Posted on 01/07/2004 10:51:13 AM PST by xsysmgr
Today the president announces his plan for a vast new guestworker system, which would grant amnesty to millions of illegals currently in the United States, as well as import millions of new workers from abroad. (The president will also call for an increase in permanent legal immigration beyond the current rate of one million a year.)
I make the argument against amnesty in the cover story for the upcoming print version of NR, but here I want to look at the basic assumption underlying the whole Bush plan: that there are jobs Americans simply won't do, so that the importation of foreigners is essential. Whether these foreign workers are illegal aliens, guestworkers, or permanent legal immigrants is a detail to be worked out by us, the argument goes, but our need for them is unchanged.
Even many opponents of the proposed Bush Amnesty assume this to be true, leading them to propose new and improved guestworker programs, with provisions for stricter controls against permanent settlement, greater incentives to return, tighter enforcement against unscrupulous employers, etc.
As well-meaning as such efforts may be, the basic assumption is false — there is simply no economic reason to import foreign workers.
If the supply of foreign workers were to dry up (say, through actually enforcing the immigration law, for starters), employers would respond to this new, tighter, labor market in two ways. One, they would offer higher wages, increased benefits, and improved working conditions, so as to recruit and retain people from the remaining pool of workers. At the same time, the same employers would look for ways to eliminate some of the jobs they now are having trouble filling. The result would be a new equilibrium, with blue-collar workers making somewhat better money, but each one of those workers being more productive.
Many people fear the first part of such a response, claiming that prices for fruits and vegetables would skyrocket, fueling inflation. But since all unskilled labor — from Americans and foreigners, in all industries — accounts for such a small part of our economy, perhaps four percent of GDP, we can tighten the labor market without any fear of sparking meaningful inflation. Agricultural economist Philip Martin has pointed out that labor accounts for only about ten percent of the retail price of a head of lettuce, for instance, so even doubling the wages of pickers would have little noticeable effect on consumers.
But it's the second part of the response to a tighter labor market that people just don't get. By holding down natural wage growth in labor-intensive industries, immigration serves as a subsidy for low-wage, low-productivity ways of doing business, retarding technological progress and productivity growth.
That this is so should not be a surprise. Julian Simon, in his 1981 classic, The Ultimate Resource, wrote about how scarcity leads to innovation:
It is important to recognize that discoveries of improved methods and of substitute products are not just luck. They happen in response to "scarcity" — an increase in cost. Even after a discovery is made, there is a good chance that it will not be put into operation until there is need for it due to rising cost. This point is important: Scarcity and technological advance are not two unrelated competitors in a race; rather, each influences the other.
As it is for copper or oil, this fact is true also for labor; as wages have risen over time, innovators have devised ways of substituting capital for labor, increasing productivity to the benefit of all. The converse, of course, is also true; the artificial superabundance of a resource will tend to remove much of the incentive for innovation.
Stagnating innovation caused by excessive immigration is perhaps most apparent in the most immigrant-dependent activity — the harvest of fresh fruit and vegetables. The period from 1960 to 1975 (roughly from the end of the "Bracero" program, which imported Mexican farmworkers, to the beginning of the mass illegal immigration we are still experiencing today) was a period of considerable agricultural mechanization. But a continuing increase in the acreage and number of crops harvested mechanically did not materialize as expected, in large part because the supply of workers remained artificially large due to the growing illegal immigration we were politically unwilling to stop.
An example of a productivity improvement that "will not be put into operation until there is need for it due to rising cost," as Simon said, is in raisin grapes]. The production of raisins in California's Central Valley is one of the most labor-intensive activities in North America. Conventional methods require bunches of grapes to be cut by hand, manually placed in a tray for drying, manually turned, manually collected.
But starting in the 1950s in Australia (where there was no large supply of foreign farm labor), farmers were compelled by circumstances to develop a laborsaving method called "dried-on-the-vine" (DOV) production. This involves growing the grapevines on trellises, then, when the grapes are ready, cutting the base of the vine instead of cutting each bunch of grapes individually. This new method radically reduces labor demand at harvest time and increases yield per acre by up to 200 percent. But this high-productivity, innovative method of production has spread very slowly in the United States because the mass availability of foreign workers has served as a disincentive to farmers to make the necessary capital investment.
