In the 19th century, most states had relatively few restrictions on immigration. Instead,

Transcription

1 CHAPTER 1 Firms, Immigration and Globalization In the 19th century, most states had relatively few restrictions on immigration. Instead, statesmen argued that to govern is to populate 1 and asked the world to give them your tired, your poor, Your huddled masses yearning to breathe free. 2 Migrants, especially those from Europe but also from the Middle East and Asia, could move legally to almost any country they wanted to as long as they had the money to do so. In fact, the desire for migrant labor was so high that even those who could not afford to move on their own could often receive subsidies from foreign governments or firms aboard to help them move. Compare that openness to immigration, especially low-skill immigration, to today: comprehensive immigration reform has died yet again in the US Congress over whether undocumented immigrants, who are almost always low-skill, have the right to stay in the US; old EU member states like Great Britain and the Netherlands are seeking ways to stop lower-skilled immigration from the Eastern European member states as well as from outside the EU; and 1 Gobernar es poblar. Attributed to Juan Bautista Alberdi, Argentine political theorist and diplomat. 2 Emma Lazarus, The New Colossus. 4

2 Chapter 1 even states like those in the Persian Gulf or Singapore that had recently been relatively open to immigration are seeking to slow the flow of low-skill immigrants. Why is immigration, especially for those with fewer skills, much more restricted today than it was in the 19th century, or even for that matter, than the immediate Post-World War II period? These restrictions on low-skill immigration are even more puzzling when we compare them to policies governing other aspects of the global economy. The same wealthy countries that have put these restrictions into place have greatly lowered trade barriers, including on low-skill labor intensive goods, and have tolerated, and at times encouraged, their firms to offshore production to countries with cheap, low-skill labor. As has been much decried by politicians, this openness to trade and the ability to offshore production has increased competition with foreign workers and led to the loss of good middle class manufacturing jobs. So, why are politicians willing to let their constituents compete with foreign labor overseas but not at home? Scholars have tended to focus on the groups that oppose immigration to explain immigration restrictions. One set has focused on the roll of native labor and labor unions. 3 Native labor dislikes low-skill immigration because immigrants compete for jobs, lowering the wage and benefits that native labor receives. But this argument fails to explain why in the 19th century in most labor scarce countries, labor lost on immigration but won on trade whereas today it has lost trade but has won immigration. Other scholars have focused on the fiscal effects of immigrants and the rise of the welfare state after World War II. 4 Low-skill immigrants (are thought to) use the social welfare state more than natives and thus place a burden on the state. High-skill natives have to contribute more taxes to pay for these benefits and low-skill natives may see their benefits decline as they have to share resources with immigrants. Yet, trade openness and offshoring have led to large-scale lay-offs, putting increased pressure on the welfare state. Athirdgrouphasfocusedonculturallybasedanti-immigrantsentiment, nativism. The- 3 For example, see Briggs (2001). 4 For example, see Hanson, Scheve and Slaughter (2007), Hatton and Williamson (2005a, b), Money (1999) 5

3 Chapter 1 ories on the role of nativism suggest that the earlier higher levels of immigration led to a backlash, as natives and immigrants increasingly came into conflict with each other over jobs, social-welfare benefits, neighborhoods and culture 5 or argue that states have identities that make them more or less receptive to immigrants. 6 While it is clear that nativism is a factor immigration politics, it is less clear when nativism affects policy. Nativism has been ubiquitous throughout history; witness the waves of nativism in the US against the Irish and Germans in the 1840s, against the Chinese in the 1870s and 1880s, against Southern and Eastern Europeans from the 1890s through the 1920s and against Hispanics today. At times nativist sentiment led to policy changes as seen by the Chinese Exclusion Act and at times it has not led to policy changes as seen by the lack of legislation in the 1840s and 1890s. Our current explanations for immigration restrictions, then, are incomplete. Immigration restrictions also create a puzzle for our theories of politics. Usually, we assume that the most powerful interest group gets its way on a policy. Immigration scholars assume that firms want low-skill immigration to have access to cheap labor. In general, we think that firms are powerful interests. So, why aren t firms able to get their way on immigration? Iarguethatthesepuzzlesareconnected. Firmscaneitherbringlabortotheircapital or take their capital to labor. In the 19th and early 20th centuries, trade was more costly due to both technological impediments and, in the last quarter of the century and the Interwar Period, due to relatively high tariffs. Moving production overseas, what I term firm mobility, wasallbutimpossibleuntiltheearly20thcentury,asfirmsdidnothave the communications technology or managerial know-how to operate production far from headquarters. Even then, only a handful of firms could operate in other countries. The only choice that firms had, then, was to bring labor to their capital. After World War II, shipping costs dropped dramatically with the rise of container ships; trade barriers fell; and communications technology made offshoring possible. Firms now could take their capital 5 Zolberg (1989). 6 Freeman (1995). 6

