booth. Whereas when you see what the actual technologies are—I was literally last week in Rwanda, and in the Rwandan airport, there was some little robot thing going around, and you know, you’re just taking the technologies and adopting them. Whereas, when I went out into the rural areas of Rwanda, they were mowing the lawn with a piece of bent angle iron. So that’s the level of technology that’s actually well adapted to their wages. 

But as you say, it feels natural to us, because, you know, if you live exclusively in the United States and look around, you think, oh yeah, we don’t have people to do this. We need, you know, a vending machine to do it; the Roomba vacuum makes a ton of sense—if you live in the United States. But you don’t think that, wait a second, all kinds of people would be super happy to come to the U.S. and vacuum your house as part of a cleaning service. 

So as human beings, we’re well adapted to the environment we’re in, and we adapt very consciously to the choices we have and the constraints we face. And labor shortages, given the demography of the rich world, are just an increasing element of the environment we’re in; so to some extent, robots seem a natural response. But it’s radically unnatural from a global point of view. 

DAN KURTZ-PHELAN 

And the other implication of this, the other cost of this, is that all of the capital and creativity and innovative energy that went into creating that Roomba instead didn’t go into something that would have been truly innovative and more productive. As you put it again in the piece, let me just quote this line here, because I think it sums that up nicely: “The drive to make machines that perform roles that can easily be fulfilled by people not only wastes money, but helps keep the poorest poor.” We’re kind of leading technology in the wrong direction and giving up on the greatest development tool there is.

LANT PRITCHETT

And again, there’s both the fact that you’re destroying the jobs in the U.S., but then there’s this bleedback to where for a variety of people, once you’ve invented the technology—and one example I use it, once you see it, it’s hard to unsee. But if you go back and watch any movie from the 1930s, 1940s, 1950s, where people arrive by train, what do you see? Porters. Right, you arrive by train, and people show up with carts to help you with your luggage because you’ve got all this luggage. Now, I traveled to the poorest countries of the world and my suitcases have wheels. There are no porters anymore. And it’s not that the wages wouldn’t sustain it in a poor country. It’s that we’re carrying technology with us all the time. And again, it’s kind of a crazy example. But once you see it, it’s like, oh, because wages went up in the U.S., because there wasn’t labor in the U.S. to perform this function anymore, that job disappeared. And then people say, oh, how do we cope with the fact that there aren’t porters or porters are expensive? Well, let’s put wheels on suitcases. But once you put the wheels on suitcases—you know, I haven’t hired a porter in 20 years.

And it’s not economic. The economics is, if I didn’t have wheels, I would be super happy to have a porter. And so we’re also bleeding out those jobs. You know, I lived in India for several years. There’s automated check-in for airlines in Indian airports. It’s like, again, in a country that’s struggling to find remunerative employment for all its people, the idea that airlines have decided to automate check-in—which is a good job, it’s an attractive job. It’s destroying jobs. Again, not economically. I’m not a Luddite. I’m not against technology. I’m just against technology being driven by false necessity. 

DAN KURTZ-PHELAN 

And as you note in the piece, and has been debated among economists for some time—productivity, even with all this new technology, it seems like there’s more efficient technology all around us. But in fact, productivity in the United States and other rich economies has been depressed, not surging, in the last few decades. 

LANT PRITCHETT

No, this is, again, if you think of things that basically all economists know but no non-economists know; most non-economists think the pace of productivity has been increasing over time. That’s only true in this very narrow array of industries that are amenable to automation through Moore’s Law—like, things like, we’re chatting over a computer right now as part of this podcast and, like, everything about IT. But outside of that sector, economy-wide, productivity growth has been much slower in the last few decades than it was in its peak from 1950 to 1970. So there is, economy-wide, as economists measure total factor productivity, total factor productivity growth has been much lower. And a lot of our social and political problems in the rich world is this slower pace of productivity growth. But like, say, people think, oh, we’re living in the most rapid-changing productivity in all time. It’s like, no, no. It’s very common for non-economists to believe that, but no economist believes that.

DAN KURTZ-PHELAN 

So I think if you’re having these debates about migrant labor in the United States, or Germany, or the UK, or South Korea, or Japan or any other relatively wealthy economy, there are a few different kinds of objections or sources of skepticism. There are, I think, kind of extreme, repellant versions of this, but also somewhat more sensible ones. And let me raise a few of those and have you address them. The first is about native workers. And while it is true that there is a shortage of labor in many of the core skilled jobs, I still think there is a, you know, it’s accurate in many ways that many low-wage workers in the United States haven’t exactly been treated especially well in the last few decades, or are thriving. 

One argument is, look, you’d have plenty of people who would be happy to be home health care aides, if you increase the wages from, you know, $15 an hour to $25 an hour or $30 an hour. There’s an argument that bringing in lots more migrant labor will further depress wages and industries that have already seen wages go down. How do you think about those kinds of objections?

