Thursday, March 08, 2007

You can never have too many

Bill Gates says we should open our doors to skilled workers:

Gates calls for 'infinite' visas

Microsoft Corp. Chairman Bill Gates told Congress on Wednesday that the United States should welcome an ''infinite'' number of high-skilled foreign workers to fill engineering, computer programming and other jobs that otherwise would go vacant.

Employers face a ''critical shortage'' of high-tech workers, he said. ''There is only one way to solve that crisis today: open our doors to highly talented scientists and engineers who want to live, work and pay taxes here.''

As I have said before, there is a strong case for allowing more skilled workers into the United States. They would pay more in taxes than they receive in government services. And by increasing the ratio of skilled to unskilled workers in the economy, they would reduce the wages of the skilled compared to the wages of the unskilled, thereby reducing U.S. income inequality. In other words, from a U.S. perspective, the economic pie grows larger, and the slices are divided more equally. More efficiency and more equality--a rare twofer.

This is not, however, a Pareto improvement. U.S. skilled workers may end up losers, as they would under almost any policy that reduces inequality. The fact that there would be more skilled workers to share the cost of government would, however, offset to some degree the fall in welfare from the downward pressure on skilled wages.

More troublesome, from an cosmopolitan ethical perspective, is that unskilled workers abroad might end up losers. That is, if skilled software engineers leave India for Silicon Valley, the unskilled workers left behind in India could well be worse off. Allowing more skilled workers into the United States might exacerbate global inequality, even if it enhances global efficiency.