Migration and Human Rights (42): The Labor Cost Argument Against Open Borders

I’ve argued many times before against the popular view that increased immigration is detrimental to native employment and income. The simple argument about an increase in supply of cheap labor driving down wages and forcing expensive native workers out of the job market is just that: simple, too simple. There’s even evidence that the opposite is true: immigration increases native wages (because it allows native workers to move up the pay scale). But even if immigration did impose a cost on the host country, that wouldn’t be the final argument against immigration, since such a cost could be seen as a form of global redistribution and global justice: improving the lot of the poorest of the world surely justifies imposing a burden on those who have more wealth and who had the good fortune of being born in the “right” part of the world. True, this burden shouldn’t fall on the poorest members of the “right” countries, but if it does that can be corrected by national redistribution.

Still, let’s return to the labor cost argument against immigration. Here’s another piece of evidence that tips the scales yet a bit further against the view that the extremely low cost of immigrant labor results in displacement of low-level native labor. The evidence I want to cite is about internal migration in China, but it’s perfectly possible to use it against arguments favoring restrictions on international migration:

Hundreds of millions of rural migrants have moved into Chinese cities since the early 1990s contributing greatly to economic growth, yet, they are often blamed for reducing urban ‘native’ workers’ employment opportunities, suppressing their wages and increasing pressure on infrastructure and other public facilities. This paper examines the causal relationship between rural-urban migration and urban native workers’ labour market outcomes in Chinese cities. After controlling for the endogeneity problem our results show that rural migrants in urban China have modest positive or zero effects on the average employment and insignificant impact on earnings of urban workers. When we examine the impact on unskilled labours we once again find it to be positive and insignificant. We conjecture that the reason for the lack of adverse effects is due partially to the labour market segregation between the migrants and urban natives, and partially due to the complementarities between the two groups of workers. Further investigation reveals that the increase in migrant inflow is related to the demand expansion and that if the economic growth continues, elimination of labour market segregation may not necessarily lead to an adverse impact of migration on urban native labour market outcomes. (source, source)

More posts about arguments against open borders are here, here and here. More posts in this blog series are here.

Economic Human Rights (42): Some Facts About Welfare in the U.S.

Welfare – meaning the provision by the government of a minimum level of material wellbeing and social support for all citizens – is a strange thing in the U.S.: it’s not directed mainly at the poor, it’s underfunded, it seems to be compatible with a high poverty rate, and it’s not colorblind – at least not in its effects.

Take a look at the following facts (source):

  • In 2010, nearly half of Americans lived in a household that received direct government benefits. That’s up from 37.7% in 1998.
  • At the same time, government revenues have been declining: adjusted for inflation, federal tax revenue was the same in 2009 as it was 1997, even though the U.S. population grew by 37 million during that period. In 2011, the federal government took in $2.3 trillion in tax revenue, and spent the exact same amount on military, Social Security, Medicare, and Medicaid alone.
  • The share of entitlements like Social Security and Medicare going to the bottom fifth of households (based on income) has fallen from 54% in 1979 to 36% in 2007.
  • The result of all of this: nearly 1 in 6 Americans – and more than 1 in 4 blacks – still live in poverty. The unemployment rate in 2009 was around 10% – for young, uneducated African-American males it was even 48.5%.

None of this should lead to the conclusion that the U.S. welfare system is completely dysfunctional – unemployment insurance, for instance, has rescued millions of Americans from poverty during the last recession. What it should lead to is serious consideration of the possibility and desirability of a completely new system.

More posts in this series are here.

Economic Human Rights (41): Unemployment, a Cost-Benefit Analysis

Unemployment is a violation of an individual’s right to work. It stunts her creativity and diminishes her wellbeing, in a material, moral and psychological sense, in many cases even pushing her into poverty, ill health and depression.

For a person with no pre-existing health conditions, losing one’s job increased the chances of reporting a new health problem by 83 percent. Overall, the newly unemployed had a 54 percent chance of reporting fair or poor health. (source, source)

Unemployment is also self-perpetuating because it makes it harder to find a new job – employers prefer candidates who already have a job. In addition, it depresses wage levels, even decades after the end of a spell of unemployment.

Needless to say, these costs don’t affect only the unemployed themselves. Their families and children also suffer:

We find that a parental job loss increases the probability of children’s grade retention by 0.8 percentage points, or around 15 percent. After conditioning on child fixed effects, there is no evidence of significantly increased grade retention prior to the job loss, suggesting a causal link between the parental employment shock and children’s academic difficulties. These effects are concentrated among children whose parents have a high school education or less. (source)

And the ripple effect of unemployment covers the whole of society. Unemployment has a social cost: above and beyond the fiscal pressure – unemployment benefits have to be paid, either through increased taxes or cuts in other public services – it deprives society of valuable input and human ingenuity.

Still, all these costs should not blind us to the real benefits that unemployment can bring. And I’m not talking about those few individuals who are “liberated” from their mind numbing jobs and take the chance offered by unemployment to start a successful business doing something they always wanted to do but never had the chance or guts to do. Neither am I referring to kidults reveling in “funemployment”, staying with their parents well into their twenties or beyond, and taking the opportunity to prolong their childhood. Those are not the majority of the unemployed.

