Friday 25 February 2005

Pic of the day: Competition is at the heart of modern economies. (Screenshot from the anime Mamotte Shugogetten.)

Solidarity hits home

This is about Norwegian politics and economy, but I think it might be of interest for any rich country, which is where most Internet users still live.

"Solidarity" was also the name of the national labor union in Poland, which played an important role in preparing the country for rising up against a repressive "communist" regime as soon as the military threat from the USSR faded. In all fairness, the Catholic Church in Poland may have done as much to instill this mindset, but the two were cooperating, strange as this may sound. Since then, many things have happened, among them that Poland has become part of the European Economic Area. So is Norway, although we are not a member of the European Union.

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Norway is richer than western Europe except Luxembourg, but not amazingly so. Yes, wages are higher, but so are prices. This holds true for almost all goods and services except computers. For alcohol there is an extra tax on top of this, a tax so high you are basically fined for drinking, which is also the intention. Since most people from Denmark southward drink some amount of alcohol in their daily life, the Norwegian practice is shocking and repulsive to them. So we haven't exactly had a flood of work migrants from these countries, even though the number of jobless in Germany is around the same as the total population in Norway. It is simply not worth moving and learning some of the language when you can live comfortably at home. Remember, in Europe you don't go hungry to bed just because you don't have a job. The State provides. The State giveth and the State taketh away, in the form of taxes. But there is no desperation.

Poland, on the other hand ... it is also a welfare state of sorts, but the level of income – whether employed or not – is far below ours. And there's a lot of people. And they're just diagonally across the strait from Norway, meaning they can get here by ferry. And they do, now that we have acceded some treaty that makes it OK. They work particularly in the construction sector, where you don't need to talk a lot but you need to work a lot. And they work for half the wages here, which is still twice the wages there, or perhaps a bit more. So everyone is happy. We increase the standard of living in Poland, since they take some of the money with them home (I doubt they buy their alcohol here at least). They increase the standard of living in Norway, as construction costs go down, leaving us with more money for other things.

But how long was the snake in paradise? Norwegian workers soon started to worry. Right now there is more than enough to do for everyone, since we're in one of our many booms again. But when things quiet down, who will the employer keep: The ones who work for half pay, or the ones who do the same work for full pay but have a name that is easier to pronounce? The answer was obviously pretty disturbing, because there was suddenly a lot of noise about how unfair it was to pay these guys so little. When in Norway, be paid as a Norwegian, say the labor unions and the political parties that try to please them.

Of course, if the pay is the same, it is suddenly not so very appealing to have a worker who, when you try to explain something in more detail, just looks at you and says "Zlotych?"

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This is a conundrum, isn't it? Allowing work migration raises the standard of living for the majority in both nations, but it does so at the expense of certain parts of the population. In Norway, it is the workers who don't need to do much talking. In Poland, if they do this with enough rich countries, there will be a shortage of the same workers.

In the long run, of course, the effect would be that wages in Norway would rise more slowly, or not at all, or even fall gradually over time. Meanwhile, in Poland the wages would rise to keep some workers at home and because there is more money sloshing around, seeing as it keeps flowing in from abroad. So over time, the difference between the countries would fall, until it is like the difference between Norway and Germany or France today – a difference, but not enough to make people bother with migrating.

Of course, by then Turkey is probably a member of the European Economic Area...