Bryan Caplan  

The Welfare State, Migration, and the Global Race to the Bottom

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I'm now reading the 3rd edition of David Friedman's Machinery of Freedom.  From the new material:
The argument against immigration takes the level of redistribution as given and points out its effect on who migrates where and why. One should also consider causation in the opposite direction, the effect of migration on levels of redistribution. The harder it is for people to move from one country to another, the more politically attractive redistribution is. The possibility of redistribution tends to increase inefficient migration, but the possibility of migration tends to decrease inefficient redistribution.

Consider a government in a world of free migration that is trying to decide whether to increase or decrease the level of welfare. Giving people money may be politically attractive, but collecting the taxes to pay for it is not. A ten percent increase in levels will attract indigents from abroad, swell the welfare rolls, and increase costs by much more than ten percent. A ten percent decrease will cause some indigents presently on welfare to migrate to countries with more generous policies, reducing costs by much more than ten percent. The existence of easy migration makes welfare state policies less attractive, with the result that levels of redistribution are likely to be lower.

While I have not seen this argument used in discussions of international migration, it is a commonplace in discussions of interstate migration. American supporters of the welfare state routinely argue that welfare ought to be federal rather than state, precisely because state welfare is held down by the threat of interstate migration. Indeed, one possible explanation for why the U.S. moved more slowly than European countries towards a welfare state is that European redistribution was by national governments with control over immigration, whereas American redistribution was largely by state governments without such control. [emphasis mine]

Personally, I've long been skeptical that the interstate "race to the bottom" heavily constrains state-level redistribution.  I almost never hear non-economists complaining that out-of-state residents are taking advantage of their state's poverty programs.  Why don't they?  Because modern Americans are Americans first, residents of their states second.  Getting really angry at out-of-state Americans is unAmerican.  The race to the bottom probably operates at a subtle level and in extreme cases, but that's about it.

If my story is right, though, the "race to the bottom" should be much more powerful at the international level.  Non-economists routinely complain that foreigners take advantage of America's poverty programs. And getting really angry at people from other countries is very American.  No offense, Americans; getting really angry at people from other countries is also very French, German, Swedish, British, Danish, Russian, Chinese, and Indian.  Friedman's conjecture should trouble multicultural social democrats.  Libertarians, however, should cheer the misnamed "race to the bottom," because the welfare state is a giant mistake and a grave injustice.




COMMENTS (8 to date)
John Thacker writes:
I almost never hear non-economists complaining that out-of-state residents are taking advantage of their state's poverty programs.

I believe that a version of this has been an issue in some sense in Canada before. There were angry allegations made that Premier Ralph Klein of Alberta bought free bus tickets for Albertans on welfare to go to the more temperate climes of British Columbia.

In general, though, you hear more complaints about out-of-state residents with money moving in than out-of-state people taking advantage of poverty programs. That might have not been true during the Great Migration of blacks out of the South to other states, but that's an exception that proves the rule. (They weren't considered full Americans.)

Scott Sumner writes:

People in my hometown (Madison, WI) complain about poor residents from Chicago moving up to Madison, and then being on welfare. Welfare is not necessarily the only motivation for moving (in my view, it could also be lower crime rates) but they do complain.

Matt H writes:

So the mechanism of action here is increasing bigotry. Against the poor, against the foreigners, against others in general. Sounds like a win for humanity.

Moebius Street writes:

Here in Texas, what I hear constantly is "You folks from California and New Jersey ruined your own states so now you're coming to Texas. Stop trying to implement those same ruinous policies here!"

Jeff writes:

Bryan,

You should craft a bet on whether the influx of migrants into Europe will shrink their famously generous social democracies over the next ten or fifteen years.

I would be willing to grant some decent odds on "no."

Matt H writes:

I'd bet countries would more likely default on their obligations then change them quickly in response to circumstances. We can call it going Greek.

It's really hard to change or get rid of broad based social programs. Smart politicians set them up to be hard to change. Democracies rarely vote them selves fewer goodies.

There is a long history of countries setting up social programs they can't afford.

Floccina writes:

There was some complaining a while back about states paying companies to get welfare cases moved to SS disability.

Hazel Meade writes:

I do hear to an extent that people do this with respect to California and it's relatively generous welfare programs. Possibly with other places like New York too.

There are people who know about and discuss the welfare benefits available in different places and cite them as a reason to live there.

It seems like the places with the most generous benefits also have the highest cost of living though, so it somewhat cancels out. Most of the time, if you're poor, you're still better off living in a low-cost-of-living area and just collecting the lower benefits. The benefit increase isn't enough to justify the higher cost of living, not to mention the moving expense.

The people who do tend to move to California to take advantage of the benefits are generally those who want some specific benefit like free mental health or substance abuse treatment.

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