Harvard CID stumbles into the sense of us in its policy engagements with governments
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We know diversification, extending production into more complex and higher value added goods and services, is they key to the process and development. And yet diversification implies doing things you currently don´t know how to do. Countries need to add new capabilities, which they cannot possibly have. We also know that it is easier to “move brains” to new locations, than to move knowhow into brains, i.e. moving experienced workers into a new location is faster than building experienced workers. Is this easier or even feasible to do? We find this is highly contingent on the “Sense of Us” as it regards policy areas like immigration and business travel. The "Sense of Us" is the collective illusion defining a place sense of who they are. Here we present three examples of three different policy engagements in Panama, Saudi Arabia and Chiapas (México), to show how did we stumble into the sense of us enthuse places, and how understanding it and be able to shape in a more inclusive way is cornerstone in the efforts to develop and grow out of poverty.
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Harvard CID stumbles into the sense of us in its policy engagements with governments
- 1. CID stumbles into the sense of us in our policy engagements Miguel Angel Santos @miguelsantos12
- 3. Panama: One of the top-ten fastest growing economies between 2005 - 2015 Gross domestic product per capita (constant US$ 2005)
- 4. Panama: Growth has been driven by a modern exportable service sector Export of services per capita (US$ million)
- 5. Panama: The modern service sector is skill -intensive
- 6. Ley de Sede de Empresas Multinacionales (Law 44) attracted more than 120 regional headquarters Special Economic Zones Ciudad del Saber Technology Park (2000) Panamá-Pacífico Industrial Park (2007)
- 7. Immigration regulations keep know-how locked into MNC and SEZ and prevent the diffusion of know -how and technology spillovers • 27 occupations legally restricted to immigrants • List of 50 countries considered national security concerns subject to (“Authorized visa”) • 10% cap of foreigners in the payroll (out of the SEZ and MNC) Restrictions to potential Immigrants Restrictions to Knowledge diffusion • Years spent on MNCs under Law 44 and SEZ do not count for residence purposes • Visas revoked the moment the expat ceases to work in the MNC • Expats dependents do not have work permit • Firms moving on from innovation to commercialization risk being expelled from City of Knowledge
- 8. H igh w age - premiums t o f oreigners across all indust ries/ prof essions indicat e t hat t alent is one of t he most binding const raint s t o grow th Wage-premium to foreign workers
- 9. R est rict ions t o high - skilled immigrant s and know ledge dif f usion are not helping t he Panamanian w orkers Immigrants flows and Panamanian wages 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Fuerza laboral panameños Panameños de baja calificación Panameños de alta calificación ChangeinwagesofPanamanianworkersassociated toanincreaseof10ppinthestockofimmigrants Total Panamanian labor force Low-skilled Panamanian workers High-skilled Panamanian workers
- 10. Panama w ant s t o be like H ong - K ong and Singapore, but seems unw illing t o support t he levels of immigrat ion of t hese count ries Stock of immigrants (% of the labor force)
- 11. “US” VS. “THEM”
- 12. Saudi Arabia: Foreigners account for 83% of private employment Composition of the Private Sector Saudis 17% Expats 83%
- 13. Contrary to Panama, foreigners earn much lower salaries than Saudis
- 14. Saudi Arabia´s minimum wage is too high for its level of complexity Saudi firms must compete in wages equivalent to those of Belgium, the Netherlands and France – economies with much higher economic complexity SAU
- 15. Are foreign workers substituting Saudis and “stealing their jobs”?
