Thursday, August 18, 2011

Captive Labor And Brain Drain

Decreasing geographic mobility doesn't benefit labor. But it is a boon to ownership via suppressed wages. Traditionally, unionizing is how a captive labor pool gained leverage in negotiations. Greater geographic mobility has rendered most unions unnecessary. That doesn't mean captive labor is a thing of the past:

The students, from countries including China, Nigeria, Romania and Ukraine, came to the United States through a long-established State Department summer visa program that allows them to work for two months and then travel. They said they were expecting to practice their English, make some money and learn what life is like in the United States.

In a way, they did. About 400 foreign students were put to work lifting heavy boxes and packing Reese’s candies, Kit-Kats and Almond Joys on a fast-moving production line, many of them on a night shift. After paycheck deductions for fees associated with the program and for their rent, students said at a rally in front of the huge packing plant that many of them were not earning nearly enough to recover what they had spent in their home countries to obtain their visas.

Exploiting noncitizen labor is an old gambit. A recent development are secondary household wage earners (typically female and residing in transit isolated suburbs). More insidious are programs designed to encourage retention. Plugging the brain drain undermines earning power while increasing margin for local companies.

Ironically, reducing the outmigration of college graduates diminishes the return on investment in human capital. CEOs for Cities Talent Dividend prize is a good example of best intentions gone wrong. Metros who raise educational attainment via inmigration will be more prosperous than metros who see equal gains primarily through retention.

Governments, not just families, are supporting outbound Asian students. A recent British Council analysis of countries that have strong government scholarship programs for students at foreign universities included Thailand. Who knew? I didn’t.

Not only is brain drain encouraged, it is publicly funded. Retention is another form of protectionism, labor market autarky. Such approaches are inefficient, costly. Regions should be promoting geographic mobility, not trying to stifle it.

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