Globalization with Labor: Is the Future Robots or Rosalie Lant Pritchett March 6, 2008 Brown University.
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Globalization with Labor: Is the Future Robots or Rosalie Lant Pritchett March 6, 2008 Brown University Are the nurses of the future Robots or Rosalie? Five Points Gaps in income/wages across nation-states are much larger than ever in history The current globalization is qualitatively different a “proliferation of sovereigns” and “everything but labor” EBL globalization will not reduce (all) inequalities It is labor versus capital for the future Currently we have historically massive gaps in income per capita and wages Steady growth of the economic leaders have left the follower countries far behind…India has not yet reached the 20th century, Ethiopia the 13th… GDP PPP per Capita $40,000 $30,000 $20,000 $10,000 Mexico, $8165 $0 1700 1851 UK 1898 USA 1929 2000 China, $5332 India, $2990 Ethiopia, $688 ~ Year 1250 Fraction of Total Inequality Due to Across Countries Historically it mattered who you were, now where you were born 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% Theil coefficient 10.0% Mean ln deviation 0.0% 1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 Years But liberalization has yet to touch labor—wage for equivalent labor are enormously larger than those that set in motion the first globalization’s migration Ratio of wages in PPP Wage gaps today between potential migration partners are 6:1 to 9:1—but with much smaller (relative) flows 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 9.0 9.1 7.2 7.6 6.1 3.6 2.3 4.1 4.4 2.4 US US US US Sp US UK Ita NL Ja A/ A/ A/ A/ ain A/ /K ly/E D/ pan N S Ire It /M G u e n th In d /V y la orw we d aly o io a a nd pi one ietn ay en 18 ro cc tem a sia am Wage gaps of 2:1 to 4:1 18 18 18 7 0 al 1 o 9 70 19 a 1 70 90 19 19 70 90 99 drove massive migrations 9 0 90 s s s 0s s prior to 1920 Current “globalization” is qualitatively different: (Proliferation of sovereigns (POS), Everything but labor (EBL)-POSEBL) Now that was globalization: the Roman Empire and Mobility…Emperors from Spain, Levant, North Africa, Europe 18 16 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Pax Americana: the proliferation of sovereigns with modest amounts of cross-border everything but labor liberality 20 ssa mena eca lac eap other 14 12 10 8 6 4 2 0 But even deep liberalization with borders does not make the world “borderless”… 2.5 2 Billions Ontario 1.5 Texas 1 Predicted with Texas without a border 0.5 0 British Columbia's exports to: Source: McCallum, 1995 The world is not flat—there are big hills separating even the liberalized countries—prices are not equalized Mean percentage absolute value difference in producer prices across goods 60 50 40 30 20 10 0 Source: Bradford and Lawrence, 2004 Canada-USA Germany-USA UK-USA Japan-USA Until very recently it was EBLG (Everything but labor globalization) Percentage of Foreign-Born Population in the Labor Force 14 12 10 Percentage France 8 Germany Italy Japan 6 United Kingdom United States 4 2 0 1989 1990 1991 1992 1993 1994 Year 1995 1996 1997 1998 Will POSEBL globalization eliminate global inequalities: The guiding myth of the post WWII globalization and “development” All problems can be solved in place without any movement of people across borders Why ever would you think so? History and experience within most large countries suggest massive population movements Does globalization of goods and capital eliminate the need for labor mobility? Simple supply and demand: If there are large region specific shocks to labor demand then… Wages Inelastic labor