However, some among the majority may also find a silver lining. Maybe unemployment makes them less materialistic and more financially prudent; maybe some of them will use their free time to volunteer and educate themselves; society may become humbler and gentler; maybe concerns for social justice become more prevalent since the unemployed, ex-unemployed and their friends and families have become more conscious of the role of luck in life’s outcomes, as compared to the limited role of desert. Some health indicators may improve:

Interestingly, though high-stress events such as foreclosures and unemployment may hurt the health of those directly impacted, there’s some evidence that recessions have a positive impact on a nation’s health overall. In 2000, Christopher Ruhm, an economist at the University of North Carolina at Greensboro, found that a 1 percent rise in a state’s unemployment rate led to a 0.6 percent decrease in total mortality, looking at mortality changes in the United States between 1972 and 1991. … economic downturns could improve health through “declines in smoking, excessive alcohol consumption and overeating during recessions as people look for ways to save money.” (source)

Of course, there’s no way these benefits cancel out all of the costs. Unemployment is a scourge and a human rights violation, and capitalism doesn’t do itself any favors by maintaining and temporarily inflating its “industrial reserve army“.

More on the human cost of unemployment is here and here.

Migration and Human Rights (36): The Social Security Argument Against Open Borders

If there’s one Milton Friedman quote that’s repeated far too often it’s the following: “You cannot simultaneously have free immigration and a welfare state”. The income of relatively rich people in many poor countries pales in comparison to what the poor, unemployed, sick, young and elderly in rich countries get from welfare and social security transfers. Hence, the argument goes, opening borders and eliminating immigration restrictions would cause massive flows of people to those rich countries. Perhaps some of these people would come in the hope of finding a good job, but at the same time they have the certainty that, if they fail, they will enjoy generous social protection. And all the rest will come just for the benefits.

The problem, some say, is that rich countries can’t afford large increases in the numbers of welfare beneficiaries, and that they therefore must limit immigration. Open borders are only feasible when global poverty has been solved and income levels are more or less comparable across countries. Or, when rich countries would decide, unrealistically, to eliminate their welfare systems or at least coldheartedly decide to exclude all immigrants from welfare.

However, immigrants in the U.S. use welfare at lower rates than natives and have higher rates of labor force participation. In the U.K., immigrants represent about 13% of all workers, but only 7% percent of unemployment benefits (source).

Anyway, even if we assume that open borders will be a net negative for western welfare systems, there’s no need to limit the options to the stark choice between welfare and open borders. We could, for example, give immigrants access to labor markets but only limited access to unemployment benefits, or we could delay their benefits, demanding that they first contribute to the system during a number of years (something which might actually strengthen the system). However, we’d have to be careful and not create inequality, discrimination and a class society.

Or we could decide to grant immigrants full access to welfare because we believe that global inequality should be reduced. Access to welfare would then be a kind a development aid.

And, finally, it’s possible to view matters from an entirely different angle. Large chunks of welfare transfers go to the elderly. Given the demographic evolutions in many rich countries, it may be that immigration will be the only way for aging countries to sustain their welfare states.

Discrimination (7): Statistical Discrimination v. Background Checks?

Employers often use background checks before deciding to hire someone. For example, they may check the criminal record of job candidates, their credit scores, health history etc. It’s somewhat understandable although not always acceptable that they are reluctant to hire someone who has been in jail, has been sick for a long time, or has proven to be undisciplined by not paying her bills.

Let’s focus on ex-convicts for the moment. These people have a hard time as it is, sometimes even for no good reason because they shouldn’t have been incarcerated in the first place (I argued here that many countries, and especially the U.S., put too many people in jail). So, allowing employers to use criminal background checks can force ex-convicts into a vicious circle: unable to find a job, they may be forced to go back to crime.

Furthermore, there’s a racial aspect to all of this: in the U.S., African Americans are more likely to be ex-convicts. According to some, this racial discrepancy is precisely the reason to allow criminal background checks. If employers aren’t allowed to check individual candidates, they will resort to statistical discrimination: they know that blacks are more likely to have a criminal record and so they won’t hire any blacks at all, just to be safe.

However, if you espouse this argument in favor of background checks, you essentially want to make things better for one disadvantaged group – blacks, who are generally disadvantaged in employment – by making things worse for an even more disadvantaged group, namely ex-convicts. And that’s assuming that employers will hire more black people if they can use criminal background checks; but assuming that means assuming there’s no racism. Helping a disadvantaged group by harming an even more disadvantaged group is plainly absurd, and you can only fail to see that it’s absurd if you have an overriding fear of government regulation. Regulation should be kept in check but not at any price. I think in this case regulating businesses and outlawing background checks is the appropriate thing to do.

Let’s turn briefly to another type of background check: credit scores.

[M]illions of Americans, as a direct consequence of looking for work, have lower credit scores. … The use of credit checks in employment decisions should be banned. It is a form of discrimination against the poor — the codification and enforcement of class barriers. It is therefore a form of discrimination against those groups more likely to be poor. (source)

It seems there’s a

growing tendency of HR departments to check the credit scores of potential employees apparently deeming this data to be an important predictor of employee behavior. This creates a Catch-22 scenario for the unemployed where you can’t improve your credit score unless you get a job and you can’t get a job until you improve your credit score. (source)

Apart from the obvious fact that credit scores seem to be a type of knowledge that is much less useful for an employer compared to a criminal record – if your house burned down and your credit score is low as a result, does that make you a bad employee? – there’s a real issue for the poor here. They shouldn’t be discriminated against just for being poor. It’s not just a lack of conscientiousness or discipline that can lower your credit score. Back luck and poverty won’t help either. Some say the free market and competition will take care of this: employers stupid enough not to hire good poor people simply because they have a credit problem will lose out. Their competitors who don’t engage in credit checks will hire them, and those businesses will acquire a commercial advantage. I don’t know. Seems awfully optimistic to me.