But perhaps immigration's role in retarding economic modernization is confined to agriculture, which, after all, is very different from the rest of the economy. Nope. Manufacturing sees the same phenomenon of a scarcity of low-skilled labor yielding innovation while a surfeit yields stagnation. An example of the latter: A 1995 report on southern California's apparel industry, prepared by Southern California Edison, warned of the danger to the industry of reliance on low-cost foreign labor:
In southern California, apparel productivity gains have been made through slow-growth in wages. While a large, low-cost labor pool has been a boon to apparel production in the past, overreliance on relatively low-cost sources of labor may now cost the industry dearly. The fact is, southern California has fallen behind both domestic and international competitors, even some of its lowest-labor-cost competitors, in applying the array of production and communications technologies available to the industry (such as computer aided design and electronic data interchange)." (Emphasis in original)
Conversely, home builders, who are still less reliant on foreign workers than some other industries, have begun to modernize construction techniques. The higher cost of labor means that "In the long run, we'll see a move toward homes built in factories," as Gopal Ahluwalia, director of research at the National Association of Home Builders, told the Washington Post several years ago. But as immigrants increasingly move into this industry, we can expect such innovation to spread much more slowly than it would otherwise.
But surely immigration is needed fill jobs in the service industry? After all, without immigrants, who will pump our gas? Oh, wait — we never imported immigrants for that and so now we pump our own gas, aided by technology that lets us pay at the pump — thus we have fewer attendants but more gas stations and get in and out faster than we used to when we trusted our car to the man who wore the Texaco star.
Other innovations suggest how, despite the protestations of employers, a tight low-skilled labor market can spur modernization even in the service sector: Automated switches have replaced most telephone operators, continuous-batch washing machines reduce labor demand for hotels, buffet-style restaurants need much less staff that full-service ones. As unlikely as it might seem, many VA hospitals are now using mobile robots to ferry medicines from their pharmacies to various nurse's stations, eliminating the need for a worker to perform that task. And devices like automatic vacuum cleaners, lawn mowers, and pool cleaners are increasingly available to consumers. Keeping down low-skilled labor costs through the president's vast new guestworker plan would stifle this ongoing modernization process.
The idea that a modern society like ours requires the ministrations of foreign workers, because there is no other way to do get these jobs done, smacks of the apocryphal quote from a 19th-century patent commissioner: "Everything that can be invented has been invented."
— NRO Contributor Mark Krikorian is executive director of the Center for Immigration Studies and a visiting fellow at the Nixon Center.
Are you sure it's not because employers are assiduously undercutting their wages and making sure they can't earn a living and have no job security? Hmmmmm?
I took a trip to Italy in 1982 and was surprised to see that tables were being waited on by full-grown Italian men, many of them no doubt with families to feed, who were efficient and professional. I didn't say there was no attitude -- there's attitude everywhere, from the mega-engineering manager Lee Iacocca once fired because he had "trouble getting along with people" (Iacocca, firing him: "Well, that's too bad, because people is all we have around here!") to the night-shift fry-cook at Denny's.
The point is, in Italy, employers haven't crushed wages every chance they got, just because they could and because the religion of the Harvard School of Business is that you always break wages every chance you get -- you underpay people, you screw people, you break unions and document people's files unfairly and fire them. You do whatever it takes to break your payroll, quoth the b-school don who's high and dry and out of the rain, just because that's the right thing to do, and we said so, and five is bigger than four.
My point is that it isn't worth wrecking worker morale for an extra point or two in your ROR; that you probably give up top-line gains to flog your horses. But this opportunity cost never goes into the ROR calculations, even if higher worker health costs do (to which the Harvard solution is to eliminate benefits and put everyone on contract).
In 1996 or 1997, I forget the exact year, Agip, the Italian oil company, brought a new American manager into its Houston office. The manager did the cool manager thing and called in Kinsey and Associates, the Jack-the-Ripper HR and management consulting firm. Kinsey said, fire a zillion people and pocket the payroll! The American manager ran with it and proposed a big layoff (Agip up to that point having laid off sparingly if at all, while all around them were wading in the gore of their former employees)........and then he made a mistake. He included a couple of Italian nationals in his cuts. Result: the big layoff went forward, the two or three Italians were recalled to Milan rather than laid off, and the American manager went out the door right behind everyone else.
Defenders of slavery used to say the same sort of thing. Funny how nobody listened to them.
They also seem to be dying to get into slavery!
Oh, take me in, gentle Master, and let me warm myself by your fire! It's so cold out here in the dark!!!
</sarcasm>
The truth is that Socialists want to stifle the economy by establishing the so called "living wage" which is in fact the wage that will cash this economy into the dust, especially for first time employees.
Funny how a living wage didn't crash the 50's economy into the dust.....or crash Ford into the dust when he was paying people the unheard-of wage of $5/day, two generations earlier.
Truth is, every employer could be Fezziwig instead of Scrooge and Marley if he wanted to. Sometimes the motive for breaking wages is just plain greed.
The bulk of Texas Mexicans (i.e., immigrant Mexicans, not first-generation or later Chicanos) are from northern Mexico, where attitudes are closer to American ones re work, family, and politics. Even so, Republicans never get better than a 40% split from Texas Mexicans (Mexicans do vote in our elections, courtesy of Texas Democrats), ex-Mexicans, and Chicanos; and the Democratic tilt is even stronger in the more westerly states, whose immigrants come from farther south.