supply (mobility restricted) Supply inelastic: wages fall Elastic labor supply (mobility allowed) Large fall in region specific labor demand Population Supply elastic: populations fall If supply is inelastic (e.g. across countries)— little labor mobility, big differences in growth Huge differences across countries In output per capita growth Small differences in net migration If labor supply is elastic—(e.g. across regions in large integrated countries)…large differences in population growth, small differences in growth Labor mobility is much larger than growth differences within these countries, vice versa across countries The emptying of the heartland and the Delta (only green shaded counties had substantial population increase over a 60 period) Red=County Declined; Netyear Decline between 0 and 5,000 Purple=County Declined; Net Decline between 5,000 and 10,000 Blue=County Declined; Net Decline greater than 10,000 Green=County Increased by more than 10,000 Divide Renville Bottineau Burke Rolette Cavalier Pembina Towner Williams Walsh McHenry Mountrail Ward Pierce Ramsey Benson Grand Forks Nelson McKenzie McLean Sheridan Eddy Wells Dunn Foster Mercer Billings Griggs Steele Traill Oliver Golden Valley Kidder Burleigh Stutsman Stark Cass Barnes Morton Slope Hettinger Logan Grant Ransom La Moure Emmons Bowman Adams McIntosh Sioux Corson Harding Campbell Richland Dickey Sargent McPherson Marshall Perkins Brown Walworth Edmunds Roberts Day Dewey Potter Butte Grant Faulk Spink Ziebach Codington Sully Clark Meade Lawrence Deuel Hamlin Hand Hyde Hughes Stanley Haakon Beadle Kingsbury Brookings Pennington Buffalo Jerauld Jones Sanborn Lyman Miner Lake Moody Custer Jackson Aurora Brule Hanson Davison Mellette Minnehaha Lyon McCook Shannon Fall River Tripp Bennett OÕBrien Sioux Brown Union Plymouth Clay Knox Holt Palo Alto Grant Hooker Thomas Blaine Garden Garfield Logan Wayne Hardin Hamilton Webster Calhoun Carroll Boone Greene Black Hawk Grundy Clayton Delaware Buchanan Linn Iowa Johnson Dawson Dodge Colfax Shelby Audobon Guthrie Dallas Jasper Polk Poweshiek Pottawattamie Hall Cass Adair Madison Polk Scott Louisa Mills Montgomery Adams Union Frontier Gosper Phelps Kearney Clarke Rawlins Decatur Furnas Harlan Franklin Webster Clay CassFremont Page Taylor Ringgold Decatur Norton Phillips Smith Sheridan Graham Rooks Osborne Gove Trego Ellis Russell Republic Jewell Washington Mitchell Richardson Davis Henry Van Buren Sullivan Daviess De Kalb Des Moines Lee Lane Rush Ness Osage McPherson Rice Marion Miami Anderson Linn Reno Woodson Greenwood Ford Polk Cedar Kingman Wilson Neosho Dallas W oods Harper Beaver Webster Wayne Scott Carter Douglas Stoddard Ottawa Craig Barry McDonald W ashington Cape Girardeau Bollinger Shannon Christian Stone Nowata Perry Reynolds Texas Wright Jasper Cherokee Lawrence Kay Grant Alfalfa Ste . Genevieve St. Francois Madison Greene Montgomery Labette Chautauqua Newton Texas Iron Barton Dade Cowley Harper Dent Laclede Crawford Elk Barber Comanche Crawford Washington Phelps Pulaski Sumner Clark Maries Camden Vernon Sedgwick Pratt Kiowa Meade Seward Franklin Jefferson Miller Bourbon St. Louis St. Louis City Gasconade Osage Morgan Benton Hickory Allen St. Charles Warren Cole Henry Bates Butler Gray Lincoln Callaway Moniteau St. Clair Edwards Pike Montgomery Pettis Cass Harvey Stafford Haskell Ralls Audrain Boone Chase Coffey Hodgeman Franklin Marion Monroe Howard Cooper Lyon Barton Pawnee Finney Shelby Randolph Saline Lafayette Jackson Johnson Morris Macon Chariton Carroll Wyandotte Johnson Saline Scott Linn Livingston Ray Clay Leavenworth Douglas Lewis Clinton Platte Jefferson Wabaunsee Clark