Racism (13b): Race and Employment

In the U.S., and probably elsewhere as well, there’s a large discrepancy between the unemployment rates for people of different races. The easy answer is “racism!”, but that may be a bit too easy. Some of the discrepancy can be explained by education levels. However, perhaps it’s those discrepancies in education levels that are caused by racism and discrimination, at least in part. I personally believe that the discrepancies in unemployment rates have many causes, and that racism is definitely one of them. I’m just not sure about the particular weight we should accord it.

There’s a lot of evidence of racism in the behavior of employers and recruiters. For instance, there’s substantial empirical proof that someone’s race can make it less likely to be called back for a job interview. In fact, black men without a criminal record are less likely to be called back for a job interview than white men with a criminal record. This has to have an impact on employment rates by race, which in turn has an impact on different poverty rates by race.

Some more evidence of discrimination in employment decisions is here:

White, Asian and Hispanic managers tend to hire more whites and fewer blacks than black managers do, according to a new study out of the University of Miami School of Business Administration. Using more than two years of personnel data from a large U.S. retail chain, the study found that when a black manager in a typical store is replaced by a white, Asian or Hispanic manager, the share of newly hired blacks falls from 21 to 17 percent, and the share of whites hired rises from 60 to 64 percent. The effect is even stronger for stores located in the South, where the replacement of a black manager causes the share of newly hired blacks to fall from 29 to 21 percent. … The finding is clear evidence that the race or ethnicity of those who make hiring decisions can have a strong impact in the racial makeup of a company’s workforce. (source)

Given the setup of the study, the racial discrepancies can’t be explained by demographics. You could assume that managers may not be motivated by racism but just anticipate the racism of their customers: they want to hire people of the same race as the majority of their customers because they believe that customers have racial preferences – or are racist – and prefer to be served by people of their own race. However, the customer population of a store doesn’t normally change when there’s a new manager. Hence, the change in recruitment policy by the new managers can’t be explained by customer demographics.

Another possible explanation is that managers, rather than being racist themselves, recruit in a racially biased way because they anticipate the racism of their existing employees: black managers hire fewer whites because they believe whites may be less willing to work for black managers. Or vice versa. And indeed:

The study found that when a white manager is replaced with a black manager, the rate at which white workers quit their jobs increases by 15 percent. “We interpret this increase in the white quit rate as evidence of discriminatory sorting by white job seekers,” the authors write. “It implies that whites who dislike working for black managers often avoid working for black managers in the first place.” (source)

More on racism is here.

Economic Human Rights (35): A Right to Unemployment Insurance?

Article 23 of the Universal Declaration of Human Rights provides a right to work, as well as a right to “free choice of employment and to just and favorable conditions of work”. That right protects us against slavery, forced labor, unfair wages, and unsafe working conditions. The same article offers a right “to protection against unemployment”. That clause can be interpreted in two ways:

  • it can mean that if we’re out of work through no choice of our own, we should get help to find work (either from the state or from our fellow citizens)
  • or it can mean that if we’re involuntarily unemployed, we should get some monetary compensation for the loss of salary or income and the financial stress that we suffer as a result.

It’s the latter interpretation that is made more explicit in another article, number 25, of the Declaration which mentions “the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control”.

So it seems we have a right to unemployment insurance or unemployment benefits. The obvious justification for this right is material wellbeing: the absence of poverty is also a right.

However, there are some other types of justification of unemployment insurance. Some call UI an “automatic stabilizer” in times of economic hardship: Keynes taught us that both unemployment and falling wages lower consumer demand and can lead to even greater unemployment. Stingy or absent unemployment benefits lower demand even more. In that view, which does sound plausible, unemployment insurance isn’t just a good in itself and for the individuals concerned (as well as for those who may someday suffer unemployment and who can suffer some amount of stress because of the risk), but is necessary for the periodic regeneration of capitalism and for the smoothing of the business cycle. Benefits are also efficiency enhancing because of another reason:

One of the possible advantages that is touted for more generous UI (including by Mike Konczal) is the idea that it allows for better job matching—people can wait to find the right long-term job opportunity instead of taking the first job that becomes available. (source)

It’s better to have people perform the jobs they prefer because they’re likely to be most efficient there. Hence, it’s better to give them more time to find the right job, and to give them unemployment benefits so that they have the time.

Others, however, call this right a foolish invention because it destroys incentives to work at the level of individuals, and reduces incentives to create wealth at the level of companies (because of the relatively high tax rates that come with the welfare state, that in turn comes with benefits such as unemployment insurance). It doesn’t enhance efficiency at all, on the contrary. But the evidence for this view is not so strong:

Evidence suggests that individuals do prolong their job search when they receive unemployment benefits, partly because they are looking for the best possible job. But the magnitude of this effect is likely to be small.

A recent study … compared lengths of unemployment among those eligible for unemployment insurance with those who were not eligible. Their statistical analysis suggests that extended benefits accounted for only four-tenths of 1 percentage point of the nearly 6 percentage point increase in the national unemployment rate over the last few years. (source)

Still others call the right to unemployment benefits a foolish invention, not because of reasons that have to do with overall economic efficiency, but because they believe that the unemployed have no one else to blame but themselves for their misfortune, and therefore can’t demand help from others. Those others can voluntarily decide to help the unemployed, in a spirit of charity that extends even to self-inflicted misfortune, but the unemployed don’t have a right based on moral concerns to demand such help. And indeed, there may be some logic to such a view: if we all believe strongly that we deserve what happens to us, we are likely to work hard, show discipline and self-control and hence achieve success. Conversely, those who think that the causes of their misfortune are always outside of their control, are not likely to invest much effort in their lives. However, morality and life are much more complicated than that. The best efforts can lead to disaster, and apathy can lead to success. People who are not the sole authors of their success can be required to help those who are not the sole authors of their misfortune.

