I'm from the government, and I'm here to help.

by von

DAVID FRUM, writing in today's National Review Online on the subject of illegal immigration:

It is most emphatically not unrealistic to believe that immigration laws can be enforced. Of course they cannot be enforced perfectly. Of course the border cannot be sealed. But law enforcement is not a NASA mission. It can succeed without achieving perfection.

It's not necessary to raid every lawn in Los Angeles. Increase the number and effectiveness of inspections of large employers in the meatpacking, construction, and hospitality industries and other industries where law-breaking is rife; increase fines for employers who break the law; introduce some measure of personal liability for executives who employ illegal labor - and you'll change the incentives those industries face. If law-enforcement can add a dollar or two to the all-in cost of employing an illegal, the demand for illegal labor will drop. Reduce the demand for illegal labor and the supply will taper off too.

(Emphasis added.)

How tiresome.  Every Single Time there's some kind of problem, what's the standard Republican solution?  That's right:  It's always regulate, regulate, regulate.  Republicans never met a regulation that they didn't like -- and never met an inspector whom they didn't want to offer a job.  Particularly if the work involves some kind of legitimate business:  God forbid that you try to make any money in this country, dem Republicans will pore over your books and tax an' regulate it right out of ya.  Git' me some bureaucrats in here, mamma, there's a business afoot!

Err, wait ....

Once -- apparently, in some in far-off la-la fairy camelot land (take a right at Weehawken) -- Republicans used to believe that regulations should work with the market, not against it.  "The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help,'" Reagan famously quipped.  It's not so funny anymore.  Big government Republicanism has become the fashion of the day.

But it needn't be -- and President Bush's plan to allow more temporary workers into the United States is a good start.  The current unemployment rate is around 5%, which is historically low.  (Source.)  Yet, the United States still manages to absorb and employ approximately six million undocumented workers.  (Source.)  Businesses are hiring all these undocumented workers not out of some deep-seated desire to break the law.  They're hiring undocumented workers because businesses need workers in order to do business, and there isn't enough legal help around.  The demand for labor outstrips the supply of legal workers looking for those jobs.  Indeed, if every illegal worker disappeared tomorrow in some anti-Malkinesque rapture, it would be an understatement to say that a "total economic devastation" would soon follow.

A sensible economic policy would recognize these market realities, not try to regulate them out of existence.  And a sensible policy of national defense would be to do all that we can to free up scarce enforcement resources to seek out the terrorists, rather using them to bust Mom-and-Pop Manufacturing Co. for employing folks who only want to support their families.

Bush's temporary worker plan is a good start.  And the beginning, I hope, of a long-awaited re-emergence of the small-government Republicans. 

Comments

[felixrayman]

Law enforcement is not regulation. Republicans used to be tough on crime. Why do you want the US to coddle criminals instead of tracking them down and enforcing the law? If there were an epidemic of bank robbery, law enforcement would look for ways to track down and arrest bank robbers, and legislators would consider increasing the penalties for bank robbery. These are criminals we are talking about here.

They're hiring undocumented workers because businesses need workers in order to do business, and there isn't enough legal help around

Do you understand how free markets work? This is a rhetorical question, don't bother answering. The answer is, "No, you do not". What should happen to wages of legal workers if there was not enough legal help to go around? They should rise sharply, directing labor to its most productive uses. Has that been happening? No. There is no scarcity of labor in the markets right now - labor force participation is at fairly low levels compared to the previous decade or two. There are plenty of workers for those employers who can employ them productively.

Instead of the free market solution, you suggest that the government should decide whether we have too many or not enough workers and step in to dictatorially enforce that decision. That's called "communism".

The demand for labor outstrips the supply of legal workers looking for those jobs

Complete ignorance of the terms of economics. Really. I want a pony, but I can't find one for 12 cents. Does demand for ponies outstrip the supply of them? No, it most certainly does not. If more people wanted to hire workers at the prevailing wage than there were workers to hire, workers' wages would rise until the imbalance was resolved and the markets cleared. Seeing as how real hourly wages have gone up barely at all since the 1970s, it does not in fact seem that there is any "shortage" of workers.