- 16. We find strong evidence that foreign workers are complement to Saudi workers – not substitutes 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 ChangeinSaudiwages(%) Effect of a 10 pp increase in the share of non-Saudi workers on Saudi wages (within a firm) -0.025 -0.02 -0.015 -0.01 -0.005 0 0.005 0.01 0.015 0.02 0.025 0.03 Changeinprobabilityoffirm-exit(%) Effect of a 10 pp increase in the share of non-Saudi workers on the prob. of a Saudi leaving the firm Higher share of immigrants in the firm is associated with significant higher salaries for Saudis No significant impact of immigration on the likelihood of Saudis losing their job
- 17. But there are many restrictions to foreign workers, which are based on the wrong assumption of substitutability Foreign workers: • Cannot own businesses • There is no permanent residence and no path to citizenship • Cannot own land • Cannot move across businesses without permission of the owner • Restrictions on bringing their family along Following oil price decline: • New taxes on foreign workers to raise government revenues Restrictions to the accumulation of knowledge
- 18. As a result , average job tenures for foreign w orkers is just 23 months 13.8 22.5 13.5 20.8 0 5 10 15 20 25 Saudis Immigrants Women Men Average job spells in Saudi Arabia labor market (months)
- 19. “US” VS. “THEM”
- 20. • 24% of the people in C hiapas belong to an indigenous gr oup, and oc c upy 50% of ter r itor y • Indigenous c ommunities ar e autonomous under Law of U s os y C os tumbr es i.e. land is c ommunal Tzotzil (20%) Tzeltal (44%) Ch´ol (10%) Tojolobal (10%) Mame, Mocho, Kakchiquel (8%) Zoque (8%) • Thes e tr ibes ar e quite dis tinc t fr om eac h other : differ ent or igins , differ ent dialec ts , differ ent gov er ning r ules
- 21. S trong ba r r ie rs to migra nts • Communal property is los t upon family migr ation • H efty fines impos ed on the family of migr ants
- 22. In spite of being poor, the chiapanecos are less prone to migrate 6.18 6.74 3.42 2.28 3.26 1.42 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 Total Urban Rural Migration rates (per 1,000 inhabitants) Rest of Mexico Chiapas
- 23. Those w ho manage t o migrat e, earn as much as any ot her Mexican migrant 0 20 40 60 80 100 120 140 Resto de Mexico Chiapas Total 100.0 67.2 15.1 51.6 115.1 118.8 * Monthly income, controlling for years of schooling, quality (ENLACE), experience, gender and indigenous. Monthly Income Migrant Premium Total monthly income Rest of Mexico Chiapas Monthly Income Migrant Premium Total monthly income
- 24. The absence of public transportation operates as a tax on salaries: Preventing indigenous communities to work urban while living rural 300 233 200 120 120 110 75 70 60 50 0 50 100 150 200 250 300 350 Director escuela Maestro de escuela (bilingüe) Trabajadores Prospera Electricista Albañil Ayudante fábrica Pox Otros trabajos (en San Cristóbal) Ayudante albañil Ayudas varias campos maíz/frijol Lavandería Cruzton: Daily salaries and cost of transportation (40 pesos round trip in shared cab) Salario diario Salario día (neto de transporte) 13% 17% 20% 33% 33% 36% 53% 57% 67% 80% Daily equivalent of monthly salaries (30 days) Wage per day Daily wage (urban) Daily wage (net of transportcosts)
- 25. Within indigenous communities, the “ us” doesn ´ t go beyond the f amily Social network of women in Cruztón, San Juan Chamula
- 26. The product space of Chiapas: Somehow a monkey has managed to survive alone
- 27. The product space of Chiapas: Somehow a monkey has managed to survive alone
- 28. Yazaki: The exception that confirms the rule
- 29. The pattern of expansion in Yazaki is highly informative: Move the jobs to where the people are 1,550 direct jobs
- 30. Some thoughts to conclude • Immigrants are like soccer referees • The sense of us is a feeling and –as such– is unlikely to be influenced by policy
- 31. We just see what we want to see…
- 32. Some thoughts to conclude • Immigrants are like soccer referees • The sense of us is a feeling and –as such– is unlikely to be influenced by policy • The way places define their sense of us has a significant impact on their growth potential and their capacity to bounce back from crises
- 33. THANKS!
Hinweis der Redaktion
- The key to growth is diversification into more complex goods. And yet diversification implies doing things you currently don´t know how to do. Countries need to add new capabilities: It is easier to “move brains” to new locations, than to move knowhow into brains, i.e. moving experienced workers into a new location is faster than building experienced workers. But is it easier to do so? We find this is highly contingent on the “Sense of Us” as it regards policy areas like immigration and business travel.