The Ethics of Human Rights (29): Should Taxation Be a Tool For Economic Efficiency or For Social Justice?

Taxation is a recurring theme in political discussions between people of the left and right. People of the left see taxation as a tool for social justice. They tend to prefer rather high taxation rates and a progressive taxation system:

  • High taxation rates bring in revenues that are large enough to enable the government to spend on programs and transfers that are designed to promote social justice: unemployment benefits, poverty reduction policies, education, healthcare etc.
  • Progressive taxation rates are just because they impose relatively (and not just absolutely) higher taxes on people who are more able to pay, and, in addition, reduce income inequality and hence realize another goal of social justice.

People on the right usually favor low tax rates and a non-progressive taxation system (either a proportional system in which everyone pays the same share of their income, or a regressive system in which everyone pays more or less the same amount in taxes). Rather than on social justice, they focus on the economic effects of taxation.

  • They reject high taxation rates because they claim that these high rates discourage people and are a disincentive to hard work, effort and investment. Because high rates limit effort and investment, they also limit productivity, innovation, international competitiveness and job creation.
  • They also reject progressive tax rates because high tax rates for high incomes discourage those people who work relatively hard (they work hard supposedly because they earn a lot) and who are most likely to innovate, to be productive and competitive and to create jobs.
  • However, they don’t necessarily favor regressive taxes because they are equally hostile to high tax rates for low income people, albeit for other reasons. High taxes for low income people discourage them from entering the labor market and hence inflate unemployment. Still, they claim that the worst damage is done by high taxes on the higher incomes, which is the reason they reserve particular scorn for progressive taxation systems. Because high tax rates for the wealthy punish the most productive elements in a society, the whole of society suffers. More productive people will limit their productivity because they don’t want to fall into a higher tax bracket, and the money they pay in taxes can’t be invested in the economy. High tax rates, especially for the rich, have an unacceptable cost in terms of economic efficiency. Keeping taxes low, on the contrary, and allowing wealthy people to use their money in the economy, will ultimately benefit everyone (this is the so-called Trickle-Down theory).

Of course, this distinction between left and right is a caricature. Most people on the left are also concerned about economic efficiency, and most on the right are not insensitive to questions of social justice. The extremes are hardly ever encountered in real life: no one wants to limit taxes to such an extent that economic efficiency is promoted but no money is left for justice, and no one wants to put tax rates at such a high level that there is ultimately no more economy to tax. (The latter concern is expressed in the famous Laffer Curve arguing that beyond a certain level of tax rates government revenues in fact decrease instead of increase. At very high rates there is no longer any incentive for a rational taxpayer to earn any income and hence tax revenues will decline while tax rates increase. However, it isn’t clear what “very” in the previous sentence actually means and where exactly the tipping point is situated).

Personally, I believe that the concerns of both right and left are justified and need to be balanced, and that too much focus on either the element of efficiency or justice is detrimental to the other element. On the one hand, there’s only so much money a government can raise without wrecking the economy, and justice isn’t only about spending money (there can even be perverse effects such as unemployment traps, welfare dependency etc.). On the other hand, there’s only so much an efficient economy can do to realize social justice all by itself and quasi-automatically (remember the invisible hand…). To quote Matthew Yglesias’ sarcastic comment on the skyrocketing incomes of the U.S. top 400 earners in the decades leading up to the 2009 recession:

As is well-known, the Top 400 are considerably more talented than the rest of us. And [the] decline in their tax rates has created exciting new incentives for them to apply their talents. And that, in turn, is why the 2000s were a so much more economically successful decade than the 1990s, not just for the Top 400 but for the rest of us as well. Thanks to their skyrocketing incomes and falling tax rates, we’re currently [during the 2008-2009 recession, FS] all enjoying the fruits of prosperity, rapid growth, and low unemployment. Thanks rich guys! (source)

A similar sentiment is expressed in this clip from the Daily Show (skip to the 4th minute or so).

I believe taxes in the U.S. are relatively low and can be raised without too much harm to economic efficiency. The resulting government revenues could then be spent on improving the social safety net and promoting social justice. It’s difficult to imagine for a European that a country such as the U.S. doesn’t offer health insurance to millions of its citizens. Also, unemployment benefits are quite stingy in the U.S., both in terms of eligibility and duration: only one third of the unemployed qualify for benefits and only for 26 weeks (extendable during recessions if the Republicans don’t object, as they infamously did beginning of 2010).

The system of unemployment benefits could easily be improved without perverse effects or harm to economic efficiency. And there are other areas of possible improvement as well.

However, as a European in Europe, I think there’s a strong argument that the social safety net in Europe (at least in some countries) has harmed European competitiveness, labor market participation and innovation.

Still, is there evidence of this? What do the data say about high tax rates harming economic efficiency, in Europe and in general? Is the conservative case against taxes as strong as it seems? I’m afraid not. There’s some evidence that the effect of reasonably rather than extremely high rates on economic efficiency is minimal at best. Here’s more evidence from Lane Kenworthy about the U.S. and other affluent countries (always keeping in mind that correlation doesn’t imply causation and that the absence of a large negative effect of high taxes doesn’t preclude the possibility that lower taxes would have had a large positive effect). One measure of economic efficiency is economic growth. If we plot economic growth rates for the U.S. against tax rates for the wealthy we see that higher tax rates lead to more growth. But of course there can be catch-up effect: higher rates producing their effects only years later. That’s taken into account in these graphs, which also show that an international comparison doesn’t prove that countries with higher tax rates have lower growth.

If we have a look at the data about the effect of high tax rates on unemployment (another conservative concern), we also see that we shouldn’t panic about taxes.