4 Chapter 1 to labor. Given that there have always been those who oppose immigration, firms found it easier to move their capital overseas rather than fight for immigration at home. Once these firms had left, they saw no reason to lobby for open immigration at home. Declining trade barriers also had a secondary effect on immigration policy; they led to the decline of low-skill manufacturing in wealthy countries. Instead of producing low-skill intensive goods like textiles, footwear and toys at home, increasingly these goods were made overseas in countries with cheaper labor by multinational corporations or by indigenous firms. Competition from developing countries forced many firms that produced these lowskill intensive goods in developed countries out of business. Once these firms exited the marketplace, they could no longer lobby for open immigration. Further, their now laid-off workers could be employed in other industries, especially services, decreasing their need for low-skill labor and willingness to lobby for low-skill immigration as well. Finally, technological development has also affected immigration policy. Increased mechanization has allowed firms to do more with less labor. Once firms have mechanized, they less incentive to lobby for immigration. These firms also likely need labor with more skills, making them even less likely to lobby for low-skill immigration. Mechanization can also have ripple effects through the economy. For example, in the US the increase in the use of farm tractors after World War II freed up millions of farm workers, who then were free to move to other industries. 7 These other industries, then, gained access to more labor even without increasing immigration and, so too, were less likely to lobby for immigration. Mechanization, especially of agriculture, may help explain why the US never had a guest worker program on the same magnitude as those in Western Europe after World War II. Once firms lobbying for low-skill immigration decreased, it allowed policymakers to restrict low-skill immigration. Policymakers face competing demands over immigration. Native labor, people concerned with the fiscal costs of immigrants and nativists dislike low-skill immigration (and often immigration in general). Low-skill intensive firms, foreign-born citizens 7 White (2008). 7

5 Chapter 1 and those who like immigration for its cultural effects (cosmopolitans) favor low-skill immigration (and often immigration in general). When low-skill intensive firms have other options besides immigration when they can mechanize or move overseas or when they are forced to close due to increased international competition, they no longer lobby for low-skill immigration. That allows the groups that oppose immigration to have relatively more power in the political system. 8 In the absence of other powerful incentives to keep immigration open, policymakers have restricted immigration. Why study low-skill immigration policy? The argument of this book focuses immigration policy towards low-skill migrants. Why do I focus on low-skill immigration policy? First, the vast majority of actual and potential migrants those who would migrate if they were legally allowed to have been lowskilled. 9 Even today, only 23.5% of migrants have a high level of education; nonetheless, this level of skilled migration is endogenous to the policies in this study without immigration barriers, the share of low-skill migrants would increase greatly. 10 Second, the flows of low-skill migrants tend to be more politicized than flows of high-skill migrants. As survey data has shown, native respondents tend to have much more favorable views to high-skill immigrants than to low-skill immigration. 11 Nor do these preferences seem to be a new feature of politics. In the US, for example, most of the anti-immigrant (or nativist) sentiment throughout its history was targeted towards low-skilled migrants. In the 1840s, there were protests and violence to Irish immigrants, who were at the time among 8 It is an open question as to whether opposition to (low-skill) immigration has increased. Peters and Tahk (2011) find that opposition to immigration in the US has been relatively stable since 1980, ranging between 45% and 55%, and if anything, has decreased since the early 1990s. Nonetheless, political parties that had been constrained on immigration by firms may be able to move further to the right on immigration as firms demands for low-skill immigration has decreased, giving the impression that opposition to immigration has increased. Chapter 7 and 8 discuss how this has occurred in the case of the Republican Party in the US and several center right parties in the Netherlands, respectively. 9 Hatton and Williamson (2005b). 10 United Nations Development Program (2009). 11 Goldstein and Peters (2014), Hainmueller and Hiscox (2007, 2010). 8

6 Chapter 1 some of the lowest-skilled Europeans. In the 1860s-1880s, nativist anger was geared to the Chinese, again among the lowest-skilled immigrants. In the 1890s through the early 1900s, it was aimed at Southern and Eastern Europeans, who again tended to be the least educated and today it is aimed at Hispanic immigrants, again the more low-skilled immigrant group. Therefore, it is politically easier for a politician to support a more open policy towards high-skill immigrants than to low-skill immigration. Further, normatively, it is important to understand why immigration is restricted in many wealthy countries given the benefits of low-skill migration for migrants and their families, developing countries and overall world income. Low-skill migration has many positive effects on migrants and their families and for developing nations; most importantly, as many studies have shown the remittances that migrants send back lead to increased health and schooling outcomes for migrants children, increased investment in farms and small businesses and also have multiplier effects for the overall economy. 12 Migration also seems to lower unemployment, especially among young men who are most likely to migrate or compete for jobs with potential migrants, and therefore can lead to less social strife. Also, the better allocation of productive resources will increase both developing countries and world income. 13 Given the benefits of low-skill migration, we should be interested in why low-skill immigration is so restricted in most wealthy states today. Although it is beyond the scope of this book, it may be that the politics of high-skill immigration are similar to low-skill immigration. On the one hand, there is overall lower opposition to high-skill immigration. 14 This should make it easier for the policymaker to open the door to high-skill immigrants. On the other hand, since the expansion of the Internet, many high-skill jobs do not need to be geographically located in any one country. For example, 10 of the top 15 off-shorable jobs on Blinder s Offshorability Index are high-skill 12 See Brown (2006) and Lopez-Cordova and Olmedo (2005) for a review of the literature. 13 See Hatton and Williamson (2005b) forareviewofmanyofthesestudies. 14 Nonetheless, there is still opposition to high-skill labor among those natives who compete directly with high-skill immigrants, see Malhotra, Margalit and Mo (2013), Peterson, Pandya and Leblang (2012). 9

