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Low-Cost Labor, Labor-Saving Technologies, and Climate Change

Posted By Don Boudreaux On January 20, 2014 @ 10:03 am In Environment,Trade | Comments Disabled

Every week brings several hostile e-mails to me in response to posts on Cafe Hayek.  Prompted by my advocacy of open borders and of complete and unconditional free trade, many people accuse me of turning a blind eye to the dangers posed to the American economy by its exposure to low-wage labor – low-wage labor in the form both of low-skilled immigrants and of products produced abroad and imported at low prices into the United States.  Another frequent complaint is of my lack of concern over climate change – change that I believe is best dealt with by free-market innovations, and by adjustments governed by market forces.

It’s not unusual for both of these complaints to be issued by the same person.  When you ponder the matter, this fact is bizarre.

Complaints about low-wage labor are complaints about consumers enjoying greater, easier, less-costly access to goods and services.  Of course, people who issue this complaint don’t think it bad in and of itself that consumers enjoy greater, easier, less-costly access to goods and services.  Instead, their concern is for the workers who produce these goods and services.  Having now to compete against lower-cost sources of supply obliges these workers to find other employment if they wish to avoid reductions in their incomes, and finding other employment typically takes time and is sometimes quite difficult.

Those who think that low-wage labor is a threat to the American economy therefore conclude that people are generally richer and economically more secure the more difficult it is to produce desirable goods and services – the greater are the amounts of valuable resources, especially labor, that must be used to produce the things that consumers demand – the more costly it is to supply ourselves with what we want.

Of course, this belief is an ages-old economic fallacy, one in which consequences are confused with causes, and one which also blinds its adherents to much that is unseen.  This fallacy fuels the popular thirst for endless draughts of protectionism, Keynesianism, and other poisonous policy elixirs.

But this complaint about low-wage labor is also at odds with concern over climate change.  Concern over climate change is concern that maintaining our standard of living will become more difficult, more challenging, more costly.

If change that lowers the cost of producing some bundle of goods and services is harmful (as is claimed when the topic is low-wage workers) – and if (as is also claimed) policy changes, such as higher tariffs, that counteract these lower production costs are desirable – why is not climate change at least potentially desirable?  Climate change will, to some degree, counteract the economic changes – such as improved technologies, more global trade, and a deeper worldwide division of labor – that are today pushing the costs of producing goods and services ever-lower.  (And won’t climate change also create new economic opportunities and new jobs?)

To those of you who worry about American (or first-world) exposure to low-cost labor (or to labor-saving technologies), and worry also about climate change, I ask: Isn’t it plausible that the ‘negative’ economic effects of the former will at least to some degree be offset – and perhaps even overwhelmed – by the ‘positive’ economic effects of the latter?

(I use scare-quotation marks, in the previous paragraph, around ‘negative’ and ‘positive’ to indicate that I am not among those who believes that greater access to low-cost labor and labor-saving technologies is in any way ‘negative’ – and, hence, I do not believe that policies or events that raise production costs are in anyway ‘positive.’)

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