Now, if there is no good reason not to tax at a moderately high level, based on concerns about economic efficiency, the question remains whether there is a good reason to tax based on social justice reasons. Given the caveat that social justice isn’t all about government spending (I argued <a href="http://here that it is primarily about something else) and that such spending can in some cases have perverse effects (see above), I do believe that some spending is necessary in some cases, and that relatively high tax rates are necessary to produce the revenues required for this spending.

Again following Kenworthy, I believe that relatively high tax rates are acceptable and even necessary to create the revenues required for social justice policies, but that progressive tax rates in themselves don’t do the job of reducing income inequality, contrary to what is often claimed as a justification for progressive rates. That doesn’t mean that we shouldn’t reduce income inequality (it’s quite high in the U.S.) – there are good reasons to try. It just means that progressive taxation in itself won’t do the job. The important thing is to have high tax revenues which can then be spent in transfers and services that reduce income inequality and achieve other goals of social justice. Yet, I still think a progressive system is required, not because of its supposed effects but simply because it is just in itself, compared to proportional or regressive systems. A person with more income can afford to pay, not merely more in an absolute sense but more in the sense of a larger share of his or her income.

The Ethics of Human Rights (27): The Human Rights of Future Generations and Poverty

I’ve argued many times before that poverty is a human rights issue, so I won’t do that again. For those who are not convinced, just assume arguendo that I am right, otherwise the rest of this post won’t make a lot of sense. I’ve also presented my views on the types of duties produced by the human right not to suffer poverty, and on the moral agents that carry those duties: is it a face-to-face thing, or does the government have a role to play by way of redistribution and the welfare state? Etc. You can read about this here and here for instance, so that’s something else I won’t repeat.

I do believe the welfare state is an important institution because it can fill the gap left by deficient private charity. But my view is that private charity should come first and should be promoted. The welfare state should be a fallback option rather than the starting point. So I guess I don’t think it’s as important as people from the left usually think it is. In order to bolster my view, I can point to some problems with the welfare state. In fact, it can be argued that the welfare state is another case of a self-defeating human rights policy, in the sense that it reduces poverty but at the same time produces poverty. Tyler Cowen, in a very interesting paper, has argued that while the welfare state does indeed reduce the levels of poverty of those people currently living (at least if we focus on the level of the state and forget the global impact of the operation of a welfare state in a particular country), it also has a negative impact on the poverty of future generations.

The argument goes as follows. It’s reasonable to accept that economic growth lifts people out of poverty and that the welfare state lowers the rate of economic growth, perhaps not by much annually but small reductions of economic growth over several years may amount to a large cumulative reduction. Now, how does the welfare state lower the rates of economic growth? There are at least four effects:

[1] A welfare state will cause some people to substitute welfare dependency for private work, thus lowering the number of individuals in the active work force or causing them to work less hard. … The poor could be engaging in more productive exchange with other individuals in the economy, but to some extent they desist, for fear of losing welfare benefits. …

[2] The taxes used to support the welfare state discourage taxpayers from working or otherwise creating economic value. …

[3] The extensive welfare states of Western Europe typically are bundled with labor market protections and interventions. It is not politically or economically feasible to give the non-working significantly more risk protection than the working. Western European welfare states therefore tend to create a privileged class of working “insiders,” with high real wages, high benefits, and near-guaranteed positions of employment. This practice, of course, lowers the number of new jobs that are created, limits labor market mobility, and raises unemployment.

[4] [The welfare state] causes the economy to develop new technologies and new ideas at a slower rate. … A welfare state will plausibly have a negative effect on innovation. By withdrawing individual labor from the productive sector of the economy, the rate of discovery is likely to fall. Both the poor and the taxpaying non-poor will work less when a welfare state is in place [see 1 and 2 above]. If we think of research and development, broadly construed, as one kind of work, we can expect the rate of growth to decline. Even if the poor do not participate in ideas production directly, they do so indirectly. To provide a simple example, to the extent it is harder or more costly to hire good janitors, and other forms of cheap labor, fewer research laboratories will be opened. … The welfare state permanently discourages various individuals from contributing to technological development and thus lowers the rate of economic growth in lasting fashion. (source)

One can argue about the importance or even the existence of these four effects, and there may even be counter-effects (welfare recipients may move in the underground economy, unemployment may lead to better parenting and hence better education etc.). But even if the effects are small, it’s sufficient to spread them towards the very long term future in order to produce a lowering of the economic growth rate and an increase in future poverty. Given that the future contains an infinitely large population, the welfare state will always produce more poverty than it eliminates (given that the current population and hence also the current poor are a limited number). That would mean that the concept of the welfare state is doomed. And if that’s the case, it would seem I have proven too much (I merely wanted to buttress my argument that the welfare state should come second, after private philanthropy).

However, I don’t think it’s obvious that we should value the rights of future people the same way as the rights of existing people. After all, these future people may never come into existence. If we try to protect their welfare by giving up the welfare state, we will harm real people for the rights of people who may never exist. Furthermore, the future may bring a novel solution to the poverty problem.

Income Inequality (20): Social Mobility in Anglo-Saxon Economies

I know that talking about national or international economic models should be avoided because it’s highly simplistic, but I’ll do it anyway because I want to show that people who do sincerely talk about such models make some assumptions about them that are, in my view, incorrect. The Anglo-Saxon economic model, when compared to the mainland European model, is believed to focus more on individual responsibility than on social support. It imposes lower taxes and delivers a less developed social safety net. It’s more “liberal” (in the European sense of the word, meaning less social) and free market oriented. (Anglo-Saxon means English-speaking countries such as the United Kingdom, the United States etc. but there are large differences between the UK and the US, the UK being less “Anglo-Saxon” than the US; and some mainland countries – like some Eastern European countries – are more “Anglo-Saxon” than they are “mainland”. This goes to show that we’re being simplistic; see also here).