7 Chapter 1 positions. 15 Companies that rely on high-skill labor therefore may have less need for highskill immigrant labor even though it may be, politically, less difficult to obtain this labor. We might expect, therefore, that increased globalization may further decrease firm and industry support for high-skill immigration. Yet, this decreased support for open high-skill immigration may not translate into similarly restrictive policies on high-skill immigration because of the lower opposition. Immigration as Foreign Economic Policy The argument of this book differs from most theories of immigration policy because it brings political economy back to immigration. I treat immigration policy as a foreign economic policy, affected by trade barriers and firm mobility. Immigration scholars have treated firms willingness to act on immigration as constant and focused, instead, on the factions in the polity that oppose immigration. Instead, I argue that while firms still want open immigration firms want any and all policies that will increase their profits their willingness to fight for immigration has changed. This explanation, then, provides a more complete picture of the politics of immigration. For the border literature on international political economy (IPE), this book brings firms back into the picture. While firms and interest groups had a central place in the early days of IPE, more recently, scholars have turned to examining individual preferences. In part, scholars turned to surveys of individual attitudes because they were relatively easy to use experimental methods, providing a test of our theories free of concerns about endogeneity. Yet, by examining individual attitudes, we have missed a critical driver of policy in many areas firms. Instead, in many areas of IPE, scholars have, like immigration scholars, treated firm preferences and willingness to lobby as relatively static. My argument about how firm preferences and willingness to lobby change with global- 15 Blinder (2007). They are: computer programmer, electrical and electronics drafters, mechanical drafters, computer and information research scientists, actuaries, mathematicians, statisticians, all other mathematical science occupations, film and video editors, numerical tool and process control programmers. 10

8 Chapter 1 ization explains not just immigration but also how globalization might affect all sorts of domestic policies. For example, there have been debates about how globalization affects tax, social and environmental policy. Some argue that trade and firm mobility have led to a race to the bottom, as states lower tax burdens and weaken regulatory standards so that firms can compete. But, there has been mixed evidence as to whether there is a race to the bottom. It may be the case that trade openness and firm mobility also affect firm lobbying over these issue areas as well. In the realm of environmental policy, for instance, we know that trade openness and firm mobility have allowed developed nations to outsource the production of dirty goods to the developing world. Once dirty firms close or move to the developing world, it may be the case that the remaining firms are relatively green and environmental standards can be increased without hurting the bottom line of the remaining firms. Further, this book shows that IPE scholars should take a more integrated view of foreign economic policy. IPE scholars rarely examine how different aspects of globalization influence each other. This chapter bridges the silos by examining how trade and firm mobility affect immigration and touches on how immigration might affect these other areas as well. It highlights, then, that IPE scholars need to take a more integrated view of the world economy. Finally, for policymakers and those who care about increasing the ability of people to migrate from the developing world to the developed world for normative or familial reasons, this book suggests that they need to forge new coalitions on immigration. Policymakers and activists used to be able to count on low-skill intensive firms to act as allies when they wanted to open immigration. But now, the economic rational for open immigration has greatly decreased; those allied firms no longer care about immigration at home or they no longer exist. This may mean that it will be very difficult, although not impossible, to get greater openness on low-skill immigration. Moreover, as more middle-income countries develop, they too will see, and in some cases have seen, the loss of their low-skill intensive firms due to trade or offshoring. These countries too are likely to close their doors to lowskill immigration. This means that at a time when open borders would do much to decrease 11

