Immigrants and the Fallacy of Labour Scarcity

By: Sam Vaknin, Ph.D.

Also published by United Press International (UPI)

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Jean-Marie Le Pen - France's dark horse presidential contender - is clearly emotional about the issue of immigration and, according to him, its correlates, crime and unemployment. His logic is dodgy at best and his paranoid xenophobia ill-disguised. But Le Pen and his ilk - from Carinthia to Copenhagen - succeeded to force upon European mainstream discourse topics considered hitherto taboos. For decades, the European far right has been asking all the right questions and proffering all the far answers.

Consider the sacred cow of immigration and its emaciated twin, labour scarcity, or labour shortage.

Immigrants can't be choosy. They do the dirty and dangerous menial chores spurned by the native population. At the other extreme, highly skilled and richly educated foreigners substitute for the dwindling, unmotivated, and incompetent output of crumbling indigenous education systems in the West. As sated and effete white populations decline and age, immigrants gush forth like invigorated blood into a sclerotic system.

According to the United Nations Population Division, the EU would need to import 1.6 million migrant workers annually to maintain its current level of working age population. But it would need to absorb almost 14 million new, working age, immigrants per year just to preserve a stable ratio of workers to pensioners.

Similarly hysterical predictions of labour shortages and worker scarcity abounded in each of the previous three historic economic revolutions.

As agriculture developed and required increasingly more advanced skills, the extended family was brutally thrust from self-sufficiency to insufficiency. Many of its functions - from shoemaking to education - were farmed out to specialists. But such experts were in very short supply. To overcome the perceived workforce deficiency, slave labour was introduced and wars were fought to maintain precious sources of "hands", skilled and unskilled alike.

Labour panics engulfed Britain - and later other industrialized nations such as Germany - during the 19th century and the beginning of the twentieth.

At first, industrialization seemed to be undermining the livelihood of the people and the production of "real" (read: agricultural) goods. There was fear of over-population and colonial immigration coupled with mercantilism was considered to be the solution.

Yet, skill shortages erupted in the metropolitan areas, even as villages were deserted in an accelerated process of mass urbanization and overseas migration. A nascent education system tried to upgrade the skills of the newcomers and to match labour supply with demand. Later, automation usurped the place of the more expensive and fickle laborer. But for a short while scarce labour was so strong as to be able to unionize and dictate employment terms to employers the world over.

The services and knowledge revolutions seemed to demonstrate the indispensability of immigration as an efficient market-orientated answer to shortages of skilled labour. Foreign scientists were lured and imported to form the backbone of the computer and Internet industries in countries such as the USA. Desperate German politicians cried "Kinder, not Inder" (children, not Indians) when chancellor Schroeder allowed a miserly 20,000 foreigners to emigrate to Germany on computer-related work visas.

Sporadic, skill-specific scarcities notwithstanding - all previous apocalyptic Jeremiads regarding the economic implosion of rich countries brought on by their own demographic erosion - have proven spectacularly false.

Some prophets of doom fell prey to Malthusian fallacies. According to these scenarios of ruination, state pension and health obligations grow exponentially as the population grays. The number of active taxpayers - those who underwrite these obligations - declines as more people retire and others migrate. At a certain point in time, the graphs diverge, leaving in their wake disgruntled and cheated pensioners and rebellious workers who refuse to shoulder the inane burden much longer. The only fix is to import taxable workers from the outside.

Other doomsayers gorge on "lumping fallacies". These postulate that the quantities of all economic goods are fixed and conserved. There are immutable amounts of labour (known as the "lump of labour fallacy"), of pension benefits, and of taxpayers who support the increasingly insupportable and tenuous system. Thus, any deviation from an infinitesimally fine equilibrium threatens the very foundations of the economy.

To maintain this equilibrium, certain replacement ratios are crucial. The ratio of active workers to pensioners, for instance, must not fall below 2 to 1. To maintain this ratio, many European countries (and Japan) need to import millions of fresh tax-paying (i.e., legal) immigrants per year.

Either way, according to these sages, immigration is both inevitable and desirable. This squares nicely with politically correct - yet vague - liberal ideals and so everyone in academe is content. A conventional wisdom was born.