Knox Caldwell Buchanan Jackson Shawnee Geary Adair Grundy Holt Brown Doniphan Nemaha Marshall Riley Schuyler Scotland Harrison Gentry Pottawatomie Clay Dickinson Ellsworth Grant Appanoose Putnam Mercer Nodaway Atchison Stevens Wayne Worth Atchison Nemaha Gage Jefferson Ottawa Morton Jefferson Saline Thayer Lincoln Stanton Wapello Sarpy Seward Fillmore Nuckolls Cloud Thomas Logan Hamilton Lucas Otoe Adams Johnson Red Willow Andrew Kearny Washington Monroe Saunders York Hamilton Douglas Butler Pawnee Wichita Keokuk Mahaska Marion Lancaster Hayes Hitchcock Greeley Warren Washington Howard Buffalo Jackson Marshall Muscatine Platte Merrick Perkins Chase Dubuque Jones Benton Tama Story Clinton Harrison Burt Nance Dundy Cimarron Allamakee Fayette Bremer Thurston Stanton Madison Greeley Sherman Lincoln Sherman Howard Chickasaw Butler Boone Valley Keith Wallace Mitchell Floyd Cedar Wheeler Custer Cheyenne Franklin McPherson Cheyenne Deuel Sac Crawford Monona Cuming Arthur Ida Dakota Loup Morrill Cerro Gordo Wright Pocahontas Dixon Antelope Scotts Bluff Hancock Humboldt Buena Vista Cherokee Woodbury Cedar Rock Pierce Kimball Clay Lincoln Yankton Boyd Cherry Sheridan Box Butte 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Ca lla h a n E ra th Wa rd Cu lb e rso n Hu d sp e th M id la n d Co ke G la ssco ck S te rlin g T om G re e n Cra n e Up to n Re e ve s Re a g a n Irio n Ha m ilto n M ills A n g e lin a Ho u sto n Wa sh in g to n E d wa rd s L ib e rty A u stin Ca ld we ll Co m a l G o n za le s B ra zo ria De Witt A ta sco sa K a rn e s Ja ckso n V icto ria G o lia d Ca lh o u n M cM u lle n Bee L ive O a k S a n P a tricio Nu e ce s Du va l K le b e rg Jim Ho g g Re fu g io A ra n sa s Jim We lls We b b Za p a ta Acadia St. Martin Lafayette Iberia Vermilion B ro o ks Kenedy S ta rr Willa cy Hid a lg o Ca m e ro n M a ta g o rd a Randolph Lee Elmore Macon Dallas Montgomery Marengo Choctaw Russell Bullock Wilcox Barbour Butler A mite Ma rio n P ike Pike L a ma r P e rry Monroe St. John the Baptist Orleans St. James Assumption St. Charles St. Bernard Ha n co ck St. Martin Jefferson Plaquemines Baldwin S to n e Ha rriso n Iberville Ascension Coffee Dale Covington Escambia Mobile G e o rg e P e a rl R ive r Henry Conecuh Washington G re e n e W a lth a ll Lafourche Crenshaw W a yn e Washington Terrebonne G a lve sto n G a lve sto n Wilso n Frio L a S a lle F ra n klin East Tangipahoa Baton WestRouge St. Tammany Baton Livingston Rouge St. Mary Fo rt B e n d L a va ca Wh a rto n M a ve rick Dim m it Jefferson Davis Autauga Chambers Tallapoosa Clarke Ch a m b e rs Co lo ra d o G u a d a lu p e B e xa r M e d in a Za va la Je ffe rso n Ha rris Wa lle r Fa ye tte B a n d e ra Uva ld e W ilkin so n Pointe Coupee O ra n g e Cameron K e n d a ll Re a l K in n e y Calcasieu Ha rd in C la rke Jo n e s C o vin g to n L a wre n ce Je ffe rso n L in co ln D a vis F o rre st West St. Feliciana East Feliciana Helena St. Landry B a stro p Ha ys K e rr V a l V e rd e B re wste r A d a ms Avoyelles Evangeline Allen San Ja cin to M o n tg o m e ry L a u d e rd a le Ja sp e r Je ffe rso n Ja sp e r Beauregard Perry S imp so n Rapides Vernon Ne wto n T yle r Ne wto n Clay Coosa Chilton Lowndes S mith S a b in e P o lk Wa lke r Lee T ra vis S co tt Hin d s C la ib o rn e Concordia San A u g u stin e M a d iso n G rim e s B u rle so n B la n co T e rre ll P re sid io Grant B ra zo s K im b le G ille sp ie Tensas La Salle T rin ity Ro b e rtso n M ila m Willia m so n Shelby Bibb Catahoula Sabine Fa lls B e ll B u rn e t L la n o Tuscaloosa No xu b e e K e mp e r Sumter Franklin C o p ia h L a m p a sa s San Saba M a so n W a