Thursday, January 28, 2010

Post-Recession Migration

Some demographic news out of Virginia may indicate that geographic mobility in the United States is ready to increase. Typically, migration is a lagging indicator. The exception to this rule is acute crisis (e.g. Michigan). The Great Reset will take shape during 2010. We should find out relatively soon if Pittsburgh will be among the new winners emerging from the economic shakedown. I'm betting it will, but I'm guessing like everyone else.

More certain is a populist backlash against immigration. About two weeks ago, GSP Consulting wrote about economic supercycles. Most people would agree that we're emerging from the nadir. I would argue that we are entering a period of stagnation, also known as the "B-phase". GSP sees an "A-phase" scenario. From where I sit, I don't see a geopolitical context that would support such an assertion. Regardless, the initial period of economic recovery is the most politically unstable. A good example of the growing populist sentiment is the Massachusetts election of Republican Scott Brown to the US Senate or the current mood in Davos.

Labor market protectionism is on the upswing and will frame the debate about US immigration reform. Concern about this direction is already apparent:

Several months ago, James Sherk, Bradley Fellow in Labor Policy in the Center for Data Analysis at The Heritage Foundation, and Diem Nguyen, a Research Assistant at the Heritage Foundation made a compelling argument against adding regulations to the H-1B program, stating in their belief, this would represent a serious setback to U.S. Other thought leaders, academics and captains of industry here in the U.S. have echoed that sentiment. While their point of view is that America's loss is the world's gain, I politely disagree with that assertion because I think it represents only half the argument. I believe that any form of protectionism is dangerous and this age of globalization, the proposal to abolish or dramatically reduce H1-B visas hurts our global economy, not just America's.

There are indications that the bunker mentality is hurting US innovation and business. Canada couldn't be happier about the frontal assault on H-1B visas. I predict an exacerbation of existing talent shortages. Ironically, this should benefit Pittsburgh. Silicon Valley is much more dependent upon foreign-born entrepreneurs. This is one of the reasons why I'm bullish on Pittsburgh as the global economy improves.

I'm not in favor of greater restrictions on immigration. But the best supporters of policy liberalization are going to do is moderate the protectionist sentiment. The result will be tremendous stress on workforce development programs. This will help inform a sluggish recovery and draw out the B-phase.

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