9 Chapter 1 poverty and provide a safe haven for those fleeing conflict, closed borders will likely be the default. Research Design and Plan of the Book In Chapter 2, I further explicate the theoretical argument of the book. Drawing on models of endogenous trade theory and lobbying models, I consider a model of politics where firms, and other interest groups, have the ability to lobby the policymaker on immigration policy. In the model, interest groups offer to provide political capital for different low-skill immigration policies. The policymaker observes these offers and weighs them against the popular consequences of different immigration policies, determining the optimum policy for the policymaker. I then examine how changes in the economy affect both firms willingness to lobby and the policymaker s choice of a low-skill immigration policy. I first examine how the ability to change technology affects firms and policy; then I examine the effects of trade openness and finally I examine the effects of firm mobility. I incorporate our other major theories on immigration policy into the argument and discuss how these theories augment my own. At the end of the chapter, I discuss an alternative explanation that immigration restrictions are driven by firms desire to use undocumented immigrant labor and the observable implications that allow us to know whether that argument holds empirically. In Chapter 3, I discuss my research design. Political scientists, and social scientists in general, have two major goals when they turn to empirical work: to show that the causal argument holds and show that it is generalizable to many different cases. These two goals often conflict. On one end of the spectrum, experiments show causality clearly due to random assignment, but they are hard to generalize to circumstances outside of the experiment; that is, they are internally valid but may not be externally valid. At the other end of the spectrum in international relations and comparative politics are large cross-national timeseries regression that show arguments are generalizable to many different cases but rarely 12

10 Chapter 1 show casualty; these tests are externally but not internally valid. Instead of using only one of these approaches, sacrificing internal for external validity or vice versa, I use both to show that my argument is both causal and generalizable. I begin the empirics in Part II by examining the generalizability of the argument. In chapter 4, I explain the development of a new cross-national dataset on low-skill immigration policy for 19 countries, covering the 19th, 20th and 21st centuries. One of the major problems encountered when studying immigration has been the lack of comparable, cross-national data on immigration policy. I examine three broad categories of policy: those that control who enters the state; those that determine the rights given immigrants and those that determine how strictly immigration laws are enforced. After introducing the dataset, I explore how different regulations have been used over time to control immigration. I also compare my coding of immigration policy to others in the literature as well as to immigration flows to show the reliability of the dataset. In chapter 5, I use that dataset to show that increasing trade openness and firm mobility have correlated with increased restriction on low-skill immigration in every era of the modern economy since the mid-1800s. Further, the 19 countries chosen are a collection of very different states, including wealthy and middle income states, autocracies and democracies, and small and large economies. The breadth of the data should convince readers that this relationship is generalizable across a myriad of states and time periods. While the cross-national time-series data show that generalizability of the argument, they do not show causality. There is no instrument that can explain trade openness or firm mobility but that does not also explain immigration. Instead, I turn in Part III to case studies to establish the causal relationship between trade openness and immigration policy. In Chapter 6, I examine the micro-foundations of the argument by examining firms preferences and lobbying over immigration. I use data on which industries testify before the US Congress on immigration and data on their lobbying behavior in the US to show that industries that have been more vulnerable to trade and that are more mobile lobby 13

11 Chapter 1 less on immigration, even as they lobby on other issues. Next, I focus on the preferences of three different industries more closely by examining their trade associations in the US: one in textiles, one in steel and one in agriculture. Each of these three industries have, at one point in their history, used a great deal of immigrant labor, but they have varied in their exposure to trade competition and their ability to move production overseas. For each group, I use qualitative and content analysis of their annual meeting minutes and other publications to understand how they have approached the issues of trade, immigration and moving overseas. This chapter, then, shows that firms willingness to lobby on low-skill immigration has changed with trade openness and firm mobility. In Chapter 7, I examine Senate voting on immigration in two different cases in which trade openness and firm mobility are exogenous to the senator. In the first period, from the founding of the Republic to World War II, I examine how the creation of a national market affected voting on immigration. Technological innovations during this time period changed the US economy from consisting of several regional markets protected by distance to one national market. Increased trade openness between the states and increased ability to relocate to areas with lower costs of the production, namely the South, should have had the same effects on immigration policy as international trade openness and firm mobility. In the post World War II era, the competitive pressures to firms and their ability to move production overseas fluctuated with changes in other countries willingness to allow foreign direct investment, technological innovation and US trade protection. Yet, US trade protection on individual goods had largely been taken out of the hands of senators by this time through the use of reciprocal trade agreements, making changes in trade policy and firm mobility largely exogenous to the individual senator during this time period as well. Chapter 8 uses process tracing of immigration policy in two small countries Singapore and the Netherlands to provide additional evidence for the causal effect of trade and capital policy on immigration policy outside of the US context. Both countries have been affected by changes in the world economy that they had only limited ability to affect and thus, 14

12 Chapter 1 firms and policymakers in these states have had to react to these changes rather than have any affect over these changes. The inclusion of these cases also increase the generalizability of the argument as they both differ greatly from the US: the Netherlands is a corporatist democracy and Singapore is an autocracy. Finally, Chapter 9 concludes the book by discussing how greater trade openness and firm mobility may have affected policy areas besides immigration. Firms today can shop around to find the country best suited to their needs. Many industries that rely on low-skill labor have moved from wealthier developed countries to poorer developing countries. Their location choices may affect many policy areas, not just immigration, including tax, labor and environmental policy. The ability of industries to move also means that firms can choose which types of governments that they interact with. Yet, firms do not have all the power. As this book shows, government have to weigh the desire of firms against different groups. Even in autocracies, the voice of the people still matters. Thus, I argue that firms are likely to win on issues that are of less importance to the general population, but lose on issues like immigration that provoke strong responses. 15