Your post is nonsense. If businesses decide that 4 dollars an hour is too much to pay for labor, would you support allowing more workers in until the hourly wage was down to 2 dollars an hour? 50 cents? How about this von, why don't you try and live on minimum wage for a few months and then report back to us about how we need to take action to lower workers' wages in this country, ok?

[von]

I see nothing in your post, FelixRayMan, that requires a response. (I'd suggest, however, that your partial application of microeconomic principles is outstripped by your utter failure to appreciate or apply macroeconomic principles.)

[Francis]

hmm, seems to me that both von and fray are missing key points.

Mexicans and other Central Americans still desire to immigrate to the US in large numbers. If we are at all serious about attacking illegal immigration we need to address that desire. Let's loop in the libertarians and draw an analogy between these desperate individuals and americans who desire to use certain pharmaceuticals. The problem must be solved on the demand side.

ok, how do we fix that problem?

A. create more better jobs in the home countries of the illegal immigrants. Elimination of crop subsidies anyone?

B. eliminate the jobs that they were coming here to do.

Since americans like having beds made in hotels, dishes washed in restaurants (and at home), and houses built, we can't eliminate the job. So, therefore we either create a strong incentive for employers to use legal labor, or create a strong disincentive to use illegal labor.

now, i represent a whole bunch of home builders who, after a few drinks and in confidence, will admit that the construction crews are largely made up of illegals. Why? Illegal labor is cheap and readily available. Profit margins are (usually) tight in this business and if everyone else is cutting costs by using illegals, an ethical homebuilder (an oxymoron if there ever was one) can't stay in business.

what possible incentive can the government offer to encourage homebuilders to obey the law and use legal labor? And what kind of terrible precedent is the govt creating by "rewarding" an industry simply for obeying the law?

As DeLong, among others, has pointed out at length, the 5% unemployment number is tricky. Total participation of eligible people in the workforce is lower than during the Clinton administration, and real wages for low-wage earners have stayed stubbornly low.

Why have a guest worker program? There may be jobs that americans refuse to do. If so, it may be the case that these jobs should therefore go overseas where people are willing to do them. Or, the business owner may have to pay a wage which attracts a new worker into the workforce or pulls a worker away from another job. Or possibly, we could clear the huge backlog of people seeking to enter the country legally.

but so long as businesses can hire illegals without real consequence, they will do so.

[Platypus]

What you seem to be missing, felix, is that supply and demand only works within the range where the business is viable. If we kick out all the immigrants, the decreased supply of workers will increase wages...up to the point where it's impossible to make a profit, at which point the demand for those workers hits zero. The net effect is that, instead of individual workers being displaced, whole companies or industries will be displaced by foreign competitors. Trying to prop up wages by restricting labor supply is just a way to let people keep being non-competitive in the global market, and pumping up a wage bubble is hardly sound economic policy.

[Grackel]

Well I'm left wondering why Felix gets no response. I can't pretend to understand the complexities of the situation but, working in construction a mere 80 miles from the border, I see plenty of evidence that the truth is somewhere in the middle of these positions. The largest developer in Tucson had no fear of writing in the local paper within the last year that he felt dependent on illegal labor for his 80-200 home projects - he has no fear that the border patrol would come to his jobsites to bust illegal hires nor would they fine him. Meanwhile, wages in construction in southern Arizona are pitifully low, even during a housing boom. This low wage structure follows through in most parts of the local economy. But it is hard to tell what other factors keep the wage base down - Arizona is also famously proud of being a "right to work" state (right to be stupid is more like it); the local and state governments seem to be vying with Oklahoma and Mississippi in providing the least possible public education and at the same time there is yet another great bifurcation in the public here, between those who support the ridiculous vigilantes on the border and those who , partly because they make so little money themselves, hire the least qualified because they cost the least. In construction then, there is an endless amount of repair work available (eventually) for skilled craftsmen, so much of the work having been done so poorly to start with. I don't know exactly where illegal immigration fits into this scenario, but I do know that multitudes come with great enthusiasm and no skills, both reviled and welcomed with open arms.

