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How Immigration/Globalization
Affects The Economy

Jim Prevor’s Perishable Pundit, June 21, 2007

We have been following the immigration debate for some time with many pieces, including: Doubtful Immigration Policy, Pundit’s Mailbag — Immigration, Straight Talk On Immigration, Immigration And The Poultry Industry, Reducing Labor With Technology, AgJobs Take 2, Pundit’s Mailbag — AgJOBS vs. Lou Dobbs, Pundit’s Mailbag — AgJOBS Bill Needs More Support, AgJOBS Gets ‘Pull’ From PMA While United And Others Provide The Push, Compromise Reached On Immigration Reform, But The Battle Is Far From Over, Pundit’s Mailbag — ‘Unworkable’ Immigration Plan, Pundit’s Mailbag — English And Immigration, Still Fighting for AgJOBS and, most recently Pundit’s Mailbag — Immigration As An Economic Issue.

Now there is a new report out by the Organization for Economic Co-operation and Development (OECD) that focuses on the question of how globilization of the economy affects the labor force in the OECD countries, which are, basically, the more affluent nations of the world.

The Wall Street Journal did an article on the report and came up with this summary:

Offshoring and inexpensive imports may be hurting low-skilled workers in the U.S. and Europe to the extent that free trade and open markets could become increasingly difficult for politicians to sell to their constituents, according to one of the world’s leading economics institutes.

The Organization for Economic Cooperation and Development, a Paris-based institute backed by the governments of 30 leading industrialized countries, is a staunch believer in free trade, which most economists believe makes all countries richer overall, including those with high wages.

But in its annual labor study, published Tuesday, the OECD acknowledges growing popular unease about globalization — the growing integration of the world economy through trade and cross-border investment — and frets about a popular backlash if governments fail to ensure that lesser-skilled workers share the benefits

“Millions are benefiting from globalization, but at the same time there’s a feeling something’s wrong with the process,” said OECD Secretary General Jose Angel Gurría. That is creating political resistance to further moves to free up international trade and investment, he said — particularly in the U.S. and France.

A growing number of economists are expressing concern about the number of losers from globalization. Despite strong economic growth, these economists note, many workers in developed countries are struggling to find well-paid work amid a combination of cheap imports, the relocation of factories and offices to low-wage countries, and changing technology.

“The conventional wisdom was that all boats would be lifted by the rising tide. That was overly optimistic,” says David Audretsch, director of the Max Planck Institute for Economics in Germany. Now, economists are recognizing that today’s processes of globalization are posing new problems, he says — but they are only starting to overhaul their theories in response.

This is not a food industry issue, much less a produce issue, but as the immigration debate proceeds, we will need to think about this issue in the context of helping all of America’s citizens.

We haven’t read the report yet, just the media reports on it, so we will discuss this more when we have the whole story. One thing not mentioned in any press report, though, is whether the OECD report pays attention to the role of low wage workers as consumers.

After all, if we were to pay enough to attract American citizens to harvest all the apples, that might help raise wage rates in the U.S. and certainly would benefit those individuals who got the newly higher paying jobs.

It would, however, also raise prices on apples, so the benefit of higher wages would have to be weighed against the cost of higher prices.

Whether this would be a net win for various segments of the American population depends on a lot of things — including to what degree wages would actually go up?

One could also imagine a cascade of protectionism. If step one is high wages to attract apple pickers, step two is high tariffs to keep out cheap imported apples and apple products. Then, of course, other countries would retaliate in kind.

It seems hard to believe that anyone would be better off in this kind of world.

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