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Blue Collars Lose Ground – Don’t Blame Trade

By Shlomo Maital

 

     Led by the Trump Administration in the US, worldwide there is a counter-revolution against globalization. Right wing governments are being elected in Hungary, Italy, Austria, partly in Germany, and elsewhere, reacting against the ravages of globalization – particularly, the claim that blue collar workers are being scalped by it – by migrants (free flow of labor) and by trade (free flow of goods).

     America, which invented this amazing system that made many emerging economies wealthy (East Asia, primarily) now leads the charge against it.

     And this whole counter-revolution is based on a falsehood. Don’t blame trade. Blue collar woes have another primary cause, according to Harvard University Professor Elhanan Helpman, in his new book Globalization and Inequality. It was not primarily free trade (globalization) that caused the large gap between blue collar and white collar wages.

     Earlier, in 2016, Helpman published an NBER working paper * showing this (typically understated, as academic researchers are wont to do):

       Trade played an appreciable role in increasing wage inequality, but its cumulative effect has      

       been modest, …globalization does not explain the preponderance of the rise in wage inequality

            within countries.

   What, then, does explain it? Technology and productivity.

     Studies show that the premium for a college education (i.e. skilled workers) was 63%.   The blue collar/white collar wage gap results from basic supply and demand factors, “…the dominant cause was an increase in the relative demand for skilled workers”.

   OK – so who is to blame?   American political leadership, for failing to find ways to upgrade the skills of blue-collar workers, especially in America’s failing and failed educational system.   And, as New York Times op-ed columnist David Brooks has noted – the educated elite simply ignored the plight of the non-educated elite – and the price they pay is the election of Donald Trump.

* Elhanan Helpman. “Globalization and wage inequality”.   NBER working paper 22944, Dec. 2016.

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Why Migrants Are an Undervalued Resource

By Shlomo Maital

 migrants

   My mother and father, grandmother, aunts and uncles, all were migrants. They came from Bessarabia, now Moldova, escaping pogroms, grinding poverty, and seeking a new life in Canada and America  a century ago.  Canada’s relatively open policy gave them new lives and eventually made Canada prosperous, through their energy and the energy of other migrants.   And their offspring have done great things for their country.  My father, for instance, built low-cost houses for working people.

   Today, Europe faces one million Mideast and African migrants during 2015. Public opinion has largely turned against them.   The brutal homicidal use of ISIL of the Syrian migrant pipeline to smuggle in a terrorist has done enormous damage to a great many peaceful Moslems, but what does ISIL  care?

   What evidence is there that migrants are constructive?  NYT columnist David Brooks draws our attention to an essay by Malcolm Gladwell, in the New Yorker, Aug. 24 2015 (awarded Brooks’ prize for one of the year’s best essays). It’s called Starting Over. It’s about sociologist David Kirk, driving around a very poor neighborhood in Post-Katrinia hurricane New Orleans, and wondering:

   “As Kirk drove around the Lower Ninth, however, he realized that post-Katrina New Orleans [Katrina destroyed much of New Orleans in late 2005, a decade ago]  provided one of those rare occasions when fate had neatly separated the two variables. In the course of bringing immeasurable suffering to the people of New Orleans, Katrina created what social scientists call a “natural experiment”: one day, people were in the neighborhoods where they had lived, sometimes for generations. The next day, they were gone—sometimes hundreds of miles away. “They had to move,” Kirk said. What, he wondered, were the implications of that?

In other words: How productive are migrants who get up and move, far away, compared to those who stay, in New Orleans? Simple answer. Migrants do far better than those who stay mired in the same poverty context.

   Kirk’s idea was to look at convicted criminals from New Orleans who had been released from prison after Katrina. As a group, they were fairly homogeneous: largely black, largely poor. For years, their pattern was to return to their old neighborhoods after they were released: to their families, homes, social networks. But for some, by the most random of circumstances, that was now impossible. Their neighborhoods—the Lower Ninth, New Orleans East—had been washed away. How did the movers compare with the stayers?

   Gladwell cites distressing evidence that black Americans born in poor neighborhoods are stuck there, contrary to the ‘American dream’ of upward mobility: “Over the past two generations, 48 percent of all African American families have lived in the poorest quarter of neighborhoods in each generation. The most common experience for black families since the 1970’s, by a wide margin, has been to live in the poorest American neighborhoods over consecutive generations. Only 7 percent of white families have experienced similar poverty in their neighborhood environments for consecutive generations.”

   One of the researchers, named Graif,  found compelling evidence that those who moved from New Orleans poverty did far better than those who stayed, despite the traumatic circumstances.

   “I think that what’s happening is that a whole new world is opening up to them,” Graif said. “If these people hadn’t moved out of the metro area, they would have done the regular move—cycling from one disadvantaged area to another. The fact that they were all of a sudden thrown out of that whirlpool gives them a chance to rethink what they do. It gives them a new option—a new metro area has more neighborhoods in better shape.”   That is, more neighborhoods in better shape than those of New Orleans, which is a crucial fact. For reasons of geography, politics, and fate, Katrina also happened to hit one of the most dysfunctional urban areas in the country: violent, corrupt, and desperately poor. A few years after the hurricane, researchers at the University of Texas interviewed a group of New Orleans drug addicts who had made the move to Houston, and they found that Katrina did not seem to have left the group with any discernible level of trauma. That’s because, the researchers concluded, “they had seen it all before: the indifferent authorities, loss, violence, and feelings of hopelessness and abandonment that followed in the wake of this disaster,” all of which amounted to “a microcosm of what many had experienced throughout their lives.”

Here is the surprising conclusion. We can learn about Mideast and African migrants from similar American migrants. They are resilient. They overcome the enormous trauma of their original homes. They do better than if they had stayed home, because nearly any place is better than that. And, they contribute massively to their new homes, as productive energetic families desperate to build better lives for their children.  Like my family did.

     In America, people can move anywhere they wish. In Syria, they risk their lives to get to Europe, where they are herded into camps for years, even though no native Europeans will do the kind of hard labor these migrants gladly seek.

     Will anyone pay attention to sociological evidence? Or will Europe listen to the hate-mongerers on the right, and vote their emotions and fears.   Can anyone translate Gladwell’s essay into language the Europeans will read and listen to?

  

 

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
June 2019
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