The mainland model is often believed to be better at poverty reduction, job security, social services, and income equality. The Anglo-Saxon model on the other hand is said to be more flexible, less state dependent and more competitive (because of lower taxes and less labor regulation) and suffers less unemployment (because of the less generous social safety net; see also here).

For the same reasons, the Anglo-Saxon model is also believed to be less equal and more open to social mobility – social mobility being defined as the difference between the socioeconomic status of parents and the status their children will attain as adults. When the focus is on individual responsibility and when people can keep a larger share of their income after taxes, they are incited to do well, to work hard, to develop their talents, and to innovate. This not only creates a more competitive economy, but also one in which people can be socially mobile and rise in status and wealth. Countries that impose high taxes and offer generous safety nets don’t give the same incentives.

However, we see that the UK and the US aren’t characterized by relatively high levels of social mobility:

A father’s income determines his son’s to a greater extent in Britain than in any other wealthy nation, with half of a high earner’s “economic advantage” being transmitted to their children, a study by the Organisation for Economic Co-operation and Development has found. … In Britain … background determines a person’s success to a far higher degree than in almost any other rich country. “Education is not as important for social mobility in Britain as for other countries. Class, to be honest, is the most likely explanation,” said Romain Duval, head of division in the Paris-based OECD’s economics department. (source)

Something similar is the case for the US.

It appears that the United States has less intergenerational social mobility than many other industrialized countries. (source)

It’s true that the UK and the US (especially the US) are highly inegalitarian, and increasingly so, but high levels of income inequality do not necessarily go hand in hand with high levels of social mobility. In fact,

social mobility between generations tends to be lower in more unequal societies. (source)

So if you care about social mobility – and I think you should because high levels of social mobility indicate equality of opportunity, something no one objects to – then you should care about reducing inequality rather than promoting it through “Anglo-Saxon” tax and welfare systems (to the extent that there is something like it in the real world).

Racism (11): Race and Employment, Ctd.

This study shows that black men without a criminal record are less likely to be called back for a job interview than white men with a criminal record.

These data were collected during an experiment in which different testers applied for the same jobs advertised in newspapers. The testers had fake credentials that made them equivalent in terms of education, job experience, and so on. The testers were either black and white. Some testers from each group were instructed to indicate that they had a past non-criminal drug possession offense. The data would undoubtedly have shown an even more dismal picture had the testers faked a record for a property or violent crime.

Whites with a criminal record are more than 3 times more likely to get a callback than blacks with a criminal record.

Terrorism and Human Rights (26): Is Terrorism Caused by Unemployment?

Some time ago, I linked to a paper claiming that poverty and lack of education do not, contrary to common belief, contribute to terrorism. If this claim is correct, then it has major implications for counter-terrorism efforts. There’s another paper here making a similar claim, looking at the correlation between violent insurgencies and levels of unemployment, specifically in Iraq and the Philippines. One often assumes that unemployment and the economic and social alienation resulting from it, are elements causing or facilitating political violence, and that efforts to promote employment can have a beneficial effect on social cohesion and political loyalty. The unemployed are believed to have the mindset (frustration etc.), the time and the opportunity to radicalize and be radicalized, whereas people who are employed have a lot to lose, economically, from political instability. Positively stated,

insurgency is a low-skill occupation so that creating jobs for the marginal unemployed reduces the pool of potential recruits.

However, the authors find

a robust negative correlation between unemployment and attacks against government and allied forces and no significant relationship between unemployment and the rate of insurgent attacks that kill civilians. … The negative correlation of unemployment with violence indicates that aid and development efforts that seek to enhance political stability through short-term job creation programs may well be misguided.

Some of the reasons given in the paper in order to explain this negative correlation are:

  • Counter-insurgency forces usually spend money to buy intelligence from the general population. More unemployment means that the available money can buy more intelligence, hence bring levels of violence down.
  • Insurgents also need to live. If there’s a lot of unemployment, they need to spend more time on basic survival and hence can spend less time on violence.
  • Efforts to enhance security—establishing checkpoints and the like—damage the economy.
  • etc.

The paper deals only with two countries, neither of which is perhaps a very typical case. Moreover, cross-border terrorism doesn’t seem to fit well into the analysis. But still, the findings are interesting.

Types of Human Rights Violations (4): Boomerang Human Rights Violations

We usually see human rights violations are zero-sum: a rights violation is a harm inflicted by one person on another, for the benefit of the former. I mentioned before that this isn’t always the correct way of viewing rights violations, but it’s adequate in most cases. One case in which it’s only superficially adequate is what I would call the boomerang human rights violation: you think that violating someone’s rights may produce some benefit for you, and it does so initially, but the actual and final results mean that you become worse off. There’s the obvious and uninteresting example of the dictator using extreme oppression and causing revolt, but here are some other, more intriguing examples. The first one has to do with the right to work.

Gene Marks is … a small business owner (he sells customer relationship management tools), who is attempting to speak to other small business owners, all of whom, presumably, are also delighted that the potential hiring pool is so chock full of talent desperate to be exploited right now. But one wonders who exactly is supposed to purchase all those products and services from the small businesses of the world, if unemployment creeps up to the 10 percent mark or higher? High unemployment means low consumer demand. Which usually means small businesses end up going out of business, or at the very least, laying off more employees, who push the unemployment rate even higher. And so on. (source)

If, as a “capitalist” (i.e. employer), you want to take advantage of unemployment – or the risk of unemployment – to put downward pressure on wages and workers benefits – and thereby violate workers’ rights (a fair wage is a human right, as are favorable working conditions) – you’ll end up shooting yourself in the foot because neither hard working laborers who don’t earn a lot nor the unemployed will consume many of your products or services. I can see the appeal of the statement that generous unemployment benefits discourage people from finding a job, but such benefits do have advantages that go beyond the mere self-interest of the direct beneficiaries.

