Tuesday, April 04, 2006

The Jobs Americans Won’t Do (Under the Conditions Offered)

As usual GipperClone’s last post got me to thinking, what is this immigration or “illegal” immigration debate really all about. Despite all the rhetoric, it’s not really about race, class, or even law enforcement. Moreover, it’s not about immigration policy or national security or even national sovereignty, all things that it probably should be about. No, it’s all about economics, labor economics to be precise; the rest is just verbal candy for the fundraisers and the elections. Click Read More to see the rest.

Now what do I mean? Well it’s simple, at the end of the day this debate is going to be decided by labor and business interests, which as usual are pretty much on opposite sides of the fence. To complicate the problem, the politics seem to be reversed. Labor, who generally favors liberal or democratic candidates, is by and large opposed to the undocumented immigrant population mostly based on the argument that they are driving down wages and taking unskilled labor jobs from Americans. (I like the word “undocumented” more than “illegal” because I think given the current law it’s more accurate. Illegal carries the connotation of criminal, although one can do something illegal without violating a criminal law, but that’s often a technical distinction lost on the non-lawyer populace, and right now, under current law, these people are, by and large, not criminals, though they are in violation of the law. Most immigration offenses, including unlawful presence, assuming no other charges or complaints are civil violations.) This of course is the same argument that many conservatives have been making for quite a while. Businesses, on the other hand, which are generally pro-conservative or more accurately pro-Republican, are generally in favor of open immigration policies, or at least policies of non-enforcement, because they mean lower labor costs, which in turn mean higher profits and happier shareholders. But you all knew that already. So that brings me to the question GC asked; what is meant by the phrase “undocumented immigrants do the jobs that Americans won’t do?”

In my post title I added a parenthetical phrase to that question, because I think it helps to understand what I think most people are saying when they make the statement in question. The phrase “under the conditions offered” is implicit to the argument that only immigrants will pick strawberries, clean houses, mow lawns, serve as maids in hotels, or be busboys in restaurants (this list could go on and on, but I think I’ve represented many of the jobs typically associated with undocumented immigrant workers). So that leaves me to explain what the conditions offered are. Though many of you already know the answer; the conditions offered in many of these jobs are not good. These jobs are underpaid (generally minimum wage ($5.15/hr by federal law, though it may be more depending on the state) or less), include no benefits, or hope for achieving benefits, have generally poor hours, long shifts, and many are not regular permanent assignments, but rather require the workers to migrate or at a minimum travel long distances between jobs. So given these facts it helps to restate the question. The question is not will no Americans pick strawberries, because I think the answer is that of course Americans will pick strawberries. Rather the better, more accurate, question is will Americans pick strawberries for $4 an hour with no benefits of any kind and under poor working conditions? Answer; by and large, no they will not (and of course we shouldn’t expect immigrants, documented or not, to work under some of the conditions offered either, but that’s another issue).

Many labor and other economists (much smarter than I) will take this exact line of argument and say that the reason that this situation exists is because the undocumented immigrants are overflowing the unskilled labor market. This large influx of workers increases supply and drives down the wages. That is certainly a reasonable and sensible position, but I don’t think it’s entirely correct. Rather, I think that what we are seeing in the undocumented immigrant labor market is the pure free market at work, outside the realm of even the most minimal of government intervention. In other words, the undocumented immigrant labor market is essentially a black market for labor, and as such, it operation, in my opinion, is less than desirable. Look at it this way; why are the wages low? They are only low by “American” standards, not the immigrant’s standards. $4/hr is a fortune for someone from a third world country where often wages rest below a dollar an hour. Why are the conditions so bad? Again they are only “bad” from an “American” point-of-view. Relative to the conditions in their native lands, even the worst working conditions here are often the equivalent of “Club Med” to immigrants from the third world. Businesses and workers know this reality and they have adjusted their labor market expectations accordingly to take full advantage of the situation. Undocumented workers can be paid less for the same (and often better) work, with no regulation or enforcement. I’m not advocating that this be done; I’m merely pointing out that such activity is rationale from the purely economic prospective of both employers and employees.

The even more disappointing reality is that the undocumented immigrant labor market is probably a very accurate picture of what the labor market would look like absent government intervention. One of the primary arguments against raising the minimum wage is that it is a government imposed market distortion. In other words, minimum wage laws do not allow employers and employees to operate under a free market wage system created by their mutual supply and demand needs, but rather imposes a artificial wage equilibrium. The reality is that strawberry picking is probably only worth $4.00 per hour because any more would likely require the price per pound of strawberries to increase to a point where many, not all, consumers would opt for another product. The same is likely true with the other markets previously mentioned. Should the cost of labor rise, there are really only two outcomes; either businesses will assume the cost increases, which eat into their profits, or they will pass the costs on to the consumers, which by definition will make the goods that we buy more expensive. Many economists have argued that even if the pass through occurs it will be minimal and not likely large enough to impact consumer preferences, but those are merely educated guesses, and my own opinion is that many of these people are dramatically underestimating the total cost savings that these businesses are getting from the undocumented immigrant labor market. In other words, it’s not just cost per hour of labor that is cheaper, but a whole host of other “costs” that are not paid (taxes being just one of them) that will have to be passed on to the consumer, because few, only the largest, of these businesses are even capable of absorbing these costs and remaining in business. Bottom line, this is one of the cases that I have argued that government intervention in the market is a good thing and generates net positive outcomes. The labor market, especially the unskilled labor market is one that is rife with abuses that even extend beyond the undocumented immigrant sector. Minimum wages are but only one solution to the problem. Nevertheless, politically they have proven to be the only possible solution, and even then the policy has not kept up with the needed changes.

Note that I’ve tried very hard to avoid normative statements about what is “good” or “bad” when it comes to immigrants or immigration policy. I’ve made suggestions regarding the minimum wage and labor market intervention, but those things benefit citizens as well as immigrants. I’m skeptical of whatever Congress comes up with on immigration as I’m not sure what the solutions are. All I do know is that the economics must be dealt with or else nothing we or anyone else does is going to have snowballs chance of succeeding. Those that are already here, legally or not, have to be dealt with as mass deportation is not really a legitimate option. That said, the labor market also has to be dealt with or else we will forever find ourselves in the same situation we’re in now. It’s not that there are jobs that American’s won’t do; it’s that there are conditions under which American’s won’t do certain jobs. Fix the conditions and I believe you can improve the labor market and slowly eliminate the need for the large number of undocumented immigrants.


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