- Panamá is exporting in 2015 US$2,800 per capita of services, very close to OECD levels (US$3,200)
- Panamá is exporting in 2015 US$2,800 per capita of services, very close to OECD levels (US$3,200) Knowledge to develop these services was not present in Panamá, and the education system did not provide (no one wants to study to work in industries that do not exist)
- SEM LAW 2007 and modified in 2012
- including all type of engineers, agriculture scientists, architects, chemists, and educators Incluyendo Albania, Bangladesh, China (excepción vía Ley SEM), India, Indonesia, Líbano, Pakistán, Sri Lanka
- Strong signal that talent and skilled labor is one of the most binding constraints By industry: Controlling for years of schooling, years of experience, gender, ethnicity, and occupation By occupation: Controlling for years of schooling, years of experience, gender, ethnicity, and industry
- Immigrants and Panamanians are not substitutes, they are complements: Restricting immigration flows and knowledge diffusion will not help the Panamanians, to the contrary! In particular, the most benefitted from immigration are the low-skilled workers
- Immigrants and Panamanians are not substitutes, they are complements: Restricting immigration flows and knowledge diffusion will not help the Panamanians, to the contrary!
- Has it been able to leverage this knowledge and diversify?
- Our first results of this work led by Juan Obach find no evidence that Saudis are substitutes for expats; in fact, we find some evidence that Saudis are complements for expats. This would imply that the more Saudi officials aim to reduce the number of foreign workers, the fewer the Saudis that will also be employed as well.
- As Saudi Arabia is forced to adjust to lower oil incomes, foreign workers are increasingly seen as scapegoats, taking jobs that Saudis could hold. And government, in representing “Us” has placed new levies (or taxes) on foreign workers to raise government revenues, with the potential to significantly harm firm profitability for both Saudis and foreign workers. These policies are based on the wrong assumption that Saudi workers act as substitutes for foreign workers.
- Knowhow is not being accumulated due to short job tenure, not being sustained in Saudi Arabia as expats leave, and not being diffused as foreign workers cannot move between firms or into new firms. Estamos Unidos: 4.2 años; 50.4 meses: more than twice more!
- Why is Chiapas poor? A large part of the explanation of Chiapas poverty lies not on their indigenous origins, but rather on the strong disconnect
- 1.15 million out of 4.8 million
- 1.15 million out of 4.8 million
- Large distrust prevails beyond the family, associations or cooperatives to pool assets and increase returns are very unlikely
- In low complexity environments it is less profitable to invest in education, because the ecosystem lacks the complexity necessary to demand and remunerate skills… Modern production requires putting many inputs together in space and time... Developing structure that lower the cost of firms connecting to skills and inputs is a WIN-WIN strategy
- The exception that confirms the rule: Yazaki
- Yazaki is the result of a great effort of the government of Ernesto Zedillo to solve the coordination problems and provide the inputs that allowed modern production to arrive in Chiapas… The government provided subsidies to salaries over the training period of workers, and some financing for the acquisition of the land 22 years later, Yazaki has gone from one plant of 600 workers, to five plants with more than 3,000 employees In Chiapas… Their expansion pattern is indicative of other binding constraints to the arrival of modern production in Chiapas. Yazaki employs plenty of Indigenous labor force, they only need high-school diploma and six days of training to join the production line
- The exception that confirms the rule: Yazaki Bring the letters closer to unemployment Puts up a transport system to bring workers to jobs Introduce them within a work hierarchy and modern production line and they have adapted well
- Immigrants are key to the process of diversification and development, they transport know-how required for countries to move into new economic activities: They are always part of the success growth stories, but are far too easily identified as the evil when things go wrong. There is an asimmetry in the way countries perceive immigration, as there is no gratitude when things go well and they easily become the scapegoat – There must be something about our wiring that makes finding someone to blame for our maladies a highly available (in the brain) notion 2) If there is a country that can tell a success story on leveraging foreigners capabilities for their own good is Panama, and yet it is hard to convince anyone in politics or the common citizen in the streets of that: The collective illusion of us does not result from a process of reflection, to the contrary: It´s a sort of automatic response that is later rationalized (the righteous mind: The elephant and the rider) – - Media and the opinion of leaders and elites surely plays a role in the formation of the sense of us, but falls short to explaining the phenomena.
- It really was tough last night to change those “we” up there instead of “they”
- 3) As we heard yesterday from our highly qualified panel of experts, we are not sure about how this sense of us is formed. There are many theories, and some of them deal with aspects like genes, culture, that are hard to change. But that should not prevent us from trying to understand this phenomena. Given its quintessential impact on the possibilities of countries to develop and grow our of poverty, we think this quest is worth pursuing.