The lure of cheap labor is bad for innovation, productivity, civic solidarity, and national strength, Vice President JD Vance told business leaders at the American Dynamism Summit on Tuesday.
The promise of cheap labor is ” a drug that too many American firms got addicted to … [and] globalization’s hunger for cheap labor is a problem precisely because it’s been bad for innovation,” Vance told his audience of investors, adding:
Both our working people, our populace, and our innovators gathered here today have the same enemy and the solution, I believe, is American innovation.
“Real innovation makes us more productive, but it also, I think, dignifies our workers. It boosts our standard of living. It strengthens our workforce and the relative value of its labor,” Vance said in a short speech.
The statement shows how Vance is trying to repair the political bridge between the party’s voters and business leaders that was deliberately demolished by ruthless pro-migration policies pushed by the two Bush presidencies. The two Bush presidencies dramatically expanded legal and illegal migration to inflate the stock market with cheap labor, more consumers, and more renters.
“There were two conceits that our leadership class had when it came to globalization,” Vance said:
The first is assuming that we can separate the making of things from the design of things. The idea was that rich countries would move further up the value chain, while the poor countries made the simpler things. You would open an iPhone box and it would say “Designed in Cupertino, California.” Now the implication, of course, is that it would be manufactured [in China] or somewhere else. And yeah, some people might lose their jobs in manufacturing, and they could learn to design, or to use a very popular phrase, and “learn to code.”
But I think we got it wrong. Turns out that the geographies that do the manufacturing get awfully good at the designing of things. There are network effects, as you all well understand, the firms that design products work with firms that manufacture. They share intellectual property, they share best practices, and they even sometimes share critical employees.
Now we assume that other nations would always trail us in the value chain, but it turns out that as they got better at the low end of the value chain, they also started catching up on the higher end [so] we were squeezed from both ends.
Now that was the first conceit of globalization. I think the second is that cheap labor is fundamentally a crutch, and it’s a crutch that inhibits innovation. I might even say that it’s a drug that too many American firms got addicted to.
Now, if you can make a product more cheaply, it’s far too easy to do that rather than to innovate. And whether we’re offshoring factories to cheap labor economies, or importing cheap labor through our immigration system, cheap labor became the drug of Western economies.
And I’d say that if you look in nearly every country, from Canada to the UK that imported large amounts of cheap labor, you’ve seen productivity stagnate. That’s not a total happenstance. I think that the connection is very direct.
Now, one of the debates you hear on the minimum wage, for instance, is that increases in the minimum wage force firms to automate. So a higher wage at McDonald’s means more [service] kiosks. And whatever your views on the wisdom of the minimum wage, I’m not going to comment on that here … [we think] companies innovating in the absence of cheap labor is a good thing.
I think most of you are not worried about getting cheaper and cheaper labor. You’re worried about innovating, about building new things, about the old formulation of technology is doing more with less. You guys are all trying to do more with less every single day. And so I’d ask my friends, both on the tech optimist side and on the populist side, not to see the failure of the logic of globalization as a failure of innovation.
Indeed, I’d say that globalization’s hunger for cheap labor is a problem precisely because it’s been bad for innovation. Both our working people, our populace, and our innovators gathered here today have the same enemy and the solution, I believe, is American innovation.
Our goal is to incentivize investment in our own borders — in our own businesses, our own workers, and our own innovation. We don’t want people seeking cheap labor. We want them investing and building right here in the United States of America.
For example, the Fortune 500 has increasingly imported foreign white-collar labor to cut costs. But the programs created by Congress and the executive — such as the H-1B, J-1, L-1, CPT, and other visa programs — have imported debilitating Indian-style office politics into a wide range of critical U.S. companies, including Intel, IBM, Twitter, and Boeing.
The damage was recently spotlighted by Citibank, which announced it would sharply reduce its reliance on foreign contractors after the contractors cost the company at least $600 million in routine operations and regulatory incompetence. The decision means Citibank will begin hiring at least 10,000 American technology professionals for jobs held by supposedly cheaper Indian visa workers.
In 2024, the Congressional Budget Office predicted that President Joe Biden’s migration policy would reduce productivity growth in the United States.
Vance told his listeners that elites’ demand for cheap labor also fractures societies:
I think the populists, when they look at the future, and when they compare it to what’s happened in the past, I think a lot of them see alienation of workers from their jobs, from their communities, from their sense of solidarity. You see the alienation of people from their sense of purpose. And importantly, they see a leadership class that believes welfare can replace a job and an application on a phone can replace a sense of purpose.
Now, I remember a Silicon Valley dinner in particular, back when I was in — in my tech days, where my wife and I were sitting around talking to some of the leaders of — of the important technology firms of the United States …
And I remember one of the tech CEOs who was there that — you know, CEO — you would know his name if I mentioned it. He was the CEO of a multibillion-dollar company. He said, “Well, I’m actually not worried about the loss of purpose when people lose their jobs.” And I said, “Okay, well, what do you think is going to replace that sense of purpose?” And he said, “Digital, fully immersive gaming.”
The same economic and civic problem has occurred in the United Kingdom, Australia, and Germany, where national leaders are inflating the economy with immigrants, dragging down average income and prosperity.
For example, immigration forces nations to divert investment to housing and consumerism and away from factory automation and high-tech research.
The economic damage has been noted by some business leaders who face competing temptations to either raise short-term profit via migration or raise long-term productivity and innovation via investment in American employees.
“I can argue, in the developed countries, the big winners are the countries that have shrinking populations,” BlackRock founder Larry Fink said at a 2024 pro-globalist event hosted by the World Economic Forum in Saudi Arabia. He continued:
That’s something that most people never talked about. We always used to think [a] shrinking population is a cause for negative [economic] growth. But in my conversations with the leadership of these large, developed countries [such as China, and Japan] that have xenophobic anti-immigration policies, they don’t allow anybody to come in — [so they have] shrinking demographics — these countries will rapidly develop robotics and AI and technology …
If a promise of all that transforms productivity, which most of us think it will [emphasis added] — we’ll be able to elevate the standard living in countries, the standard of living for individuals, even with shrinking populations.