[Francis]

platypus, many of the service jobs being done by illegals are not capable of substitution. home building, restaurant work, hotel work, maid service are all necessarily local.

the substitutable service jobs are going fast, e.g., Indian call centers.

[Brian Palmer]

What macroeconomic principles are you referring to, Von? Your post seems to focus on microeconomic supply/demand curves, where felixrayman's points are spot on.

Do you remember the stories that circulated last month about how Wall Street Analysts were putting pressure on Costco to reduce its employee benefits (despite Costco being quite profitable as it is, and expanding very nicely)? There's a real problem right now that real wages are not growing in the US.

[Phil]

Holy frijoles! To paraphrase Brian the dog from Family Guy, who knew that labor economics was one of felix's buttons?

[save_the_rustbelt]

Bush will not get excited about enforcing immigration laws because his campaign contributors want cheaper labor.

Bush is doing an excellent job of depressing blue collar wages in this country.

There are carpenters ready and willing to do construction work in this country, just not at $4 an hour.

So if illegals are not required to obey the law, why should the rest of us?

[John Thullen]

Just a little news on labor supply and demand. Wal Mart opened a store in California the other day and had 12,000 applicants for 400 positions. $10.40 starting wage.

I'm pretty non-regulatory when it comes to immigration. But it kills me (in a knee-slapping kind of way) how business people can rationalize breaking the law. I want to do that.

When Andrew Carnegie began giving away his fortune via cultural amenities, many of his workers believed higher wages and better lives along the way might have been a better place to spend the money. For years, the city fathers of Pittsburgh refused to filter the city water; that might have meant higher taxes and public spending. At whose behest was this practical measure denied to the public? Mellon, Carnegie .... you get the idea.

Years ago, my wife the wetland botanist traveled to Texas to visit a ditch near the border of Mexico. The nearby barrios were certainly inhabited by mostly immigrants. Because the water in the ditch was filthy with sewage and the State of Texas refused to treat the water adequately, some 90% of the children suffered from gastro-intestinal diseases and hepatitus. Was there money to fix the problem? No. We might need to raise taxes.

Yes, let the folks in. Then, raise my taxes so that some level of my government can provide clean water.

Government surely didn't help in those two instances and that seemed a little scary, too. Ronald Reagan was full of s---, as I just quipped.

Funny how we are rallied to just believe in the cause in Iraq and not be naysayers about our efforts there, but government can do no good here at home. What a load.

On the other hand, when I view the scene from a Baghdad minaret, maybe Reagan had a point.

Sometimes when I here about small-government Republicanism, I wanna make the government so small that even Grover Norquist can't find it when he needs it to protect himself from me. It would be funny to watch him desperately trying to wake the drowned baby, perhaps administering a little CPR. Just for him of course.

[John Thullen]

"here" would be "hear" in a just world.

[John Thullen]

By the way, I switched from Sam's Club to Costco recently, because the progressives running Costco provide better service and better product. Even though their workforce is apparently "incentivized" by higher pay and better benefits to study their manicures and check their stock portfolios .... no wait.... they work even harder it seems then the drudges over at Sam's.

I don't get it. I thought hunger and open sores made folks snap to, like in the underdeveloped world.

[felixrayman]

Just a little news on labor supply and demand. Wal Mart opened a store in California the other day and had 12,000 applicants for 400 positions. $10.40 starting wage.

I saw that too, John, although I believe the ~$10 figure was Wal Mart's average wage in the area rather than the starting wage, which would have been even lower. I have an idea, when Wal Mart advertises for 400 new positions at a decent wage and benefit level and gets only 15 applicants, then we can all talk about whether we should allow foreigners to legally apply to come here to provide cheap maid service, gardening and construction work.

Until then, let's figure out why, although worker productivity has soared over the last 3 decades, most workers (at least those in jobs without anti-competitive government-regulated barriers to entry, like lawyers, for example) have gained little or nothing from those increases in their productivity.