LANT PRITCHETT

So generally, I think the best evidence is that in a flexible labor market, migrants don’t displace native labor because the amount of low skilled labor demand they create by being part of the economy is roughly equivalent to the labor they do. And so the best kind of natural experiment was the Mariel boatlift in the 1980s, where all of a sudden the population, the core skilled or low skilled population of Miami went up by almost seven percent overnight. 

DAN KURTZ-PHELAN 

And this is because a huge number of Cubans were able to leave the island all of a sudden?

LANT PRITCHETT

Yeah, and the beauty of it is that the difficulty of studying the impact of migration on wages, is people move to high wages. So, you know, this is the difficulty of economics, is that since we’re all tied up in a complex system in which human beings are making conscious choices to go here or there, it’s very difficult to parse out the causal effects. So what you kind of want is a natural experiment where people didn’t go to Miami because they just wanted to; they went to Miami because all of a sudden Castro let them. And they went to Miami because it was what was across the water; they didn’t have the choice to go to Minneapolis, right? So, David Card has done a study, which I think has held up very well over time—just finds zero impact on native employment.

And I think part that is really good news. I know sometimes people don’t believe this, that migrants don’t displace native workers. And some part of the reason for that is very good news. The American worker is actually a very productive and highly skilled individual in a global sense. And we always kind of knew that, you know, in economist jargon, substitutes mean I can take one of you and replace it with one of me. Compliments means if there’s more one of me your productivity goes up, not be displaced. So the more different the incremental migrant is from the native worker, the less likely they’re close substitutes. 

So what’s changed is, in the 1920s, the incremental migrant was, in fact, a good substitute for the incremental American, right. And so a lot of the—in the era in which our nativist, very sharply limited immigration policies were established, it probably was the case that incremental migration was bad for native workers. But part of the divergence, big time, that I mentioned before, of the divergence in incomes and skills between the U.S. and other workers, in spite of the convergence and schooling—we can come back to that—is that the typical native, you are not easily substitutable by a core skilled person coming from Haiti. And so the reason why immigrants don’t displace native workers is good news—it’s good news—because mostly American workers have moved up the skills chain. And so who incremental migrants mostly substitute for is previous migrants.

DAN KURTZ-PHELAN 

The other objection that you would hear from, you know, most politicians is a kind of societal or political one, and some would invoke this out of fear, or some out of genuine concern. You cite some research in the piece, noting that, based on surveys of people in countries around the world, 158 million additional migrants want to come to United States today, if given the opportunity—which is a number that I think, if you’re, whether you’re Joe Biden or you’re a different kind of politician in the United States, you would find that rather rather alarming. How do you think about the politics of this? And is there a way that you argue that creating a better system—a better structure that would allow what you call rotational migration—would, in fact, help allay some of those concerns?

LANT PRITCHETT

Yeah, I think a lot of the political challenge is that since the 1920s, when, again, migration restrictions were mostly launched around the world in the aftermath of World War I, we’ve forced two questions to have the same answer. One question is, who is the future citizens? Who’s the future of us? Right, who is the future voters and citizens and society of America, or Germany, or Japan, or France? And the second question is, who are we going to allow to be legally present on our physical territory to perform labor services?

If you force those two questions together, then you’re going to be very reluctant to allow workers to come to do jobs—even if you really need them. Because you’re gonna say, look, we might need home care, you know, we might need more elder care workers, but I’m not going to put the future of the vision of who we are as a people and as a nation and as a society at the at the beck and call of labor demand. Whereas if you separate those two questions, the whole politics changes, right; you say, look, yeah, my view about migration I think tends to make both ends of the political spectrum unhappy, which I take as a virtue.

I’m perfectly happy to say not everyone who doesn’t want to put—you know, there is a sense of nation, and there is a sense of people. And countries have every legitimate reason to protect that. And if the Swiss want to be Swiss, and they want to protect their Swissness; and the Japanese want to be Japanese, and they want to protect the Japanese—that’s not xenophobia. That’s not racism. That’s a legitimate human impulse, and we should acknowledge that. But they don’t have to—if they will say, we’re going to have one set of decisions of who the future of us is, and we’re going to have one set of decisions about who we’re going to allow to be here to work, and those don’t have to have the same answer. In the short and immediate run, I’m not advocating programs that would let the Gulf-style, where you could work from Bangladesh for 40 years in Kuwait, and when you’re done, you’re done, and you haven’t entitled any engagement with the society. 

Having permanent workers present in your society without ever being on a path to citizenship, I think, is very dangerous. But rotational—we do in fact have all kinds of, we acknowledge that all the time, we have all kinds of rotational possibilities. We say, yeah, you know, people want to come and do this in a short term way; let’s allow them to do it without necessarily allowing that legitimate economic need to conflate with our political need to say who’s the future of us.