Yet, both ideas are wrong. These are fallacies because economics deals in non-deterministic and open systems. At least nine forces countermand the gloomy prognoses aforementioned and vitiate the alleged need for immigration:

I. Labour Replacement

Labour is constantly being replaced by technology and automation. Even very high skilled jobs are partially supplanted by artificial intelligence, expert systems, smart agents, software authoring applications, remotely manipulated devices, and the like. The need for labour inputs is not constant. It decreases as technological sophistication and penetration increases. Technology also influences the composition of the work force and the profile of skills in demand.

As productivity grows, fewer workers produce more. American agriculture is a fine example. Less than 3 percent of the population are now engaged in agriculture in the USA. Yet, they produce many times the output produced a century ago by 30 percent of the population. Per capita the rise in productivity is even more impressive.

II. Chaotic Behaviour

All the Malthusian and Lumping models assume that pension and health benefits adhere to some linear function with a few well-known, actuarial, variables. This is not so. The actual benefits payable are very sensitive to the assumptions and threshold conditions incorporated in the predictive mathematical models used. Even a tiny change in one of the assumptions can yield a huge difference in the quantitative forecasts.

III. Incentive Structure

The doomsayers often assume a static and entropic social and economic environment. That is rarely true, if ever. Governments invariably influence economic outcomes by providing incentives and disincentives and thus distorting the "ideal" and "efficient" market. The size of unemployment benefits influences the size of the workforce. A higher or lower pension age coupled with specific tax incentives or disincentives can render the most rigorous mathematical model obsolete.

IV. Labour Force Participation

At a labour force participation rate of merely 60% (compared to the USA's 70%) - Europe still has an enormous reservoir of manpower to draw on. Add the unemployed - another 8% of the workforce - to these gargantuan numbers - and Europe has no shortage of labour to talk of. These workers are reluctant to work because the incentive structure is titled against low-skilled, low-pay, work. But this is a matter of policy. It can be changed. When push comes to shove, Europe will respond by adapting, not by perishing, or by flooding itself with 150 million foreigners.

V. International Trade

The role of international trade - now a pervasive phenomenon - is oft-neglected. Trade allows rich countries to purchase the fruits of foreign labour - without importing the laborers themselves. Moreover, according to economic theory, trade is preferable to immigration because it embodies the comparative advantages of the trading parties. These reflect local endowments.

VI. Virtual Space

Modern economies are comprised 70% of services and are sustained by vast networks of telecommunications and transport. Advances in computing allow to incorporate skilled foreign workers in local economic activities - from afar. Distributed manufacturing, virtual teams (e.g., of designers or engineers or lawyers or medical doctors), multinationals - are all part of this growing trend. Many Indian programmers are employed by American firms without ever having crossed the ocean or making it into the immigration statistics.

VII. Punctuated Demographic Equilibria

Demographic trends are not linear. They resemble the pattern, borrowed from evolutionary biology, and known as "punctuated equilibrium". It is a fits and starts affair. Baby booms follow wars or baby busts. Demographic tendencies interact with economic realities, political developments, and the environment.

VIII. Emergent Social Trends

Social trends are even more important than demographic ones. Yet, because they are hard to identify, let alone quantify, they are scarcely to be found in the models used by the assorted Cassandras and pundits of international development agencies. Arguably, the emergence of second and third careers, second families, part time work, flextime, work-from-home, telecommuting, and unisex professions have had a more decisive effect on our economic landscape than any single demographic shift, however pronounced.

IX. The Dismal Science

Immigration may contribute to growing mutual tolerance, pluralism, multiculturalism, and peace. But there is no definitive body of evidence that links it to economic growth. It is easy to point at immigration-free periods of unparalleled prosperity in the history of nations - or, conversely, at recessionary times coupled with a flood of immigrants.

So, is Le Pen right?

Only in stating the obvious: Europe can survive and thrive without mass immigration. The EU may cope with its labour shortages by simply increasing labour force participation. Or it may coerce its unemployed (and women) into low-paid and 3-d (dirty, dangerous, and difficult) jobs. Or it may prolong working life by postponing retirement. Or it may do all the above - or none. But surely to present immigration as a panacea to Europe's economic ills is as grotesque a caricature as Le Pen has ever conjured.

