FT.com / World - American dream hit by dollar’s decline

Ever wonder if there was a connection between the strength of a country’s currency and the flow of immigrants into that country? No? Me neither… but interestingly it appears that there is a direct relationship between these variables. The weaker a country’s currency, the fewer immigrants cross its borders to find work. Here’s why:

Migrant workers are choosing to move to Europe, Australia or Canada instead of the US in order to protect the purchasing power of the money they send home to their families, according to one of the world’s leading experts on remittances.

The shift is a result of sharp falls in the value of the US dollar against other international currencies, many of which have been boosted by the rise in commodity prices.

This news may make some American’s happy, since it could mean more opportunities for the American workers who may have lost their jobs during the current recession. This, however, may not be the case. It turns out that much of the decline in immigrant workers is in high skilled fields for which demand for workers in the US remains high even in times of recession. According to the article, “the trend was especially notable among skilled workers, such as doctors, nurses and information technology specialists”.

A decline in the inflow of high skilled workers may actually make Americans worse off. I have blogged about the shortage of American workers in fields such as engineering, software design, and natural gas rig technicians,and I don’t think many Americans would argue that health care in America is already too cheap, so I suspect that more doctors and nurses would be desired.

A weak dollar has many effects on America. In some ways, it makes the country better off. As I have blogged about here, a weak dollar should lead to more balanced trade, a boom for US manufacturers, and an increase in exports, all related, of course, to the relative decline in prices of US goods to foreign consumers. But a weak dollar may in fact do more harm than good, one reason for which is explained here: skilled foreign workers whose talents are in strong demand in the US are moving more and more to European markets to find work.

Anti-immigration hawks may be cheering, but American consumers may start rearing as high-skilled labor shortages drive up wages and prices in the markets Americans most depend on today: health care, energy and technology.

Powered by ScribeFire.

Irrational choices | Free exchange | Economist.com

The debate over the impact of immigration on American wages is a hot one. As seen in the video below of immigration opponent Lou Dobbs, many in America view the free-market, open boarders ideas of certain economists with outright disdain and hatred. Among these “anti-immigration hawks” is economist George Borjas:

“(Anti-) immigration hawks like George Borjas have estimated that wage competition from immigrant labour may reduce native, unskilled worker earnings by something like 7 percent.”

Among economists, however, such views are rare:

“Other researchers dispute such figures, arguing that immigrant impact on native, unskilled workers wages is minimal and is strongly positive for skilled labour. In either case, it’s clear that the gains enjoyed by the migrants themselves significantly exceed domestic worker losses.”

Continue Reading »

Recently, in AP Economics, we have been learning about Labor markets; in IB Economics we’ve been focusing on the benefits and costs of international trade and global economic integration. As students of market economics, it is ingrained in us that economic liberalization, the freeing of markets, enabling resources to be allocated based on the price mechanism; these are all are good things. Removing barriers to the free movement of products and resources across national and political boundaries should eventually result in greater world output, and subsequently increases in living standards and wealth for the citizens of all free trading countries.

Nations will produce the products for which they have a comparative advantage, and trade with their neighbors for those products for which they don’t. Resources will flow from markets in which they are in low demand to those where they are in high demand. Prices in both product and resource markets will rise and fall, allocating scarce resources to the markets where they are needed most.

So why, in an era where the benefits of free trade and free flow of productive resources seem so visible around the world, do Americans seem so susceptible to views like those exhibited in the video below:

Continue Reading »

Here’s a fascinating article about the importance of learning economics in order to overcome our innate, perhaps genetically ingrained understanding of human exchanges as a zero-sum game, where one person’s gain comes at another’s loss.

Paul H. Rubin - Evolution, Immigration and Trade - washingtonpost.com

Rubin finds several fascinating links between evolutionary biology, psychology, and economics.

“Our primitive ancestors lived in a world that was essentially static; there was little societal or technological change from one generation to the next. This meant that our ancestors lived in a world that was zero sum — if a particular gain happened to one group of humans, it came at the expense of another.”

“Economists have argued for more than two centuries that voluntary trade, whether domestic or international, is positive sum: it benefits both parties, or else the exchange wouldn’t occur.”

This ingrained belief of one person’s gain coming at the expense of someone else leads to dangerous policies such as protection and trade barriers, which as we know limit an economy’s growth and improvements in standards of living. Therefore, learning economics is as important to society’s progress as learning to read is to an individual’s education. Rubin concludes with this interesting insight:

“A useful analogy is between speech and reading. All humans growing up in a normal environment learn to speak, but reading must be taught because it does not come naturally… A deeper understanding of economics is like reading — it must be taught.

America’s success in lowering its barriers to outsiders shows that we can and do learn. But like reading, we must teach each generation anew.”

Powered by ScribeFire.

Immigration: The Human Cost | The Onion - America’s Finest News Source

Free trade, labor mobility, globalization: scary words! Watch this harrowing story of the insufferable losses imposed on American workers due to immigration, then post your comments. What impact does immigration have on American jobs? Should the US take greater steps to protect Americans like Mr. Boyle from the threat of cheap labor from poor countries? Who is truly harmed by labor mobility and who benefits?

Powered by ScribeFire.