DAN KURTZ-PHELAN 

You raise what I think is another objection to expanding labor of this kind—and it’s less prominent in political debates in the United States or other rich countries, but I think comes to mind for most people when they hear about this kind of labor. There’s of course the Gulf model, where you have lots of South Asian laborers who are living in camps, and very isolated, and in some cases are kind of indentured servants in a way that some people call modern slavery. There have been reports in the U.S. of child migrant labor being, you know, exploited by bosses of several kinds. How do you ensure that this kind of expansion doesn’t merely result in more of that kind of exploitation?

LANT PRITCHETT

I actually think there’s a good case to be made for the opposite effect, which is, you know, I want more and better labor mobility. And I think with respect to labor mobility, particularly in the U.S., we’re exactly in prohibition. You know, Americans decided to pass a constitutional amendment that banned all sale and import and production of alcohol, and then they learned they really didn’t want to enforce it. And so what you did is you made a perfectly natural—you forced a perfectly natural industry underground. And when you forced it underground, you realized you couldn’t both have it illegal and regulated. 

So I think there’s gains to be had by saying, you know, we are going to have these people who are going to come and work, but we want to do it in a way that’s consistent with our best vision of who we are. And I think the best vision of who we are as an American people—we don’t want child workers, and we want to enforce that. And we don’t want people tricked and defrauded and abused, we want them to be protected. But the way to protect them is to create legal pathways.

And so without the legal pathways, we have forced a huge amount of employment in these industries in the United States off of the books, and by forcing it off the books, it makes it harder to regulate and harder to protect the workers. So as part of the labor mobility partnerships at organizations I work with, we want to think about, how do you construct an industry that does the functions of moving people back and forth well? You know, how do you recruit people fairly? How do you prepare them for the jobs they’re going to do? How do you place them with legitimate workers? How do you protect them while they’re in place? And how do you facilitate compliance with return? Those five functions can be carried out, but we have to acknowledge that it’s an industry, and we have to think of it as an industry of people who move people, and we need to regulate it as an industry. 

DAN KURTZ-PHELAN 

I think most of us in the world of policy, both domestic and foreign, probably spend much less time thinking about demographic trends and the constraints and challenges of demographics than we should. But we have seen in the last few months, demographic constraints leap into the headlines in a way that is not all that common. We’ve seen, of course, in China, the demographic challenges that are going to lead to shrinking populations, and a really disadvantageous ratio of workers to retirees which will make sustaining their economy much more challenging. In France, in recent days, we’ve seen enormous protests against President Macron’s efforts to raise the retirement age from 60 to 64, motivated by—I might have the numbers slightly wrong here—but something like a change from four workers for every retiree to 1.5 or 1.7 or something like that, which creates a huge challenge in sustaining the safety net and the welfare state. 

Do you see anything—you could, you know, discuss demographic challenges in the United States and East Asia, in kind of any developed economy—do you think that the growing awareness of these demographic trends, the constraints they’re going to put on economic and political systems, might change this debate in the years ahead?

LANT PRITCHETT

I am quite confident that that’s going to happen. I have a saying that I go by that isn’t always true, but—what has to happen will happen. Even 20 years ago, there was a prominent demographer, Paul Demeny, who was editor of the Population and Development Review—a Hungarian, wonderful gentleman—he gave this presentation about the implications of aging in Europe. And he pointed out—and this was 20 years ago—he pointed out, there’s only three options: either you increase taxes, you decrease benefits, or you allow a lot more migrants to work and pay taxes to support the current age. Those are arithmetically the only options. All three of them are completely impossible, but one of them has to happen. 

So sometimes I think labor mobility is the least impossible of the three impossibles. And if you watch—I would be pretty sure and I don’t follow this as a specialist, but going from 62 to 64 is a tiny little fraction of what you would have to do to really address—and France, by the way, is one of the most demographically stable European countries. So France is facing in some sense less demographic pressures because their fall in fertility happened a very long time ago compared to, say, Eastern Europe or Italy, that have had much more rapid falls and demography facing much higher pressures. But if you look, you know—you’re just a hair’s breadth from bringing down the government over moving from 62 to 64. It’s really going to be impossible to cut benefits in the social contract that we’ve developed, and which we all benefit from and are all in favor. You know, taxes around the OECD are at 40 to 45 to 50 percent already. And so, you know, the scope for incremental taxation, tax rates in Europe fundamentally haven’t, as a percent of GDP, haven’t gone up in 20 or 30 years because I think they’ve reached a quite high level, it’s hard to tax more of that. So it’s all I can say there’s one of three things arithmetically has to happen.

And of those three, migration might sound politically impossible, but it’s—if handled well, and if you separate it out from the challenge of we’re selling the soul of our nation state in order to meet our labor needs, and acknowledge sophisticated conversation of the different types of ways in which people are allowed to be on our sovereign territory—I think it’s the least impossible. Which isn’t to say it’s easy, but I think it’s the least impossible.

DAN KURTZ-PHELAN 

That is a good note to end on, Lant. Thanks for the wonderful essay in the current issue. And thanks for joining us today. 

LANT PRITCHETT

Thanks for having me. It was fun.