Wednesday, July 23rd, 2008...11:56 pm
Immigration: Better Than a Bolivian Degree Financed with Microcredit
What’s the largest form of wage discrimination in the world today? To answer that question, Lant Pritchett, Michael Clemens, and Claudio Montenegro have compiled this handy chart for you:
Wage gaps between observably identical Nigerian workers in the United States and Nigerian workers in Nigeria (same gender, education, work experience, etc) are… considerable. They swamp the wage gaps between men and women in the US. They swamp the gaps between whites and blacks in the US. Actually, they swamp the wage gaps between whites and blacks in the United States in 1855. For several countries, the effect of border restrictions on the wages of workers of equal productivity “is greater than any form of wage discrimination (gender, race, or ethnicity) that has ever been measured.” The labor protectionism that keeps poor workers out of rich countries upholds one of the largest remaining price distortions in any global market.
Who cares? You weren’t planning on seeking employment in Nigeria anyway. The upshot is that even a very limited loosening of borders could do enormous, immediate good. No other poverty alleviation policy–microcredit, education, public health interventions, anti-sweatshop activism–compares with a work visa, even a temporary one. The Pritchettarians do the math:
- “Simply allowing one member of a Bangladeshi household to work in the US for one month (for a gain of US$835 in present value) brings a larger increase in earnings to that household than a lifetime of microcredit (for a gain of US$683 in present value).”
- “The cumulative lifetime effect of the anti-sweatshop movement on an Indonesian worker’s earnings could be earned if that person had the chance to work in the US once for a period of about 30 weeks.”
- “An additional year of schooling [in Bolovia] is associated with an annual wage gain of $205. The net present value of a lifetime of such additional payments is about $2250.35 which is about 21% of the annual wage gain to a Bolivian working in the US.”
The paper is here. Another classic Pritchett chart can be viewed here.
Via Chris Blattman.
9 Comments
July 24th, 2008 at 6:48 am
Don’t you really have to analyze this gap at the ROI level? It costs money for, say, a Nigerian worker to transport herself to the US and domicile there, even if there are zero immigration controls. During the time in transit she’s probably out of work in Nigeria itself. That’s completely leaving aside non-monetary costs like homesickness. (About which I do not joke: it seems obvious that there’d be a lot more migration in the world except for deep personal attachments to familiar places.)
So I don’t doubt at all that a Nigerian worker who comes to the US will probably be ahead economically. But I wonder what the earnout period is.
July 28th, 2008 at 12:11 am
The physical and mental costs associated with homesickness, I have to assume, would be at least cancelled out by the improved standard of living for the time the Nigerian worker stayed in the U.S.
The ROI may be significant (though I think relatively insignificant) for manual laborers; but, since the wage gaps are standardized, you can’t assume all the workers are of that type. Professionals could acquire assets and access investments that negate or more the ROI adjusted wage gap.
July 28th, 2008 at 3:24 am
This is sort of a silly analysis. Of course it is beneficial for someone in an impoverished nation to come and work in a wealthy one. That’s of secondary concern… what is important is whether or not it’s a good trade for both the immigrant AND the host nation/employer. If the answer is yes then it is a rational and truly capitalistic exchange that would and should willingly be made… however if the answer is no then it’s just charity on the part of the host nation/employer. There is more to immigration than just money after all.
July 29th, 2008 at 1:17 pm
[…] experience simply from the chance of being born in the wrong country are extreme. Kerry Howley comments on a new Lant Pritchett paper which finds that wage gaps between otherwise equivalent workers living […]
July 31st, 2008 at 10:17 am
Why do you “have to assume” this?
July 31st, 2008 at 10:22 am
Jim,
Pritchett and Clemens are extremely careful to include the costs of adjustment to a new country into their calculations. It’s a long paper and the vast majority is an attempt to make sure that the above represents wage discrimination due to borders and not to the constraints you’re talking about. Had they not done so, the ratios would be far more extreme. Skim the paper, it’s fascinating!
July 31st, 2008 at 12:09 pm
That’s exactly the kind of info I was looking for, Kerry. Thanks.
August 4th, 2008 at 11:28 am
Dear Kerry,
My name is ClaudiO y no ClaudiA, which is the feminin in Spanish.
Thank you!
Claudio.
August 4th, 2008 at 12:13 pm
Oh no! I hate when people do that to me. Sorry, Claudio.
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