13 CHAPTER 8 Immigration Policy in Small Countries: The Case of Singapore and the Netherlands The cross-national evidence shows a robust and general relationship between open borders for goods and foreign direct investment and immigration policy and the data from the US show that this relation is causal. Yet, we might be concerned that the US represents a very special case, as it was the hegemonic economic power after In this chapter I examine the evolution of immigration policy in two small economies Singapore and the Netherlands after World War II that have been much more reliant on the international economy and, further, have much less economic power than the US. These two cases help establish causality; as small countries, neither Singapore nor the Netherlands has had much control over global economy. Instead, these states have had to take the actions of larger states as given. Additionally, as small economies, many firms in these states produce for the export markets rather than for the home market. I focus on, in this chapter, how other states actions affect the ability Singaporean and Dutch firms to compete in the export markets. 263

14 The results of this chapter should provide further evidence that the relationship between trade, firm mobility and immigration policy is both general and causal. In addition to showing that the argument is casual, the Singapore and Netherlands case studies show the generalizability of the argument. Both countries have very different relationships between firms and the government than the US. In the Netherlands, firms interests are represented through the Social and Economic Council (SER), which provides an institutionalized forum for employers organizations, unions and third-party experts to have a voice in crafting policy. Because of their representation on the SER, firms do not need to lobby the government in the same manner as firms in the US where a similar institutional link does not exist. Singapore represents yet another form of business-government relations. Nominally, Singapore has a similar corporatist structure as the Netherlands and, indeed, there are institutionalized forums for firms to comment on draft legislation. Yet the informal connections between firms and the government may be more important. The Singaporean government has investments in large swaths of the economy and there is a revolving door between government and private business. While the government mandates that government-linked corporations (GLCs) act strictly as profit-maximizers, I argue below that their connection to the government gives them the ability to help shape policy, as any profit-maximizing firm would like. Nonetheless, the way in which firm preferences are internalized in government policy in both these cases means that, unlike the US case, we do not have quantifiable data on lobbying. In addition to having different relationships between firms and the government, both states also have very different relationships with the rest of society than the US. As an electoral autocracy, the People s Action Party (PAP )insingaporehaslessaccountabilityto the public than officials in a democracy. Yet, policy in the Singapore cannot stray too far from the will of the people or else the PAP is likely suffer a loss of legitimacy and support. The Netherlands is a proportional representation (PR), parliamentary democracy based on a corporatist system of government. PR systems allow for more, smaller parties, which give 264

15 greater voice to more extreme elements. For example, we have seen in the Netherlands and in other PR systems in Europe the rise of Radical Right parties that are not found in first-pastthe-post majoritarian systems like the US. Further, unions get one-third of the seats in the SER, which gives labor increased influence over policy. Thus, in Singapore, we might expect that the rest of society has relatively less influence over policy than in the US and in the Netherlands, the rest of society, especially unions, should have relatively more influence over policy. If the argument holds in both places, then, again we should have greater confidence in its generalizability. Methodology and Expectations In this chapter, I use process tracing to establish that the argument is causal as well as being generalizable. As Bennett explains, process tracing evaluates competing arguments by examining the intervening steps in a hypothesized causal process. 1 As with the US case studies, Singapore and the Netherlands are what Seawright and Gerring call typical cases, ones in which the hypothesized relationship holds. 2 These are two cases in which the data support the general relationship: as we saw in Chapter 4, trade openness, especially as measured by the value of the exchange rate, and firm mobility, are negatively correlated with immigration policy. The goal of this chapter, then, is to show that the relationship is causal; namely, that business support for immigration in these two countries decreased with greater trade openness and firm mobility and that policymakers reacted to these changes by restricting immigration policy. As I will show, the change in business support was not the only factor that affected immigration policy, but it was a major factor and that it is the only explanation that can explain the entire post-world War II immigration history of these states. I support my argument with evidence from interviews, primary and secondary sources. 1 Bennett (2010). 2 Seawright and Gerring (2008). 265