[cleek]

They're hiring undocumented workers because businesses need workers in order to do business, and there isn't enough legal help around.

of course there is. employers just don't want to pay for it.

i'd like to not pay my taxes. it would help my wallet, and that would help the bottom lines of Apple's iTunes division, Papa John's and the Anchor Brewery. gonna defend me ?

[sidereal]

Costco is fantastic.

I'm sure you can't imagine why you'd ever need to own a 2-gallon tub of French's yellow mustard, but I'm telling you that once you have one, you'll know.

[notyou]

I'm sure you can't imagine why you'd ever need to own a 2-gallon tub of French's yellow mustard, but I'm telling you that once you have one, you'll know.

You must be doing it wrong. A two-gallon tub was not nearly enough.

[von]

Had a frosty beverage. F-R-M's objections to the use of the word "outstrips" in the following sentence are reasonable: "The demand for labor outstrips the supply of legal workers looking for those jobs." I think my meaning is clear, but a better, clearer way of putting it would be the following:

Should undocumented workers be removed from the economy, the result would be a decrease in labor supply and a corresponding increase in labor costs and a decrease in labor demand. The effect will be that some companies will go out of business; some will move out of the country; and some will automate. In the short term, these effects will reduce the supply of whatever product or service is produced by the business, generating a second supply shock. Results of a supply shock are higher prices to consumers and, potentially, a combination of inflation and depression (e.g., stagflation).

Brian Palmer is right that the above generally involves microeconomic concerns, although "macroeconomic" concerns are assumed in it and elsewhere in my short piece.

Otherwise, F-R-M, your arrogant snark is thoroughly misplaced.

Francis and Grackel:

Both of you make similar, and well-taken, points. I'll try to address both by responding to the following anecdote from Grackel, which I think is representative (and trust that you'll tell me if it's not):

Meanwhile, wages in construction in southern Arizona are pitifully low, even during a housing boom.

Obviously, housing booms and busts result from all kinds of factors -- not the least of which are interest rates. But the cost of a home is, without a doubt, one of those factors. Labor costs contribute to a significant part of a new home's price (indeed, it can be the most significant part, although the speculative nature of development means that this is not always true). It's not clear to me what the "real" cost of a home is at fair market wages. It is clear to me that there will be fewer of these homes and that they will be less affordable.

Oh, and Sam's Club sucks.

[Charles Bird]

Carrots and sticks. The guest worker program is reasonable because it addresses the reality that there are millions of illegal aliens on American soil, providing a legal avenue for them to work in the US without fear of deportation. What I'm not sure about are the sticks, the measures to remove them when they break the law. Seems like good legislation oughtta have both, but I'm don't know what the sticks are.

[Francis]

I'd like to focus on a broad issue: who is our economy for? what is the proper role of government?

I am utterly unqualified as an international comparative labor economist. but before anyone says anything, i'll admit that my lack of qualifications has rarely stopped me in the past from posting here.

So let's look around. It appears that compared to other countries that people are trying to get into rather than out of (let's call these the West) the US regulates its economy relatively lightly. Minimum wage is a starvation wage. The govt does not provide health care. Immigration policy is politely described as chaotic. Vacation time is not mandated. Labor laws are pretty weak.

What do we see? A country where people work even harder than the Japanese. DeLong had some interesting statistics a while back arguing that europeans (the french in particular) are more productive per person based on hours worked per year. Since americans work far more hours annually, though, americans' total annual productivity far exceeds that of europeans.

But what kind of country do we have these days? We're relatively lightly taxed, compared to the rest of the West. Oh, and the richest americans appear to be capturing all, really ALL of the income generated by all this productivity.

so the vast majority of our work force is worried about health care (rightly), worried about jobs going overseas (wrongly), and worried about not getting ahead (rightly).

Any moment now someone's going to argue that because so much stuff is so cheap (color tvs, cars, AC, microwaves, etc.) real wages are rising across the board.

but so what? there is no immutable law of economics that i'm aware of that says that the range in the distribution in income has to be so large.

to return to Von's point, given the forces of globalization, the powers of the Fed, and the tremendous amount of income available for redistribution across the wage scale, I think we're a long long way from a wage/price spiral leading to inflation and resulting diminution in real wages.

to return to housing for a second, Toll Brothers was recently reviewed in Forbes magazine. Toll's shareholders are making a ton of money these days; Toll's workers, not so much. Given the degree of competition in the housing market, a pay increase to Toll's employees might simply result in a shift in the housing market, with more lower-cost houses being built.

i'd be interested to know what percentage of corporate income goes to labor costs these days, and how that's changed over time.

