Thursday, March 16, 2006

When conservatives don't get it about illegal immigration

Conservatives, whether "big government" Republicans or old-fashioned Reaganites, sometimes should stick to pure politics and refrain from discussing any economics. Take Rich Lowry's March 14th column as an example, which I read in today's New York Post. Instead of attacking illegal immigration from a legal standpoint, he brought up economics -- and showed he doesn't really understand that aspect of illegal immigration.

Like Michelle Malkin, Lowry brought up a myth by which anti-immigration pundits create irrational fear. In fact, he started off with it:
A core element of the American creed has always been a belief in the dignity of labor — at least until now. Supporters of a guest-worker program for Mexican laborers say that "there are jobs that no Americans will do." This is an argument that is a step away from suggesting that there are jobs that Americans shouldn't do.
Actually, and this is not being racist in the least, there are jobs Americans shouldn't do. As I wrote in my entry on price-setting and illegal immigration, Americans have incredibly high opportunity costs. Even without taxpayer-funded social safety nets, it's not worth our time to pick strawberries for $2 per hour, or do a lot of dangerous construction at low wages. Americans should be thankful that there are so many immigrants, legal and illegal, who can only do the most meneal of jobs because they lack education and/or English proficiency.

Even in the absence of minimum wages and other forms of government coercion regarding labor, a little unemployment is unavoidable. The reason is simple: imperfect information, which I wrote about last night. The unemployment rate depends on how quickly information spreads through an economy, and how much it costs. The unemployment rate is not just because of lag time from when a position opens and an applicant is hired. A bit of unemployment will result from search costs for both sides. An employer might not find the right person because the costs of advertising, time spent on interviews, etc., are too high for what the job is worth. Similarly, someone wanting that job might have to spend more than it's worth to get it. We have social safety nets (which I am only mentioning, not extolling) and very high wealth, so most Americans aren't desperate to take a job, any job. The wealth is in the form of personal savings that people fall back on, assistance from family and friends, and the ability to borrow. Credit lines are an indicator of wealth, because they reflect the borrower's expectations of his ability to repay, but more importantly, the lender's expectations too.

What does that paragraph have to do with illegal immigration? Everything. Americans have such high opportunity costs that we don't look as hard for work as illegal immigrants do -- and illegal immigrants have extremely low opportunity costs by comparison. They're the ones willing to "pound the pavement," going from shop to shop asking if there's any work to do, like Americans once did when we weren't as wealthy as today. Illegal immigrants are the ones willing to take jobs that, yes, Americans won't do, not at those wages.

I once lived in Brewster, New York, where Central American immigrants regularly hang out in the center of town. Exceedingly few are looking to cause trouble: nearly all of them are simply waiting to be hired. Employers looking for such "day labor" know where to look, so it's like a reverse taxi stand. For $8 or $10 an hour, they'll do the most backbreaking work that no American construction worker would do for less than $20. Does that take away jobs from Americans? Damned right. Do I care about an American losing work because of that? I'll be damned if I ever do. It only means some American is by definition uncompetitive by wanting more than what someone else is willing to accept. Meanwhile, the rest of us do benefit by getting immigrant-produced goods and services at lower prices.

Like any good consumer, my concern is getting the best value at the lowest possible cost, whether or not the guy is an American. Did it make a difference that the taxi driver this morning was Middle Eastern? Not a bit. When we talked about how he likes his job and makes a good living, did I even think for a nanosecond, "Oh, an American could be doing his job!" Not on your life. I didn't care about his physiognomy, accent, haircut, style of dress, religion or even immigration status. I only cared about whether he could safely convey me from Grand Central to work with speed and efficiency.

If it's such a good thing to restrict jobs to "legal labor," because citizens and legal residents can get paid better wages, then why don't we just command higher wages in the first place? Why not push the minimum wage to $20 per hour, or $100, or $1 million? I'm sure Lowry is familiar with the fallacy of minimum wages, but the same principle applies when government prevents illegal immigrants from working. A section of the population is perfectly willing to work for less, but they can't because that's been made illegal. Meanwhile, the rest of us pay in the form of higher prices for those same goods and services.

