No Free Tickets

A couple of weeks ago Gary Becker – a Nobel-prize winning economist –made a speech at the Institute of Economic Affairs in London, proposing a pretty radical solution to the rich world’s immigration woes.

His core proposition is, there is currently no price that matches supply and demand of work visas.  Vet out criminals and terrorists, and visas can be assigned to those willing to pay the most for them.  In theory, someone who has the most to gain from immigrating (say, a younger person, with more years to recoup the expense; a well-educated person whose income is most likely to significantly increase) would be willing to pay the most. 

The US currently receives about 1million legal immigrants a year.  Charging them $50,000 each for the right to immigrate would provide an additional $50 billion to the government coffers.  Not enough to save the banking industry, but about enough to bail-out AIG or GM.  And probably enough to make people take notice, especially in the current times.

Any radical position on immigration policy is going to attract a lot of criticism, and many people have been poking holes in the idea.  There are serious question marks and potential undesirable outcomes.  Does it really provide a better market mechanism than a points-based system (as already used in Australia, NZ, Canada)?  What skills alignment is there (ie wealthy retirees may like the idea of sitting out their years in Florida, but how does that benefit the US workforce)?  What about talented people who are not able to front up the cash?  Becker suggests a government-loan scheme, or even a form of indentured servitude to employers until loans are paid off. 

Regardless of the applicability of the scheme, I think it's healthy that there can be some intelligent public debate around such an emotional issue.  Here's to Mr Becker for putting his neck on the line.

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Image © Kazuhiko Yoshino

Helluva Week for Optimists

Those looking for signs of a sustained economic turnaround in the US - or just any sign from Europe other than a graceful slide into summer - were somewhat disappointed last week.

The US Labor Department's Bureau of Labor Statistics released their May report.  On a rough-read basis, 431,000 new jobs for the month sounds impressive; unfortunately nearly all of those were temporary hires by the US Census Department.  The whole private sector only accounted for 41,000 new jobs.  This begs the question, surely the US Census Department could conduct annual or even bi-monthly surveys?  A single temporary spurt once every 10 years is nowhere near enough to turn the unemployment situation around.

At the same time, there was some exciting news from Hungary's week-old new government.  We all know what happens when someone new comes into a senior role.  They dramatically emphasise the failings of their predecessor, the situation is far worse than anyone thought, anything that seemed positive in fact is neutral at best, etc. This is standard operating procedure to be able to get some breathing space to operate, and claim credit for any good results coming in the future. 

Unfortunately when Viktor Orban's government took this approach last week, suggesting that the 2010 Hungarian public debt could actually be double current estimates (7.5% vs 3.6%), and drawing parallels between themselves and - gasp! Greece! - the markets went ballistic.  In what one can surmise was a weekend of phone activity sufficient to make a material impact on Magyar Telecom's quarterly earnings, Orban's government has now basically made a 180 degree turnaround.  Don't worry, it was all a big mistake. We're new at this. Sorry everyone.

Too late though.  Combined with the rosy news of the Euro-zone's slug-like economic growth, this was enough to send global markets into a spin, with the Dow dipping below 10,000 (again), a pattern repeated across the timezones.  Another lively week seems imminent.

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Image © Todd Wheatland - Blogus Picturas