[felixrayman]

Should undocumented workers be removed from the economy, the result would be a decrease in labor supply and a corresponding increase in labor costs and a decrease in labor demand. The effect will be that some companies will go out of business; some will move out of the country; and some will automate

Agreed, although the phrase "decrease in labor demand" is questionable. The supply curve for labor would shift down. The demand curve for labor would stay the same (to a first approximation). There would be a decrease in the quantity of labor demanded, and an increase in wages. We know the approximate effects of the increase in immigration over the last few decades - best estimates say the 11% increase in the labor force that was due to increased immigration from 1980 to 2000 reduced the average US wage by 3.2%, with most of the effects concentrated on low-wage workers.

In the short term, these effects will reduce the supply of whatever product or service is produced by the business, generating a second supply shock

Only to the extent that what was being produced was necessarily local, unless you are describing the case where all illegal immigrants disappear from the US workforce on a single day (or month or year), which is unrealistic.

Results of a supply shock are higher prices to consumers and, potentially, a combination of inflation and depression (e.g., stagflation).

There would be increased inflation. We have historical examples of large numbers of workers being removed from the workforce (WW2, for example). Was the result depressionary? Can you give examples of negative labor supply shocks that have caused what you describe?

In the real world, of course, illegal immigrants are not going to disappear overnight. The effects would be at the margin. As most illegals are employed in low-wage occupations, what would happen would be extremely beneficial for low-wage and middle class workers and less so for those who do not compete with illegals for jobs.

This is really no different than the argument over whether monetary authorities should target unemployment or inflation. They have increasingly chosen inflation in recent decades, to the detriment of most and the benefit of the few.

[Frank]

Felix- Great post!

Von- You really really don't seem to know what you are talking about. You need to take some econ classes if you want to talk about this stuff in the presence of anyone who has a degree.

Labor costs are an extremely small part of produce costs, so unless a price hike of $.02/lb will cause US producers to go out of business, there is no truth to your argument.

[von]

Only to the extent that what was being produced was necessarily local, unless you are describing the case where all illegal immigrants disappear from the US workforce on a single day (or month or year), which is unrealistic.

Well, let's not play dumb or spin our wheels; let's focus on the actual topic of my post: David Frum's proposals. He'd like to hold U.S. executives personally liable for illegal immigrants in their company's labor force. Let's presume a requirement something along the lines of SOx: a personal certification that their company's labor force is 100% illegal-free.

With the potential for jail time on the line, how long do you think it will take to substantially reduce the number of illegal workers? And how much will it cost the companies? (I'd say somewhere between 6 months and a year, at significant cost.)

We have historical examples of large numbers of workers being removed from the workforce (WW2, for example).

Bad example, for a variety of reasons (the cause of the removal; the involvement of the government; etc.). I had envisioned a classic shock to the labor market resulting in business failure (due to international competition; unless you'd like to restrain trade as well) and sudden labor cost increases. An effect similar to the supply shocks of the 70s is not out of the question (hence, the reference to stagflation).

Frank, thanks for attempting to score the debate; I'm giving your words all the consideration they deserve. BTW, why do you say that labor costs "are an extremely small part of produce costs"? Did you have a particular industry in mind (picking fruit and produce? manufacturing? slaughterhouses?), or were you just making it up as you go along?

[felixrayman]

He'd like to hold U.S. executives personally liable for illegal immigrants in their company's labor force. Let's presume a requirement something along the lines of SOx: a personal certification that their company's labor force is 100% illegal-free.

With the potential for jail time on the line, how long do you think it will take to substantially reduce the number of illegal workers?