rre n Richland Cleburne Talladega Pickens W in sto n Ne sh o b a R a n kin Caldwell Natchitoches Na co g d o ch e s Leon M cCu llo ch L e a ke Ma d iso n Madison Red River Winn M e n a rd S u tto n Lincoln Ouachita De Soto Co rye ll Co n ch o Cro cke tt Issa q u e n a East Carroll Fre e sto n e S ch le ich e r P e co s Je ff Da vis A tta la Greene Jackson P a n o la S h e lb y L im e sto n e M cL e n n a n West Morehouse Carroll Bienville Ru sk Ch e ro ke e A n d e rso n B ro wn Co le m a n Union Caddo S m ith He n d e rso n Na va rro B o sq u e Co m a n ch e Ru n n e ls Bossier G re g g E llis S o m e rve ll Hill E cto r Win kle r Ha rriso n Ho o d E a stla n d M a rtin A n d re ws L o vin g E l P a so Ho lme s Y a zo o Claiborne Webster Up sh u r Van Za n d t K a u fm a n Jefferson Hale M a rio n Calhoun St. Clair O ktib b e h a L o wn d e s S h a rke y Ra in s Da lla s T a rra n t C h o cta w C a rro ll Hu mp h re ys Chicot Ashley C la y W e b ste r Walker Fayette Lamar Mo n tg o me ry W a sh in g to n Union Lafayette Ca ss Ca m p G a in e s Columbia T itu s M o rris Ho p kin s Hu n t Ro ckwa ll S h a ckle fo rd S te p h e n s Bradley Miller Fra n klin T e rry Y o a ku m Cherokee Etowah Drew Calhoun De Kalb Marshall Mo n ro e G re n a d a S u n flo we r L e flo re Nevada Ouachita Jackson Madison Morgan Cullman Blount Desha M o n ta g u e Knox K in g Lawrence Winston Marion C a lh o u n C h icka sa w B o liva r Lincoln Cleveland Limestone Colbert Franklin L e e Ita wa mb a P o n to to c Y a lo b u sh a Pike Sevier Lauderdale T ish o min g o P re n tiss L a fa ye tte C o a h o ma Q u itma n Arkansas Jefferson A lco rn T ip p a h Un io n P a n o la Phillips Cla y Co ch ra n Ma rsh a ll T a te T u n ica Lee Monroe Garland Montgomery Hot Spring Jefferson Wilb a rg e r Cottle Motley Lonoke Pulaski Saline Polk Pushmataha Atoka Johnston B e n to n D e S o to Woodruff St. Francis Coal Murray Tillman Crittenden White Faulkner Perry Scott Le Flore Pontotoc Garvin Stephens Ch ild re ss Cross Conway Yell Latimer Comanche Jackson S wish e r Poinsett Jackson Pope Logan Sebastian Pittsburg McClain Harmon Ca stro P a rm e r Mississippi Craighead Independence Cleburne Franklin Haskell Seminole Hughes Pottawatomie Kiowa Van Buren Johnson Sequoyah MacIntosh Cleveland Grady Co llin g swo rth Dunklin Lawrence Searcy Stone Crawford Okfuskee W ashita Caddo Do n le y Pemiscot Muskogee Okmulgee Oklahoma Wh e e le r Beckham A rm stro n g Ra n d a ll Newton Adair Lincoln Custer Canadian G ra y Ca rso n P o tte r O ld h a m De a f S m ith Madison Washington Cherokee Greene Sharp Izard Tulsa Payne Dewey Clay Randolph Baxter Boone Ellis He m p h ill Mississippi Butler Oregon Ja ckso n Geneva Houston Ghosts and Zombies Post WW II world has run a huge natural experiment—(a) expand dramatically number of sovereign states (borders, flags, currencies), (b) encourage mobility of capital and labor but freeze labor in place (POSEBL globalization) How will this turn out? Hinges on views of the role of region specific labor demand: Small shocks—all good Big shocks, flows accommodate—all good in long run Big shocks, policy and ‘institutional’—not so good, can be fixed Big shocks, really geographic: lets not think about it—What would be ghost countries are zombies Is anything other than POSEBL globalization possible? What was, was, What can be, could be Value of annual savings from debt relief versus existing remittances ` 135 Billions Flows from HIPC debt relief Remittances to SubSahran Africa Net developing country remittances 3 7.3 Gains to developing country residents from “globalization” options on and off the table ` 305 Billions