An ideal policy … would allow people to collect unemployment insurance indefinitely, and let the unemployed borrow or save money. This way, unemployment insurance would not merely be a financial band-aid letting people take risks on the job market and endure some jobless spells, but a critical source of “liquidity,” allowing the unemployed to keep spending reasonable amounts of money — which in turn helps create demand, something sorely lacking from the economy at the moment. (source)

And here’s another example, related to gender discrimination. In many countries, there’s a son preference: male offspring is considered more valuable than female offspring, for reasons to do with gender discrimination and social, cultural or religious views regarding the proper role of women in society. One of the consequences is the “missing girls” phenomenon. The sex ratios in many countries – India and China stand out – are out of balance. Some estimates say that 90 million women are “missing” worldwide. In somewhat overwrought rhetoric this is called gendercide. Girls are often aborted in selective abortions (a one child policy can make this even more widespread), and young girls are often prejudiced against when it comes to nutrition and health care resulting in higher mortality rates. The son preference and the missing girls phenomenon have their roots mainly in cultural beliefs, but economic considerations also play a role. Some professions are open only to men; girls marry “into” other families and hence can’t continue the family business; there’s the dowry problem etc. However, these economic considerations don’t stand on their own and are often the result of discriminatory cultural beliefs. When we accept that gender discrimination and the will to sustain patriarchy is the cause of the son preference and the missing girls phenomenon, then we are dealing with a human rights violation. And also this rights violation can come back to haunt those responsible for it.

A societal preference for boys here has become an unlikely source of power for Indian women. The abortion of female fetuses in favor of sons — an illegal but widespread practice — means there are more eligible bachelors than potential brides, allowing women and their parents to be more selective when arranging a match. (source)

Rather than cementing patriarchy, the son preference and the resulting unbalanced sex ratios give women more bargaining power. These and other boomerang rights violations are variants of what I’ve called self-inflicted rights violations: people violate other people’s rights, and in so doing they ultimately violate their own rights.

Racism (9): Race and Employment

Racism expresses itself in different ways, one of which is discrimination in employment:

In 2004, Jean-François Amadieu, a sociologist at the Sorbonne, sent out 500 CVs replying to ads for sales jobs in the Paris region. The CVs were identical except in one regard: some applicants had north African names, and others traditional French ones. The white male French names received five times as many job offers as the north African ones. When Amadieu repeated the exercise in 2006, the ratio was 20:1. (source)

Such examples of racism in employment policy have an impact on unemployment rates across races. Those are very unequal for different races.

And then the numbers exclude those who are in prison. Given that there are 5 times as many blacks behind bars as whites in the U.S., including them in unemployment statistics would make the gap even wider. (And why shouldn’t we include them? They obviously don’t earn a living and can’t provide for their families).

Of course, this difference between the unemployment rates for blacks and whites isn’t entirely caused by direct discrimination in employment decisions. Other elements play a part:

  • Jobs are often concentrated in white suburbs, difficult to reach for blacks who do not own a car.
  • Blacks often can’t rely on networks of family businesses as much as whites or Latinos.
  • Blacks “have been relegated to precarious, low-wage work … at disproportionate rates” (source), making them more vulnerable to recessions, outsourcing and competition from immigrants.
  • Indirect discrimination: if blacks receive substandard education, are less healthy and more poor, then this will affect their employment prospects.

Economic Human Rights (29): Unemployment Benefits in the U.S. and Elsewhere

Strange as it may seem to some, unemployment benefits are a human right, and rightly so in my opinion. Poverty makes rights impossible, and unemployment benefits save many from poverty, especially during a recession in which unemployment isn’t just a phase between two jobs. Read for instance art. 22, 23 and 25 of the Universal Declaration:

Article 22: Everyone, as a member of society, has the right to social security.

Article 23: Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.

Article 25: Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

Three times! They must have meant it.

Compared to many other industrialized countries, the U.S. usually adopts a very critical attitude towards social and economic rights in general, and hence also to the right to unemployment benefits. Which is apparent from its relatively stingy system.

At just under $300, the average weekly benefit is less than half the average private-sector wage. Mississippi’s maximum benefit of $230 is not much more than the federal poverty threshold of $200 for an individual. (source)

And it’s not just the total amounts of the benefits:

Compared with the systems in other industrialised countries, the American unemployment-insurance (UI) scheme pays lower benefits for less time and to a smaller share of the unemployed. … States often require beneficiaries to have worked or earned an amount that disqualifies many part-time and low-wage workers. They also disqualify people seeking only part-time work – even though many people now work part-time for family reasons. Benefits typically last for only six months, more than enough time to find a new job in normal times but not in recessions. (source)

This isn’t only a human rights issue. Especially in a recession it can mean making things worse. When people lose their jobs, you don’t want them to lose a large part of their purchasing power since economic recessions are made worse by falling consumer spending.

However, making the system of unemployment benefits more generous would almost certainly require higher taxes. And although the U.S. is a low-tax country (compared to other industrialized countries) that seems pretty utopian right now (given the already hysterical fears about the fiscal consequences of the healthcare proposals).