Laborers in the 18th and 19th centuries, particularly in France, feared foreign trade as much as (perhaps more than) industrialization. Many Americans today make the same appeal to government, and along with the usual lobbying efforts for tariffs and quotas, they demand protection from competitive immigrants (meaning immigrants who are willing to give the rest of us more value for our money). Such erroneous protectionist economics benefits them, but it harms everyone else.

Lowry might have had a point had some of his assertions been factual and from the real world. As McQ at QandO observed last December, after the crackdowns on illegal immigration, farmers in California and Arizona can't get enough legal labor, even offering $8.50 per hour! It's not necessarily that Americans are lazy; it's just that we place a much higher value on our non-work time. Our opportunity cost was not as high during the Great Depression, when it was so low that people would accept a dime an hour to pick cherries. American society has grown much wealthier since.

Lowry also said:
We are supposed to believe, however, that the work ethic does stop [at the Rio Grande] — it is only south of it that people can be found who are willing to work in construction, landscaping and agricultural jobs. So, without importing those people into our labor market, these jobs would go unfilled, disrupting the economy (and creating an epidemic of unkempt lawns in Southern California).

This is sheer nonsense. According to a new survey by the Pew Hispanic Center, illegals make up 24 percent of workers in agriculture, 17 percent in cleaning, 14 percent in construction, and 12 percent in food production. So 86 percent of construction workers, for instance, are either legal immigrants or Americans, despite the fact that this is one of the alleged categories of untouchable jobs.
This is a strawman. Nobody ever said that those industries function only or even mostly on immigrant labor (legal or illegal). His example of construction workers is laughable at best, because what's the stereotype? A middle-aged, hairy Caucasian male. If anything, an illegal immigrant may not necessarily work harder, but he has more incentive to. He's very replaceable, and his employer can turn him over to the INS at any moment, so he'll do everything to keep his job. An American citizen, however, is more likely to join a union that will give him job security and allow him to be a little more lax.

Now, there are significant percentages of those industries that are made possible by the low wages that illegal immigrants accept. Any industry would be devastated if it suddenly lost 24% of its workforce, or even 12%. Talk to a store manager who oversees 100 people, and ask him how the business would do if he lost 12 people and had to hire replacements for twice or three times the pay. Who would end up covering the higher wage costs? We, the consumers, would. The store would have to raise its prices to cover the higher costs, and if the higher prices are more than what consumers are willing to pay, then we simply won't have the items we wanted and otherwise would have had. Either way, we lose.

What's actually sheer nonsense is Lowry's other strawman assertion that anybody claimed there would be unkempt lawns without illegal immigrants. Instead of paying $5 per hour to illegals, people would have to pay, say, $10 or $15 to local teenagers. Since income is finite, people could afford to hire the teenagers only half or a third as often as illegal immigrants. The same money has been spent, but there has been a loss in value: the people have lost the full enjoyment of what should have been better-maintained lawns. They could do some of it themselves, but they lose there, too, because it cuts into their free time.
Oddly, the people who warn that without millions of cheap, unskilled Mexican laborers, this country would face economic disaster are pro-business libertarians. They believe in the power of the market to handle anything — except a slightly tighter labor market for unskilled workers. But the free market would inevitably adjust, with higher wages or technological innovation.
I guess he's talking about me, a "pro-business libertarian." I would sooner accept that than call myself an "anti-competition, pro-government-regulation conservative."

And since when did any libertarian economist claim the market could "handle" all that "except a slightly tighter labor market for unskilled workers"? Yes, the free market will adjust, as I explained in the two paragraphs above. It will adjust by higher wages that mean consumers must pay higher prices, or that consumers will no longer get those items because they've become too expensive. Now that is how the free market adjusts. Fulfilling what Bastiat said of bad economists, Lowry is only considering half of the story. He's looking only at what is seen, not at what is not seen.
Take agriculture. Phillip Martin, an economist at the University of California, Davis, has demolished the argument that a crackdown on illegals would ruin it, or be a hardship to consumers. Most farming — livestock, grains, etc. — doesn't heavily rely on hired workers. Only about 20 percent of the farm sector does, chiefly those areas involving fresh fruit and vegetables.

