Here is an interesting contradiction: Some politicians
say that relying less on foreign workers will make their nation more
competitive, but in fact it makes the workers’ home country more competitive.
Notice that I said contradiction, not paradox, because it is not a paradox at
all. It is logical, and it is supported by recent research.
Here is how it works, as explained in an article by Dan Wang in Administrative Science Quarterly. Foreign workers are often used by
highly advanced and competitive firms, because those firms are best positioned
to take advantage of a worker’s skill wherever it is found, and to transfer it to
wherever it is needed. They also have excellent production processes, advanced
technologies, and knowledge on how to best operate these. Sometimes their foreign
workers go back to their home countries (usually voluntarily). What happens
then?
The start is quite simple. These workers may be
holding knowledge of great value to firms in their home countries, so the key
is whether they can make a knowledge transfer back home. The firms that hire
them, or the new firms they form if they become entrepreneurs, will benefit
from their knowledge. But the full story is not as simple as the start. These
workers differ in how well connected they are to others, in the companies they
worked with abroad, and in the companies they work with after returning. Their
personal networks differ in how many people they know and how well they know
them. It turns out that knowledge transfer depends greatly on these
connections, because the greatest transfers happen when a worker is highly
connected both abroad and after returning home.
The conclusion is clear. Playing the competitiveness
card may be a good way to cater to xenophobia among voters, because those who
prefer fewer foreigners around like to hear reasons for their dislike. (Even if
the excuse isn’t true, it is nice to have an excuse.) But competitiveness is
not a valid reason to send foreign workers home.
Wang’s research had one more important conclusion: it
was not just personal networks that made knowledge transfers effective, but
also an absence of xenophobia in the home country. Now the contradiction
becomes even more interesting. Xenophobic policies of sending people home may
be phrased as helping competitiveness, but they usually hurt it — except when
the workers come from a country with xenophobic people, because then the
knowledge they have won’t transfer back. Xenophobia is a lose–lose proposition.
