It is tempting to think of the globalisation of the labour market as a zero-sum game in which Mrs Kamal in Pakistan is benefiting at the direct expense of Ms Vetter in America. But economists point out that such calculations suffer from the “lump of labour fallacy”—the belief that there is only a fixed amount of work to go round. A better explanation, they say, is the theory of comparative advantage, one of the least controversial ideas in economics, which suggests that free markets make the world better off because everyone can concentrate on doing what they are best at.
All the same, a global labour market will not make every individual in the world better off: there will be losers as well as winners, and they may put up stiff resistance to change if the losses prove too painful. For instance, total global GDP could double if all barriers to the free movement of labour were removed, argues Michael Clemens in a recent paper, “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?”. Yet the political implications of such mass migration make it improbable that governments, especially in rich countries, would unconditionally open their doors.
Compared with previous bursts of global integration and technological upheaval, the changes now taking place in the labour market may produce an unusually large number of losers, partly because they have coincided with a particularly deep recession and partly because they are happening exceptionally fast. The priority for policymakers must be to keep the number of losers as small as possible.