Marianas Variety

Last updateSun, 19 Aug 2018 8am







    Sunday, August 19, 2018-6:12:03A.M.






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Variations: Wealth, scarcity and simple arithmetic

ONE can argue against hiring foreign workers from a nationalist perspective. Perfectly valid and understandable. Popular, too. To say, however, that it will also be good to the economy is not true.  It doesn’t add up. The math is way off.

In the NMI’s case, ending the federal CW program will result in labor shortages involving many job categories that keep the local economy afloat and allow the CNMI government to meet many of its mounting obligations to the local people.

NMI employers will have to hire over 12,000 workers from other territories and states which have more prosperous economies and are paying higher wages but are also experiencing labor shortages. How can the NMI possibly compete with U.S. employers, many of whom also want to hire foreigners due to the lack of U.S. workers for certain jobs? What made us think that over 12,000 U.S. qualified workers would leave their homes, families, friends and loved ones in the states and other territories so they can move to the NMI for construction, hotel, restaurant or other service-oriented jobs and remain here for at least a year or two?

What is the actual experience of PSS, the AG’s office, CHCC, CUC and other agencies that hire from the states and other territories? These agencies pay higher wages and offer more benefits than most NMI private sector employers, and they don’t hire thousands of off-island workers. What are their retention and turnover rates — and why do we believe that the private sector could fare better?

To attract U.S. qualified workers, some insist, the NMI must raise wages to U.S. levels now. Without discussing, again, why government mandated wage hikes usually harm their supposed beneficiaries, I must ask, again: Why is it that U.S. employers in the more prosperous states where wages are already high and are increasing are also complaining about labor shortages and are hiring foreign workers? And what makes us think that suddenly increasing the costs of doing business here won’t make the tourism industry less competitive? And if the tourism industry nosedives what do we think will happen to the local economy — and CNMI government revenue projections?

You cannot improve the local economy by making it costlier to do business here. (Economist Henry Hazlitt: “All this is not to argue that there is no way of raising wages. It is merely to point out that the apparently easy method of raising them by government fiat is the wrong way and the worst way.”)

Depriving the economy of an adequate workforce will also not improve the economy. The non-partisan GAO, in its report, said the same thing. 1 minus 1 equals 0, not 2.

But, some say, foreign workers remit money! Money that should have circulated here is “lost”!

This argument was refuted already…by Adam Smith in the 18th century. It persists because we confuse money with “wealth.” But if money is wealth then governments can simply print a lot of money. And many of them did just that. (Google “hyperinflation.”)

Real wealth, as Henry Hazlitt wrote in 1946, “consists in what is produced and consumed: the food we eat, the clothes we wear, the houses we live in. It is railways and roads and motor cars; ships and planes and factories; schools and churches and theaters; pianos, paintings, and books.”

Wealth consists of things that make our lives easier, better, more comfortable. In return for hiring foreign workers (because there weren’t enough local or U.S. workers), the NMI now has roads, concrete homes, sewers, indoor plumbing, schools, a hospital, clinics, other buildings, caregivers, healthcare services, seaports, airports, telecommunications infrastructure, a power plant, electricity, among many other things that we take for granted.

True, foreign workers remit a portion of their salaries which are not handouts but money they receive in exchange for the work they do here. Said economist Thomas Sowell: “Many economic fallacies are due to conceiving of economic activity as a zero-sum contest, in which what is gained by one is lost by another. This in turn is often due to ignoring the fact that wealth is created in the course of economic activity. If payments to foreign investors impoverished a nation, then the United States would be one of the most impoverished nations in the world, because foreigners took $543 billion out of the American economy in 2012 — which was more than the Gross Domestic Product of Argentina or Norway. Since most of this money consisted of earnings from assets that foreigners owned in the United States, Americans had already gotten the benefits of the additional wealth that those assets had helped create, and were simply sharing part of that additional wealth with those abroad who had contributed to creating it.”

Can you imagine someone telling you to stop buying vehicles because they’re not made in the NMI and because you also have to buy fuel for it which is also not made here? That you must give up electricity and the internet and smartphones and computers, and not buy food, medicines, clothes, appliances, construction materials and services from off-island, and not patronize non-NMI owned airlines? Because those things cause money to leave the NMI instead of staying here where it could circulate…and be as valuable as Monopoly money.

Said Arnold Kling in “Specialization and Trade”: “If we took such sentiments to their logical conclusion and tried to eliminate commerce with strangers entirely, we would have to return to primitive hunting and gathering.”

This may be news for some of us, but living in remote islands means buying and getting a lot of things off-island, including labor and expertise. And that is not a bad thing if you’re not into subsistence fishing and farming.

Incidentally, after getting us the goods, items and services that we need, where do you think all those U.S. dollars that left these islands go? Money, said Adam Smith, is not sent abroad for nothing. As Edward Conard in “Unintended Consequences” has noted, “It’s simple arithmetic; the flow of dollars out of the United States to buy imports must flow back to the United States to buy U.S. exports or assets. [Even] dollars invested overseas by U.S. investors must also flow back to the United States to buy goods or assets….”

Said Henry Hazlitt: “By buying English sweaters they furnish the English with dollars to buy American goods here. This, in fact…is the only way in which the British can eventually make use of these dollars. Because we have permitted the British to sell more to us, they are now able to buy more from us. They are, in fact, eventually forced to buy more from us if their dollar balances are not to remain perpetually unused. So, as a result of letting in more British goods, we must export more American goods. And though fewer people are now employed in the American sweater industry, more people are employed — and much more efficiently employed — in, say, the American automobile or washing-machine business. American employment on net balance has not gone down, but American and British production on net balance has gone up. Labor in each country is more fully employed in doing just those things that it does best, instead of being forced to do things that it does inefficiently or badly. Consumers in both countries are better off. They are able to buy what they want where they can get it cheapest. American consumers are better provided with sweaters, and British consumers are better provided with motor cars and washing machines.”

It was also Hazlitt who said: “Most…policies have been followed under the assumption that there is just a fixed amount of work to be done, a definite ‘job fund’ which has to be spread over as many people and hours as possible so as not to use it up too soon. This assumption is utterly false. There is actually no limit to the amount of work to be done. Work creates work. What A produces constitutes the demand for what B produces.”

The main argument for ensuring that the local economy will continue to have access to the workforce it needs is premised on basic economics. To ensure that the local economy will continue its recovery will also ensure that many local residents can live and work on their own islands comfortably while enjoying the many other opportunities available to their fellow Americans in the states.

But again, that is a policy choice that can be made or not by local residents themselves. These are their islands. It’s up to them.

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