16 For both case studies. the interviews were conducted in the summer of In Singapore, I conducted interview with high level civil servants in the agencies responsible for immigration policy: the Ministry of Manpower (MOM), the Ministry of Trade and Industry (MTI) and the National Planning and Talent Division (NPTD). I also met with a high-level official at SPRING, an agency under MTI, responsible for helping small and medium size enterprises (SMEs) grow and generally represents the interests of SMEs. This official has also served on numerous corporate boards and discussed his views on immigration from that perspective as well. Additionally, I met with one of the leaders of the Singaporean Democratic Party (SDP), one of the larger opposition parties. While I was able to meet with officials from major government ministries that craft and implement immigration policy and one opposition member, the interviews nevertheless, provide an incomplete picture. I was unable to meet with higher ranked officials who might have had a more holistic view of how immigration policy is crafted. Further, I was unable to meet with officials from the two major opposition parties, the Workers Party and the National Solidarity Party, or with non-aligned members of parliament. For these two parties, Irelyontheirpubliccampaignmaterialstogaugetheiropinionsonimmigration.Fornonaligned members of parliament, I also rely on their public materials. I was also unable to meet with officials from the major government holding companies which own shares in large swaths of the economy. Ideally, these interviews would have given me greater insight into firms preferences over immigration and how firms influence government policy, instead I rely on primary and secondary source material. The main source of bias from the data is the lack of direct information on firm preferences and on their ability to lobby the government. As I discuss below, the government has some stake in a large swath of the economy. Yet, it is rather opaque as to how large of a stake the government has in the economy and how the government influences corporate behavior and vice versa. In large part, this seems to be due to the government s desire to downplay their role in the economy. Instead, the government likes to highlight the independent nature 266

17 of these firms. This bias in reporting should make it less likely to discover a link between firms preferences and government policy. For the Dutch case study, I contacted all major political parties, all the employers association, all the unions, the ministries that oversee immigration policy and enforcement and several academics. I received positive responses from one Member of Parliament, two of the large employers organization, one of the large unions, the Ministry of Security and Justice, which oversees enforcement, and several academics. As in the Singapore case, these interviews provide only an incomplete picture. I thus rely on primary and secondary literatures, which should provide a more complete picture in an open democracy like the Netherlands. My argument leads to the following causal chain in these two states. Changes in the global economy, outside of the the control of Singaporean or Dutch policymakers, lead to an erosion of competitiveness of domestic low-skill labor-intensive firms in export markets, and potentially also in the domestic market. The erosion of competitiveness for these firms leads them to increase their productivity or the skill level of their production process, move production to another country with lower costs or close. All three of these lead to less support for open immigration for low-skill immigrants. Policymakers then restrict low-skill immigration. The argument, then, predicts a specific sequencing of events: changes in the global economy should lead to changes in the composition of firms which then should lead to changes in policy. As I show below, the Singapore case does not always follow this sequence exactly but is, in some ways, an exception that proves the rule. Low-skill intensive Singaporean firms, like Dutch firms, have lost competitiveness with changes in the global economy, most notably the rise of China. Yet, instead of decreasing firm lobbying always preceding immigration restrictions, the government, at times, has restricted immigration in hopes of forcing low-skill intensive firms to increase productivity, change to a more capital/ skill intensive product line or move production overseas, while retaining headquarters in Singapore. The government is even willing to tolerate firms closing as the cost of increasing the skill intensity of produc- 267

18 tion in Singapore (what they term, up-skilling). In Singapore, then, changes in the global economy lead directly to both less firm support for open immigration and less government support for open immigration. The main alternative explanations for immigration policy have different causal chains. If immigration policy is driven by the role of labor, we expect that increases in the power of labor should precede greater restrictions and that decreases in the power of labor should precede greater openness. For this hypothesis, I will examine the role of unions and, in the Dutch case the role of the labor party: what policy do they articulate and does the government follow their policy recommendations. If the fiscal argument drives immigration policy, we expect that welfare spending increases and/or a budgetary crisis should precede immigration restrictions and that further, policymakers should explain restrictions as a consequence of these fiscal issues. For the nativism hypothesis, we expect that increased nativist sentiment either the articulation of this sentiment through the established parties or through new, far-right anti-immigrant parties should precede more restrictions. As discussed in earlier chapters, these hypotheses are not mutually exclusive. Trade and capital openness will only lead to restrictions if there are groups that dislike immigrants in the polity. Otherwise, immigration policy may stay the same after openness. Similarly, a lack of nativism, weak labor and a small social welfare system will only produce immigration openness if there is a group firms that want immigrants. Following Van Evera, I examine data that lends themselves to four different types of tests. 3 The least demanding test, the straw in the wind test, providessuggestiveevidence that a hypotheses is correct but it is neither necessary nor sufficient. 4 Hoop tests provide necessary but not sufficient evidence; these type of data can rule out but not rule in a hypothesis. 5 Much of the evidence presented are in the form of hoop tests: they show that the conditions each argument suggests should precede a change in immigration policy did, 3 Van Evera (1997). 4 Bennett (2010). 5 Bennett (2010). 268