You cannot generalize by proposing two unique situations - one argument which is definitely a fallacious one - involved in both these scenarios. IN the case of Ford, by the mid 30’s Ford had cut all Ford workers' wages in half.
About the 50's - it seems that you and Krugman look back nostalgically at the 50's ---funny he is a leftist...On most accounts, the middle class today enjoys a higher standard of living than his parents/grandparents did in the 50's. You are wrong on this.
I am not wrong. The "standard of living" you speak about today involves both parents working and kids growing up without adequate supervision, as "latchkey" kids and as habitue's of daycare or other parking solutions.
A father in the 50's was able to support his family comfortably according to the standards of the day on just his income. That's what I meant. By raising the bar, you are axiomatically comparing apples and oranges, and then calling me wrong.
Married women have entered the workforce to supply their menfolk's declining earning power (in deflated dollars) as companies wage war on payroll costs.
In response to the extremity of a worldwide economic depression, and not just as a general practice of doing business. Please.
Then Again you Suthren boys have been a little touchy since Sherman decided to go visit the Sea....
It was obviously clear enough for the guy in post #4.....so maybe clarity is in the eye (or not) of the beholder....Vision Check anyone?
retarding technological progress and productivity growth."
ABSOLUTELY!! This issue has so many aspects that it's almost impossible to address them all. The US will be hurt by this proposal probably beyond repair. IF Bush isn't stopped, I am afraid we are doomed.
Don't worry. Mark Krikorian will get the boot sooner or later as Buchanan and Sobran have got. And people like you make the best publicity for the trade unions.
I suspect that the problem is with American managers and not with American workers. American CEOs, managers should be laid off/fired and replaced with Italians, Indians and Chinese. It will save a lot of money, assure LONG TERM viability of American companies and protect American jobs.
It depends on what you call a higher standard of living. In the 50's a high school graduate could be married at age 21, buying a house shortly after, support a number of kids on one income, the house typically had a 4% interest rate, 15 year mortgage, the car loan could be paid off in 2 years. No credit card debt at all was common. Today a high school graduate isn't likely to have much of a job, shouldn't marry at age 21 because there is no way they can afford marriage, kids, houses. He might have a car if his parents paid or he has a 5 year car loan. If the 21 year old high school graduate buys a home it's going to be a 30 year mortgage rate.
Having grown up chopping cotton in the cotton fields of Tennessee in the mid-70's I can assure you that African Americans are quite capable of holding a shovel or (in my case) a hoe.
In fact, the biggest challenge is re-educating them on the fact that when referring to the "hoe", we're talkin' about their girlfriend!
The costs for these services, plus schooling, IS NOT miniscule in California, eleni. The costs (BILLIONS) are placed on the backs of ordinary taxpayers and homeowners. California taxes are among the highest in the nation, yet our state is going bankrupt. Property taxes are sky high, and they want to raise them to build more schools for the millions of illegal alien kids who reside here. The free breakfasts and lunches, the assisted housing, the food stamps, the welfare checks, everything is free to them, and we just can't afford it anymore. Many medical centers have been forced to close because of the high costs of providing medical care to millions of "emergency room" patients who don't have emergencies at all, but know that ER care is free.
Bush's program will encourage millions more to come, and they will, hoping for dead-end jobs, with income supplemented by free perks paid for by us. It isn't fair.
OK, fair enough, but suppose there were no street workers would the ditch still be dug or would the project grind to a halt? Chances are you'd rent a backhoe and get the job done just the same. Maybe you'd pay a little more but you'd still do the job. Over time the backhoe rental company would see its profits increase, so other entriprising individuals would get into the rental business, competition would drive the daily rental of backhoes down and your costs would be the same as if you have a group of illegals doing the work. The difference being that the ditch would be dug quicker and straighter.
The 50's were a unique period for American manufactorers. The industrial sections of Europe, Britain, Japan, and the USSR had been mostly destroyed during WW-2. The only major industrialized nation with its factories intact was the US. If you wanted manufactored good, you pretty-much HAD to buy American. The rest of the work was also buying American industrial equiptment to fix up their factories. The American people had just been through years of rationing and wanted to replace their old cars and appliances.
All this meant full employment for all American workers and a high standard of living for the US, while the rest of the world was hungry
Now, if we had another major war, this time between the West and Islam and China, and by some miracle the US survived intact (doubtful in the age of nukes and missiles) while the rest of the world had to rebuild, I guess American manufactoring would do well again.
The cost seems rather high, though
What's the minimum wage in Dhaka? Is there any? If none, then what is the lowest wage being paid there?
I want you to show us how. Show us some moral leadership, by accepting that wage. Then tell us it's good enough for the rest of us, and how we can live on it, and why we should accept that life as our destiny.
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