Europe’s Refugees and Immigrants Fatigue (Brussels Morning)


Greek coast guard officers were caught on camera by the New York Times transferring asylum seekers - including women and children – to a boat at sea and then abandoning them to their ineluctable fate on a raft.


Migration from the Mediterranean to Europe often ends in death. Refugees are fleeing conflict, persecution, and, above all, hopeless poverty. They do not seek to improve their lot – they want to have a lot to start with. Many women consent to be trafficked just to extricate themselves from their domestic inferno.


Europe is focusing its efforts, such as they are, on defensive “security”. There is no real, coordinated, strategic attempt to tackle the root causes of immigration because sending hapless refugees to their death is way cheaper than mitigating penury or resolving conflicts in their home countries.


For example: the budget of Frontex, the EU’s border control agency has quadrupled to 24 billion euro in 2021-7. More than 30,000 met their deaths at sea or are missing since 2014, according to the IOM (International Organization for Migration).


Stereotypes are often wrong and it is no exception when it comes to migrants: their involvement in crime and social unrest is not higher than the general population’s. One is left wondering who is churning out these convenient and self-justifying Trumpian prejudices, cui bono.


Moreover: the EU is working closely with rogue states and quasi-militias in countries like Libya and Tunisia to wall off immigration. Values like democracy, free speech, human rights, and the rule of law be damned.


Immigrants are corralled by the coast guards of the very polities they have fled and held in concentration camps, aka detention centers, in violation of a bevy of principles of international law (such as non-refoulement).


Such self-defeating choices result in a panoply of far right and alt right mindsets: xenophobia, racism, euroskepticism, and anti-Semitism.


Recently, these foul attitudes have been extended to apply to Ukrainian refugees. The impact on the labor supply of these victims, displaced by Russia’s savage aggression, is far more immediate and akin to a sugar rush: 4 out of 8 million are of working age. Many are high-skilled women with children and endowed with a college degree.


Contrary to populist messaging, immigration enhances GDP in the long run – especially in developed countries. But, in the short term, immigrants compete with locals for employment opportunities and scarce economic resources.


Had the EU acted rationally, this is what it would have done:


It should establish a few immigration hubs and redistribute incoming flows to all members of the EU according to their population and GDP per capita.


It should invest in economic development and conflict mitigation in the countries of origin.


It should establish worker migration programs on European soil (including for temp labor and gigs) and provide humanitarian and family reunion residency visas as well as accelerated pathways to citizenship.


It should open distance learning campuses of its major higher education institutions where immigration originates.


It should establish safe, formal, and legal migration routes to Europe with EU-trained guides and forward application processing and visa granting (consular) centres. This step alone is likely to decimate human smuggling and human trafficking.


Migrants availing themselves of the aforementioned routes should be immediately offered welfare benefits, education, healthcare, legal aid, and employment opportunities, and a clear, irrevocable trajectory to residency and citizenship.


The EU must take over the management and financing of all the refugee detention centres in Africa and Asia. It should also compensate host countries for their hospitality, however coerced or reluctant it may be. It should provide economic and humanitarian aid as well as reskilling programs for local labor faced with competition from a burgeoning immigrant population.


Above all, the EU must abolish the Dublin Regulation. Immigration is a Europe-wide systemic problem, not to be dumped on frontline states such as Italy or Greece.


Finally, search and rescue operations must be augmented and financed centrally. Immigration is not going anywhere any time soon. Europe is rich. Its neighbors across the seas are poor. End of story. Better accept reality and cope with it in a mature way and on a long-term, prophylactic basis.


Compassion Fatigue: Ukrainians Not Welcome (Brussels Morning)


This unsavory turn of events has been predicted long ago: compassion fatigue, the point in time when Ukrainian refugees become a burden rather than welcome guests, subject to outpourings of compassion.


The maximal geopolitical and military positions of both Russia and Ukraine preclude any diplomatic resolution of the conflict. Mind you, Ukraine is the victim here, so enforced symmetry would be immoral. Morally, Russia has to give.