19 or importantly did not, occur. A third type of test is the smoking gun test; passing this test confirms the hypothesis but failing does not eliminate it. 6 Some of the evidence presented here especially statements of officials fall in this category. These statements confirm the argument but if an official had not given the statement, the argument would not have been eliminated. The final type of test is a doubly decisive test that confirms a single hypothesis and eliminates the others. 7 Van Evera notes that doubly decisive tests are rare in social science but that a combination of hoop tests and smoking gun tests accomplish the same goal. 8 Below, most of the evidence fall in one of the first three categories, but together provide a picture that shows the argument to be causal. Singapore In 2011, voters in Singapore sent a resounding rebuke to the People s Action Party (PAP ) in large part due to its immigration policy. its worst performance since independence. 9 The PAP won just over 60% of the vote, The next year, a wildcat strike by Chineseimmigrant bus drivers over pay disparities with Malaysian-immigrant bus drives sparked widespread hostility against immigrant workers. 10 Opposition to the PAP s immigration policy further increased in 2013, when it was announced that the draft population target for 2030 would be 6.9 million, of which only 55% would be native-born Singaporeans. The release of the White Paper lead to an unprecedented 4,000 person protest against the policy. 11 barr s ingapores Afterafivedaydebateinparliament, oneofthelongestdebatesinthehistoryofsinga W ewilltrackandcontrolthenumberof non Singaporeansandtheinf lowof immigrantssothatwearenotove andhigh skillimmigration. The fact that popular opposition to immigration has forced the government to restrict 6 Bennett (2010). 7 Bennett (2010). 8 Van Evera (1997, 32). 9 Brown (2011). 10 Barr (2014) Quoted in Chen (2013b). 269

20 low-skill immigration is somewhat surprising given existing theories of immigration policy. Organized labor is extremely weak; the government controls the labor unions. Given the PAP s control of the state resources, including housing, there has been, until recently, little support for opposition parties, especially those representing the lower classes. Arguments based on immigrants use of the social welfare system cannot explain the restrictions either; low-skill immigrants (referred to as foreign workers rather than immigrants) are not eligible to use the social welfare system. Finally, if employers should have a voice in immigration policy anywhere, it should be in Singapore, where the government controls or has a large stake in many corporations. How, then, did Singapore get to this point? I will argue in this chapter that the PAP s immigration policy has been a balancing act between keeping Singaporean companies competitive in an ever increasingly competitive international marketplace and keeping opposition to the PAP low, in part by restricting immigration. The PAP has been able to keep its hold on power in large part because it has been able to deliver export-led economic growth. Yet its ability to provide this growth has been challenged as other Asian countries have developed. At first, it responded to the loss of competitiveness by increasing openness to foreign workers. However, this openness has sparked fears that natives would be overrun and the traditional ethnic balance would be lost. In response to both the fear that Singapore was losing its competitive edge and that immigration would lead to a backlash, the government has encouraged firms since the 1980s to up-skill their production, increase productivity and/or move low-skill production overseas while maintaining research and development and headquarters functions in Singapore. The focus on increasing competitiveness has decreased the demand for low-skill workers from firms, especially in the manufacturing sector, and, in contrast to most other states, pushed the government to restrict low-skill immigration to force firms to be more productive. 270

21 The Structure of Immigration Policy in Singapore Immigration policy in Singapore is divided into two separate policies for low- and highskill immigrants to a much greater than most countries. Currently there are three major categories for immigrants, not including family reunification immigration, which is limited to family members of natives and high-skill immigrants. Low-skill immigrants come under the Work Permit holder category; middle-skill immigrants come under the S Pass holder category and high-skill immigrants come under the Employment Pass holder category. Within the Work Permit category, the number of immigrants who are allowed to enter each year is based on nationality restrictions, a dependency ratio ceiling and a tax on firms for each immigrant they want to employ. When the government wants to change the number of low-skill immigrants entering the country, it uses any or all of these different policy tools. First, Singapore only allows low-skill immigrants from some Asian countries to apply for a work permit. The countries that are included has changed over time but include the traditional countries of origin for Singaporeans (Malaysia, China, India and Bangladesh) and newer countries including Indonesia, Sri Lanka and the Philippines. Next the government determines the dependency ratio. The dependency ratio is the proportion of foreign workers (including S Pass holders as well) to native workers that the company may employ. The dependency ratio has been adjusted over time and separate dependency ratios were created for different sectors. Finally, there is a monthly levy on work permit holders. The levy has also been adjusted over time to make using immigrant labor more costly and it has also been adjusted so that firms have to pay higher levies the greater their dependency ratio is. For example, for the January 1, 2013 through June 30, 2013, firms with a dependency ratio below 15% had to pay a levy of S$270 per month for S Pass (middle-skill) holders and S$370 for Work Permit holders, S$380 for S-Pass and S$480 for Work Permit holders if the ratio was between 15% and 25% and a levy of S$550 for both categories if the dependency ratio was between 25% and 50% National Population and Talent Division (2012, 34). 271