Doubling net ODA Net gains to developing countries from liberalization in Doha round 79.5 86 Value of welfare gains to current developing country residents (including gains to movers)from 3% of OECD labor force increase Which is facetious? ` 8000 Flows from HIPC debt relief Billions Doubling net ODA Net gains to developing countries from liberalization in Doha round 3 79.5 86 305 Value of welfare gains to current developing country residents (including gains to movers)from 3% of OECD labor force increase Gains from open borders “You see that that Mr. Anderson?... That is the graph of demographic inevitability... It is the sound of your death... Goodbye, Mr. Anderson... “ (The Matrix, adapted) Population (millions) Europe’s disappearing act—compared to the “Muslim tier” that surrounds it 1400 1200 1000 800 600 400 200 0 1950 1970 1990 2010 Year 2030 2050 Support ratios (workers to retirees)-rule of thumb: what cannot happen will not—but what will happen? 6 5 4 France Germany 3 Italy Japan United States 2 1 0 2000 2005 2010 2015 2020 2025 Year 2030 2035 2040 2045 2050 “Hard core non-tradables” (non-outsourceable services) are the major labor growth of the future who will do these jobs? With a declining labor force what is the face of the future labor force? The historically huge decrease in the cost of capital and the rise in returns to education—unskilled labor is threatened by skill biased technical change—lack of labor mobility exacerbate this problem? Occupation Employment in 2000 (in ‘000s) Projected employment in 2010 (in 000’s) Combined food preparation and serving workers 2206 2879 673 Retail Salespersons 4109 4619 510 Cashier, except gaming 3325 3799 474 Security guards 1106 1497 391 Waiters and Waitresses 1983 2347 364 Truck drivers, heavy and tractor trailer 1749 2095 346 Nursing aides, orderlies and attendants 1373 1697 324 Janitors and cleaners 2348 2665 317 Home Health Aides 615 907 292 2084 2373 289 Landscaping and grounds keeping 894 1154 260 Personal and home care 414 672 258 Receptionists and information clerks 1078 1334 256 Truck drivers, light orderly services 1117 1331 214 Packers and packagers, hand 1091 1300 209 27492 32679 5177 Laborers and freight, stock and material movers Total, hard core non-tradable services Low to medium skill Absolute Increase (in 000s) '000 increase in jobs Future labor creation—top 25 occupations, hard core non-tradables, mostly low skilled (e.g. truck drivers, waiters) 6000 5000 4000 3000 2000 1000 0 Hard core Hard Core Services, nonnonlow skill tradable, tradable, low skill high Skill Services, high skill What is the future? Moore’s law (increased computing power) Robotics Increase in very high skilled researchers in rich countries plus hugely distorted labor costs— Robots displace Rosalie (ATMs, automated checkout, self-service parking garages) What could be, can be Will the world choose people? Globalization cannot include migration because voters are against it…. In favor of reducing migration "a little" or "a lot" 80 70 60 50 40 30 20 10 0 Italy Austria Spain There is similar, or higher, opposition to trade, but this is a problem to be handled with globalization and free trade, but an insuperable objection… 80 70 60 In favor of reducing migration "a little" or "a lot" 50 40 In favoring of restricting trade "a little" or "a lot" 30 20 10 0 Italy Austria Spain While voters closed borders in the early 20th century, the huge historical spread in incomes raises the question: are the median voter in rich countries and an unskilled migrant really substitutes? Source: Author’s calculations with many assumptions Are the nurses of the future Robots or Rosalie?