Crossing Borders Brings Great Wealth
Darwinian competition makes workers more productive in developed countries.
Posted Aug 28, 2018
Developing countries are poorer because their workers are less productive. When inhabitants move to a developed country, they become instantly wealthier.1 Their productivity rises and they earn substantially more. How is this miracle accomplished?
In some ways, there is no mystery about why immigrants earn more. They typically move from a place having a weak labor market to one where workers are in greater demand and the cost of labor is bid up. Yet there is probably much more to the story than this. A developed economy is a well-oiled machine capable of churning out more products per unit of time.
Underlying reasons include better technology and infrastructure and more effective management techniques. Then there are changes in the workers themselves that range from health and nutrition to education, job opportunity, and work motivation.
Technology and Infrastructure
In the early days of factory production, mechanization of industries such as cloth production meant that the average worker could produce much more than had been true for the hand looms used in earlier times. This raised industrial profitability and wages.
When workers cross borders to work in developed countries, they reap the rewards of more sophisticated technologies and better developed infrastructure, such as good roads and efficient transportation via cargo containers, railroad, and air.
Technology alone does not make workers more productive if they are unfamiliar with how to use it and if their efforts are not well organized by effective management.
Both issues are illustrated by the mixed results of mechanizing cloth production in India early in the twentieth century.
Astonishingly, cloth production per worker did not improve for machine looms compared to mechanical ones.2 Indian plants hired far more workers, but the weavers spent most of their time unengaged in productive work. According to economist Geoffrey Clark:
A substantial fraction of workers were absent on any given day, and those at work were often able to come and go from the mill at their pleasure to eat or to smoke. Other workers would supervise their machines while they were gone, and indeed some manufacturers alleged that the workers organized an informal shift system among themselves. The mill yards would have eating places, barbers, drink shops, and other facilities to serve the workers taking a break. Some mothers allegedly brought their children with them to the mills. Worker's relatives would bring food to them inside the mill during the day. “There was an utter lack of supervision in the Bombay mills.” One manager even stated that the typical worker “washes, bathes, washes his clothes, smokes, shaves, sleeps, has his food, and is surrounded as a rule by his relations.”
Low work motivation trumped technology in the lackluster productivity of Indian textile mills. India was not different from other developing countries where industrialists found it difficult to turn a profit despite low wages.2
So, why might workers be more productive when they cross the border to a developed country?
To begin with, affluent societies enjoy better health and have access to an unlimited supply of food. Both these influences increase the amount of biological energy that may be expended in work.3
Just as important as metabolic energy is the psychological effect of living in a country where residents look forward to living long healthy lives that encourages them to work hard and accumulate resources.
Residents of poorer countries live in the present, seeking to enjoy their lives today rather than work for a highly uncertain future. One interesting consequence of this focus in the present is that interest rates are higher.2 Enjoyment of money today is emphasized whereas the same money in a dim and distant future seems a lot less valuable. This mindset is very bad for investment in projects that pay off years into the future.
Being healthy and well nourished are key criteria of successful Darwinian competition. The main other components are social competition over money and status, and reproductive competition that affects male workers more than females as they vie for the romantic interest of women.
In societies having social mobility, workers are more ambitious and work harder to rise in status. Successful men are more desirable for marriage and men work harder if there is a scarcity of women.
Matters were very different in societies of the past where a person's economic fate was determined by their birth. Peasants worked primarily to satisfy their basic needs and once that limited goal was accomplished, they slacked off.
The same principle holds in societies having large extended families. The family operates as a collective where every individual is guaranteed basic subsistence and any surplus is distributed throughout the group whether they work or not. This saps work motivation.
My analyses found that these four aspects of Darwinian competition can explain most of the variance in worker productivity in modern societies. People work harder if they succeed in being well nourished and healthy. We are also more productive if we live in small families, and if there is a relative scarcity of reproductive-age women.4
When immigrants cross borders, they are often motivated by a desire to improve their quality of life. They benefit from improved nutrition and healthcare. Thanks to low infant and child mortality, most developed countries have an excess of males (who are more vulnerable to early death). This makes the marriage market more competitive.
My results suggest that human behavior in modern economies is much more affected by Darwinian competition than most social scientists suspect. In addition to higher wages, immigrants find an environment where ambition flourishes.
1 Clemens, M. A., Montenegro, C. E., and Pritchett, L. (2016). Bounding the price equivalent of migration barriers. IZA Institute of Labor Economics, IZA DP No. 9789.
2 Clark, G. (2007). A farewell to alms: A brief economic history of the world. Princeton, NJ: Princeton University Press.
3 Floud, R., Fogel, R. W., Harris, B., & Hong, S. C. (2011). The changing body: Health, nutrition, and human development in the Western world since 1700. Cambridge, England: NBER/Cambridge University Press.
4 Barber, N. (under review). Does Darwinian competition drive worker productivity? A work-motivation approach to the Industrial Revolution.