The average "consumer unit" in the U.S. spends $7 a week on fresh fruit and vegetables, less than is spent on alcohol, according to Martin. On a $1 head of lettuce, the farm worker gets about 6 or 7 cents, roughly 1/15th of the retail price. Even a big run-up in the cost of labor can't hit the consumer very hard.
If Martin really said this, he's a terrible economist simply because he considered only retail prices. A labor cost increase of 6 or 7 cents will have significant effect on what a deli or restaurant pays to wholesalers. Here are farmer's market prices from North Caroline. Let's assume the maximum price for head lettuce, 24 heads for $25, which will be about 48 pounds for $25, or 52 cents per pound. And while 6 or 7 cents may not do too much to the price per head of lettuce in a grocery store, it will impact prepared foods that use lettuce, like sandwiches in the deli section and pre-packaged salads. The latter is now a fast-growing business in the United States; bags of pre-cut iceberg or romaine are affordable by middle-class families who can now save time like only the very wealthy once could. Eliminating illegal immigrant labor means that a lot of those middle-class families will effectively find themselves poorer. Either they'll have to pay more for conveniently pre-packaged lettuce, or they'll have less free time because they must cut up lettuce themselves.

A dollar more per pound of strawberries may not seem like much, but what will it do to the price of ice cream, shortcake and anything else that uses strawberries? Their price will go up too, and if high enough, people will start buying substitutes. Instead of strawberry-based products, they'll buy chocolate chip ice cream, apple pie and bananas. But the strawberry farmers can adjust, right? After all, I'm the first one to say that people should adapt to changing market conditions. But they shouldn't have to adapt here. It's a government policy (namely a crackdown on illegal immigration) that changed the conditions, not natural shifts in the economy, so people adapting to new industries is a complete waste of resources.

Update: I was thinking this morning that, even if it's only $10 more per year that I spend on groceries, will Lowry personally reimburse me and everyone else? As far as I'm concerned, that's $10 that his government policies stole from my pocket. Do I not have the right to transact peacefully and voluntarily with whomever I choose? According to Lowry, no, and it does not matter that I harm him nor anyone. And what is the basis of his claim that the government should deny me that freedom? "Saving American jobs," which we have already debunked. So there must be another reason besides that tiresome, xenophobic excuse. Is Lowry really that afraid of super-competitive labor from people whose skin tone is darker than his, people who will work 12-hour days in the sun for $2 an hour because even that's better than the conditions back home??
Martin recalls that the end of the bracero guest-worker program in the mid-1960s caused a one-year 40 percent wage increase for the United Farm Workers Union. A similar wage increase for legal farm workers today would work out to about a 10-dollar-a-year increase in the average family's bill for fruit and vegetables. Another thing happened with the end of the bracero program: The processed-tomato industry, which was heavily dependent on guest workers and was supposed to be devastated by their absence, learned how to mechanize and became more productive.
This is just like President Bush's failed steel tariffs. The claim was that they would add just a few dollars to the retail price of a refrigerator, and perhaps $25 to the retail price of a car. What they actually did was destroy a lot of jobs that involved cheaper foreign steel, because a few dollars here and there became significant. As I noted here, one study calculated that over 200,000 Americans lost their jobs because of the steel tariffs. And why? Just like with lettuce and strawberries, the tariff advocates forgot about all the businesses that turned the base commodity into finished products. They forgot, or unscrupulously ignored, that the price increase is far more drastic on the wholesale level.

Lowry's claim that a government policy can force an increase in productivity is among the most absurd things I ever heard a conservative utter. It's so interventionist that, once upon a time, only a liberal (if not an avowed socialist) would claim such a thing. When will modern conservatives learn that when government intervenes, when it refuses to let the free market work unhindered, it only makes things less efficient? If the technological progress were such a good thing, it would have already taken place before government forced it. An entrepreneur would have seized upon the opportunity to deliver more goods to his customers at cheaper prices.
So the market will manage with fewer illegal aliens. In agriculture, Martin speculates that will mean technological innovation in some sectors (peaches), and perhaps a shifting to production abroad in others (strawberries). There is indeed a niche for low-skill labor in America. The question is simply whether it should be filled by illegal or temporary Mexicans workers, or instead by legal immigrants and Americans, who can command slightly higher wages. The guest-worker lobby prefers the former option.
Of course the market will manage. As I said, it will by higher prices or consumers being able to afford less. You can't have your cake and eat it too: you can't eliminate illegal immigrant labor and expect Americans to have the same standard of living, not when illegal immigrants provide so many of our least expensive food and services. And again, Lowry ignores the facts, particularly that California and Arizona farmers can't hire enough legal labor, at least not for wages that permit them to sell enough of their products to remain in business.