But the indolent, decadent, and sated West is fatigued. The novelty wore off as did the self-congratulatory feel good grandiose factor. The whole conundrum has lost its jaded entertainment value. Time to move on to another reality TV show.


The recent events in Czechia reify this Europe-wide self-indulgent mood. A Roma man was murdered by a Ukrainian newcomer. This has been only the latest in a string of bloodied skirmishes between these two minorities.


Central Europe – from Romania to Poland – has absorbed the brunt of the influx of Ukrainians displaced by Russia’s criminal aggression. Ill-equipped to deal with such a deluge, governments relied on civil society NGOs to cater to the needs of these refugees.


In some destinations, Ukrainians have become the largest minority, supplanting long-vested interests of other groups and upsetting the apple cart.


The anti-Western fringes in many European polities are anti-Ukrainian, even pro-Russian. In a grotesque turn of events, Czechia’s virulently xenophobic and white supremacist far right is now pro-Roma, casting the long-abused and discriminated against minority as the victim of the Ukrainian influx. The enemy of my enemy and so on.


This might be a sinister divide-and-rule tactic, pitting one deprived group against another and the Roma against their erstwhile champions, the not-for-profit sector.


We are beginning to witness protests in Europe against the vast resources diverted to the conflict in Ukraine. People advocate “neutrality” (codeword for surrender to Russia’s agenda).


Many of these demonstrators parrot Kremlin nonsense propaganda on social media. Others seethe with resentment and envy at the generous aid and privileges granted to the Ukrainian influx.


These perks were never as much as imagined by the indigenous and indigent Roma who are largely non-white: shockingly, about a third of the Roma in the most deprived areas have still to gain access to clean water.


The truth is that the war in Ukraine has reverberated far afield. For example: housing was rendered unaffordable in large swathes of the continent as real estate got snatched by homeless refugees. The Ukrainians also crowded out Roma and locals from certain McJobs.


The EU provided Ukraine with 77 billion euros in aid (even more than the USA) and has pledged another 72 billion over the next 4 years. The total annual budget of the EU has never exceeded 180 billion. It is a debilitating undertaking.


Such glaring favoritism is radicalizing mainstream politics. The influence of the far right is surging even in pivotal countries such as Italy and France. Tidal waves of immigrants, refugees, and asylum seekers only exacerbate tensions.


Discrimination against non-whites and non-Europeans and in favor of white Europeans such as the Ukrainians is grating. Glaringly, Ukrainian Roma are treated way worse than their whiter compatriots.


The war of attrition in Ukraine is beginning to fracture the united anti-Russian front of the West. Should it linger, cracks will appear in the heterogenous societies of the European Union. Support for Ukraine is contingent, by no means an immutable geopolitical given.


Zelensky is surviving on borrowed time. In the absence of a breakthrough military offensive, Ukraine will be cajoled and then coerced by its ostensible allies to partake of diplomacy.


Ours is a changed world: trench wars are a thing of the past. Attention spans are limited. The news cycle is merciless and dysempathic. Fake news are the only news. Largesse and magnanimity are nothing more than conditional virtue signaling. Patience is running thin and tempers high.


Sooner or later, blood on a massive scale will be spilled as Ukrainian refuges all over Europe are surrounded and hounded by their economic competitors and ideological rivals.


Even if Putin were to lose power, the alternatives are predatory scumbags like Prigozhin. A civil war in Russia is in no one’s interest, not even Ukraine’s.


Life is the sum total of injustices and losses. Russia has illegally invaded a neighboring sovereign country and seized its lands. In an ideal world, these adverse outcomes should be fully reversed and Ukraine restored.


But this is a world ruled by psychopathic narcissists on both sides of the aisle. Might is again becoming right and democracy is scarcer by the day, even in the United States and Israel.


A great leader snatches victory from the jaws of defeat and mobilizes his nation to accept the ineluctable and make the best of it: lemonade from lemons.


It is time to call it a day. Russia is much weakened in some ways. This should be enough of a victory for the brave nation of Ukraine.





Also Read:

Migration and Brain Drain

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