22 The government also uses a dependency ratio and levy for S Pass Holders along with a minimum wage criteria. S-Pass also count towards a firms dependency ratio and there is a separate sub-cap; S Pass holders cannot be more than 25% of a firms workforce. 14 SPass holders must also make a certain wage per month. Finally, their are Employment Passes (EP) for high-skill migrants. EP holders have to meet two criteria to get their visa. First, they have to have a high salary. In 2012, P1 Employment pass holders had to have a monthly salary of at least S$8,000 (S$96,000 or US$77,760 per year); P2 pass holders had to have a monthly salary of at least S$4,500 (US$66,666 per year) and Q1 holders at least S$3,000 per month (US$29,000) if they were recent college graduates and more if the applicant was older. 15 EP pass holders also had to have relevant qualifications for the position. Only some EP holders are eligible to bring family members with them. Permanent residence and citizenship are also based in part on skill level. Singapore takes a holistic approach in granting permanent residence and citizenship, which includes family ties to Singapore, economic contribution, qualifications, age and family along with the applicants ability to integrate into Singapore and willingness to maintain ties to the country. 16 Except for spouses and children of citizens and permanent residents, these criteria make it impossible for low-skill immigrants to gain permanent residence or citizenship. Firm Lobbying in Singapore How do firms lobby the government in a non-democracy like Singapore? First, in Singapore there is an official channel for businesses and other groups to influence policy, somewhat similar to Notice and Comment rule making in the US. To get an understanding of public opinion on issues, the Singaporean government seeks comments from stakeholders before it changes key policies, through structured dialogue. 17 For example before publishing the National Population and Talent Division (2012, 35). 15 National Population and Talent Division (2012, 35). 16 National Population and Talent Division (2012, 33). 17 Chong (2007, 954). 272

23 White Paper on Population, the government published an issue paper on population that sought comments from the public. 18 According to a civil servant at the National Population and Talent Division, the government constantly seeks feedback before developing a new policy: Firstly, we had to put up information in the public.... Over the course of the year we put out occasional papers on different scenarios, different issues that we are facing - so that s the issues paper that was put up, and also some other occasional papers. At the same time we were trying to do public engagement efforts that sort of touched upon the key stakeholder groups that we knew we had to so we started with some small focus group discussions with stakeholders. We met the unions, the business leaders, social media, the youth, students - who else did this? - voluntary organizations, community leaders, and got their feedback on specific issues on the population. We also held some larger facilitated discussions and met lots with the public. Together with the launch of the issues paper in July, we also launched a publishing microsite on the Internet. People could use that microsite to submit their views and feedback on specific issues related to population. We took all this into account in drafting the population policies that eventually went into the white paper. It was almost a full year of engagement, and then we moved onto drafting the policies, and then making it permanent in January this year. That was generally the approach that we were taking. 19 Firms, then, through their official meetings on immigration policy (and other issues) can make their preferences known to the government. Further, from my discussions with civil servants throughout the government, it appears that the civil servants take these preferences into account when drafting the final policy. 18 National Population and Talent Division (2012). 19 Civil Servant at the National Population and Talent Division. Personal Interview. June 4,

24 Second, firms in Singapore likely have influence over policy through their political connections. Firms in Singapore are not alone in using their connections to gain an advantage; using data on firms in Indonesia, Fisman finds that a large percent of a well-connected firm s value may be due to political connections. 20 These firms may be able to get special access to credit, monopoly rents or other policies that specifically benefit their firm over another. What is differentiates Singapore from most autocracies is how much of the economy is likely linked to the government. The Singaporean government is linked to firms through two main types of organizations: statutory boards and government linked corporations (GLCs). Most of the statutory boards are advisory or charity organizations but they are also responsible for key infrastructure in the state including much of the housing, development of industrial parks, airports and water. 21 Examples of statutory boards include the Economic Development Board, which helps to attract and subsidizes foreign direct investment in Singapore; Jurong Town Corporation, which is the principal developer and manager of industrial parks; and Sentosa Development Board, which manages the developments on Sentosa Island, including hotels and restaurants. The board of directors of these organizations are appointed by the minister to whom they report, and they usually include civil servants from the relevant ministry. Further, Parliament approves their budget and the Ministry of Finance approves any additional funding requirements. 22 The second type of organization are GLCs. Most shares in the GLCs are held by one of the governments holding companies, the largest being Temasek Holding Company. Temasek was founded by the government in 1974 to use fiscal surpluses to invest in the domestic economy. Temasek is wholly owned by the Ministry of Finance, which had been the main agency responsible for investing in domestic firms. 23 In 1981, the Government Investment Corporation (GIC) of Singapore was created to invest excess reserves overseas. There are 20 Fisman (2001). 21 Gómez and Bok (2005). 22 Gómez and Bok (2005). 23 Low (2003, 135). 274