I'll state my position again: because of 9/11 and Muslim terrorists trying to sneak in through our southern border, I believe the U.S. must regulate immigration. But it should make it fairly easy for non-criminal immigrants to get approval, meaning anyone trying to cross anywhere but at checkpoints will be up to no good. And if we eliminate the welfare state, then conservatives will no longer have to worry about illegal immigrants costing the states billions in school and hospital expenses. With those changes, the only immigrants coming will be those who just want to work hard and honestly. Who could possibly object to that?
If this debate is presented clearly, there is little doubt what most conservatives — and the public — would prefer. In his second term, President Bush has become a master of the reverse-wedge issue — hot-button issues that divide his political base and get it to feast on itself with charges of sexism, xenophobia and racism. The first was Harriet Miers; then there was the Dubai ports deal; and now comes his guest-worker proposal, making for a trifecta of political self-immolation.

There is still time for Bush to make an escape from this latest budding political disaster, but it has to begin with the affirmation that there are no jobs Americans won't do.
And Lowry ended with the myth with which he began. He had better be careful about invoking what "the public" prefers. Which presidential candidate did they prefer in 1992 and 1996? What "the public" wants can often be wrong, especially when their tendency is to vote for the guy who promises them the most government services on someone else's dime.



Blogger LonewackoDotCom said...

Have you heard about the new Free Island Project? Some members of the LP want to buy an island off Borneo and construct a true libertarian society. In fact, if you want, I'll help conduct a fund-raising campaign to send you and all other net-libs there.

But, seriously. Those illegal aliens are consuming a great deal of services. Not all of them are working: many are children being educated in our school systems, elderly getting welfare benefits, etc. In other words, you're supporting massively subsidized labor.

And, if 20 million illegal aliens are a good thing, why don't we just swamp our entire market with even cheaper labor from Bangladesh? Wouldn't that make everyone that much richer?

And, for just one of the non-economic arguments against illegal immigration, try this:

Most libertarians have probably never considered that side of things, for the obvious reason that they're unable to view the totality of an issue and are unable to understand history's lessons.

Thursday, March 16, 2006 11:14:00 PM  
Blogger Perry Eidelbus said...

Illegal aliens are unquestionably consuming more resources than they pay for. So are citizens and legal residents, though, as I have pointed out from the start.

I have long called for the complete abolition of the welfare state -- to everyone. Citizens, legal residents, illegal immigrants. Everyone. Then you won't have to worry about illegal aliens coming to take advantage of taxpayer-subsidized schooling and emergency room care. Nor will you have to worry about paying for your neighbors' children when you have none in the public school system.

Deporting illegal aliens IS unrealistic. You talk about losing control of our interior, but the police state required for such control is NOT the hallmark of a free people. And so what if a war or recession occurs? Unless we were again fighting again with Mexico, and the odds would be SLIGHTLY in our favor there, illegal immigrants would be as relevant during wartime as my choice of cap-toes or wingtips.

And for during a recession, what are you saying, that illegal immigrants can be deported so that more Americans can have jobs? It doesn't work that way. Once again, you conservatives need to stick to pure politics and stop talking about economics you don't understand. Read the part of my entry again about how if illegal immigrant labor must be replaced by higher-priced "legal" labor, the product's price must go up. You can't eat your cake and have it too.

I'll also say that you have far more to fear from your own government than you do from illegal immigrants holding entire localities hostage. You're right, I haven't considered that, because it's an absurd doomsday scenario. I don't know what riots you're referring to, but the ones in the U.S. tend to be by black Americans who are citizens (not just legal residents). What about the France riots? Legal residents of principally North African descent.

You'll probably cite the war conditions along the U.S.-Mexico border, but those aren't about illegal immigrants. They're precipitated by Mexican drug gangs, sometimes backed by the Mexican army, that should be shot on sight.

Friday, March 17, 2006 10:39:00 AM  
Blogger Benny said...

You can read my blog post about illegal immigration, and follow the links to read about the story in the New York Times, as well as write an email to your representatives in Congress telling them to pass the Senate bill regarding illigal immigration if you so desire. That is a very well written post.

Thursday, May 25, 2006 8:12:00 PM  

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