Baywatch and protectionism (Do foreign workers steal domestic jobs?)

This article provides an interesting example of issues raised by protectionism, describing a summer guest-worker program in the US, under which young foreigners take short-term jobs in the US at the expense of higher unemployment among young Americans. A particular example given is lifeguards at swimming pools. Employers admit a number of reasons for preferring guest workers to hiring more Americans, such as cheaper labor (no need to pay high taxes), greater availability during the season, lower demands posed by the workers, and a shortage of Americans willing to work as lifeguards etc.

Protectionism here is expressed by a visa policy that restricts foreign workers from competing in the labor market. Thus, guest-worker programs are the easing of protectionism. This style of protectionism is very common and therefore often overlooked; indeed the very existence of nation-states aims at giving a group of people (the nationals of a particular state) various advantages over foreigners, particularly, in access to the domestic labor market. While many countries practice visa-free regimes for tourist visits, working invariably requires obtaining a visa. Even within the European Union employers are encouraged to prefer domestic workers.

Getting back to the situation at hand, there are four different groups of actors involved: the companies/employers, consumers of services (i.e. those who are using swimming pools), domestic workers, and foreign workers. Companies and the two types of workers are engaged via the labor market.

Economically, the outcome of hiring is most efficient if the domestic and foreign workers have equal access to the labor market so companies can employ the maximum number of workers under the most profitable conditions and provide cheaper and higher quality services to their consumers.

Socially the economically efficient outcome is not necessarily the best. One might, for example, see higher social value in ensuring maximum domestic employment while disregarding foreigners. Tightening visa requirements may force companies to put more effort in finding domestic labor, and to offer better salaries/work conditions/employment periods in order to hire a sufficient number. The downside of this outcome is that it will hit negatively at the domestic producer (i.e. the companies/swimming pools), as well as at the domestic consumer, who will have to pay a higher price for using a swimming pool, or be at greater risk of drowning due to the shortage of lifeguards, or face the closure of some pools due to their economic inefficiency or lack of lifeguards.

What I find most interesting is how this simple case raises uncomfortable questions regarding the traditional “right vs. left” political views as they exist in the US and Europe.

In particular, the moderate “left” (represented, for example, by Barack Obama and François Hollande) advocates government involvement to improve market outcomes, along with more compassion towards foreign workers (i.e. potential immigrants). Here, government interference (i.e. tightening visa rules) would improve the market outcome domestically, but hit immigrants.

Conversely, the moderate “right” (Mitt Romney and Nicholas Sarkozy) would find it hard to reconcile a pro-free-market position with its tougher views on immigration.

In this light it is not surprising that the positions of nationalists (such as Marine LePen) and Communist-like movements (Jean-Luc Melenchon) are often so similar and isolationist: the right sees protectionism as a way to hit hard against disliked immigrants, whereas the left sees protecting domestic workers as a convenient justification for striking “the rich” (i.e. the companies).