Economic Human Rights (28): The Health Consequences of the Recession and of Unemployment

The Economist called it the “unsurprising research finding of the day“, but I think it’s a useful confirmation of an existing intuition: this paper finds that the recession can have a beneficial effect on the health of some people who lose their job because of it, namely those people spending their new leisure time in a healthy way. Other people, however, spend their leisure time cultivating some of their pre-existing unhealthy habits, or find themselves depressed and without employer-provided healthcare (especially in the U.S.). Because their healthcare has become more expensive now that they are unemployed, they decide to go without treatment or tests.

Results showed the body mass of the average laid-off food-lover increasing by the equivalent of more than 7 pounds for a 5-foot, 10-inch man weighing 180 pounds during unemployment. Similarly, frequent drinkers on average doubled their daily alcohol intake after losing their jobs and before finding another one. (source)

Elsewhere in the world, and especially sub-Saharan Africa, it seems that the health consequences of the global recession are more dramatic:

The financial crisis will kill between 28,000 and 50,000 babies in sub-Saharan Africa this year, according to this paper. The reasoning here is straightforward. For people on subsistence incomes, a fall in GDP can be fatal. The paper’s authors, Jed Friedman and Norbert Schady, estimate that a one percentage point fall in per GDP across sub-Saharan Africa is associated with a rise in infant (defined as under-ones) mortality of between 0.34 and 0.62 per 1000. If we multiply this increase by the number of births this year and by the 2.4 percentage point difference between GDP growth this year and last (a reasonableish estimate of the effect of the crisis), we get a figure of between 28,000 and 50,000. … Of course, you can quibble with the numbers. But the general story holds. For the poor, income is a matter of life or death. Which brings me to my question. If one-in-seventeen British babies were to die this year because of the financial crisis, it would be the biggest media story for years and there’d be rioting in the streets until the government did something. So, why the silence? Chris Dillow (source)

Discrimination (1)

Discrimination, in its non-political and non-legal sense, simply means the recognition of differences. In the political and legal sense, it means unjustifiable differences in treatment between groups of people, most often the unjustifiable denial of the equal enjoyment of human rights.

Groups of people are discriminated because they have certain group-specific attributes that set them apart from the rest of society and that warrant, in the eyes of the people who are discriminating, less favorable treatment. One can make the following distinctions:

  • Discrimination can come in different degrees, affecting large or small numbers of people to a large or small extent: from government policy to an unspoken mentality of a small part of the population, and everything in between (such as states not acting to counter discrimination, very active and outspoken discrimination in some parts of the community, entrenched cultural practices such as the caste system etc.).
  • It can be exercised in different ways. People may be discriminated on the grounds of their race, gender etc. They can be discriminated in relatively harmless ways (denial of a promotion because of a likely pregnancy for example) or very brutal ways (slavery, denying of equal education etc.). They can also be discriminated in many different fields of life: education, employment, justice, health care etc.

Some people have the misfortune of finding themselves in a state which has an overt and active policy of discrimination, and in different discriminated groups at the same time (black lesbians in Apartheid South-Africa for example). As a result, they may also be discriminated in different fields of life at the same time (employment, family law, education etc.).

There are many types of discrimination, and the concept of discrimination is often linked to others such as racism, agism, sexism, xenophobia, intolerance, religious fundamentalism, genocide, ethnic cleansing etc. Whereas all these phenomena undoubtedly have a dose of discrimination, they are not the necessary result of discrimination. Discrimination can be much more limited.

One can distinguish between types of discrimination according to the groups that are discriminated, and the ways in which these groups are discriminated.

Groups:

  • racial discrimination
  • gender discrimination
  • discrimination based on one’s sexual orientation
  • discrimination based on one’s language, culture or national origin
  • discrimination based on one’s religion or one’s status within a religion
  • discrimination based on one’s political convictions
  • age discrimination
  • health discrimination (e.g. discrimination of HIV patients, disabled persons or obese persons)
  • etc. (when it comes to cruelty, man’s imagination has no limits I’m afraid)

Ways:

  • economic discrimination (e.g. persistent differences in poverty levels between groups)
  • employment discrimination (e.g. discrimination in career opportunities, pay, “Berufsverbot” etc.)
  • housing discrimination
  • family law discrimination (e.g. the inability of homosexuals to marry or to adopt)
  • education discrimination, different levels or quality of education for different groups
  • discrimination of the access to public service or elected positions
  • judicial discrimination, discrimination in the justice system
  • health discrimination, different levels or quality of healthcare for different groups
  • cultural practices such as honor killings, female genital mutilation,…
  • legal discrimination such as Jim Crow or segregation
  • etc.

Causes of discrimination:

  • racism, sexism etc.
  • a history of discrimination, creating a burden on future generations
  • immigration
  • xenophobia
  • recession or economic scarcity
  • education
  • cultural practices (e.g. the caste system)
  • religious doctrine
  • legislation (e.g. the Jim Crow laws or other types of legally enforced discrimination)
  • etc.

Article 2 of the Universal Declaration prohibits discrimination:

“Everyone is entitled to all the rights and freedoms set forth in this Declaration, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.”

Although poverty has many causes, discrimination is undoubtedly one of them. Large differences in wealth between groups (for example racial groups) may indicate the existence of discrimination.

Statistics on the differences between races in incarceration or execution rates may indicate the existence of discrimination in the justice system, although these differences may have other causes besides discrimination, e.g. differences in poverty rates (see above), differences in levels of education etc. Of course, the latter differences may be caused by discrimination so that discrimination is indirectly the cause of the differences in the application of justice. Here again are some data on the situation in the US, showing that blacks, although they make up only 12% of the population, account for more than 1 in 3 of the prison population and of the executions. 5% of black men are in jail, compared to less than 1% of white men.

 

 

Blacks are also about twice as likely as whites to be a victim of a crime.