What percentage of illegal immigrants do you think are currently working directly for corporations rather than for themselves or for small independent contractors that would be difficult or impossible to police under the proposed law? If you want to argue that a law like that should be phased in over time to avoid a severe shock, I have no problem with that, I argue for increased aid and job training to those adversely affected by offshoring for similar reasons. I don't think the risk of what you are describing is a real one, but if it were, it could easily be mitigated without throwing out the idea of increased enforcement of immigration law.

An effect similar to the supply shocks of the 70s is not out of the question (hence, the reference to stagflation).

Sure, I got the 70s reference, I was just wondering if you had, in the long and storied history of labor supply shocks, an example of what you are describing. If you don't like my example, do you have an example with effects similar to what you predict?

[felixrayman]

As fuel for the discussion, a recent poll shows that 40% of Mexicans would live in the US if they could, and 20% of them would be willing to do so illegally.

What would the impact of 25 or 50 million relatively uneducated and unskilled immigrants be on the economic well-being of the lower and middle classes in the US, do you think?

[Frank]

Von- produce= farm produce = the stuff in the produce asle in your local supermarket.

In construction there is no prospect of employers outsourcing US industry.

Ditto gardeners maids and nannies.

[J. Michael Neal]

Regardless of whether one thinks that legalizing illegal immigrants is, in general, a good idea, the guest worker program is a terrible one. It only allows immigrants to stay in this country for a limited time, and only so long as they are working for the employer that sponsors them. Contra Charles, they won't be living without fear of deportation. Anything that they do that irritates their employer makes them a candidate for exactly that. If said employer starts bending labor rules, or workplace safety rules, do you think that the employees are going to feel free to speak up about it?

The program is terrible. It does nothing to reduce the problem of illegal immigration, while making it easier for employers to hold down wages.

It's also really easy for people like von (or myself, for that matter) to be in favor of higher immigration, since we get all of the benefits of the lower prices, without seeing our wages being depressed. It should be noted that even in von's bad scenario, it largely would not be low wage American citizens or legal immigrants that would pay the price for any jobs that are lost from the market by industries folding up their tents if we restrict the supply of immigrant labor; they already aren't working those jobs. The losers would be the illegal immigrants, and those of us that pay for the services performed by the illegals.

Don't expect low wage workers to thank you for protecting these industries, von.

[hilzoy]

I can see a case for changing the laws, instituting new programs, whatever, but I really can't see a case for not enforcing the laws against employers. I mean: we're not likely to reduce the supply of people coming over here to find better jobs; if we actually want to have a national immigration policy, wouldn't it be best to start with demand?

[dmbeaster]

Businesses are hiring all these undocumented workers not out of some deep-seated desire to break the law. They're hiring undocumented workers because businesses need workers in order to do business, and there isn't enough legal help around.

Sheer ignorance.

Businesses are happy to break the law because its the cheapest labor -- in some areas they may have to because all the competition does and undercuts them. And there is plenty of legal help to go around -- just not at the dirt wages that illegals will take.

At least you have made it clear that big business Republicans support lax immigration laws for the simple economic reason that they can obtain much cheaper labor costs by exploiting illegal immigrants.

[otmar]

Just a dumb question from a foreigner: What percentage of the employed illegal immegrats are payed less than the official minimum wage?

[Platypus]

many of the service jobs being done by illegals are not capable of substitution. home building, restaurant work, hotel work, maid service are all necessarily local.

That just means the negative effects of propping up wages will be expressed in other ways. If hotel workers become more expensive, hotel prices will rise and demand will drop. People will travel less to meetings, and conduct business instead by phone/fax/computer. If construction workers become more expensive, people will either forego construction (bad for that industry) or pay more for the same product/service (bad for everyone else including their workers who will now have to be paid out of a smaller remaining budget). As von quotes:

The effect will be that some companies will go out of business; some will move out of the country; and some will automate.

There's no escaping the fact that propping up wages beyond what a global economy can bear won't work forever. That's the economic equivalent of a perpetual motion machine. Do we even want to have a nation of maids, waiters, and un- or semi-skilled farm/construction workers? Why should we maintain an incentive to stay in such "professions"? We'd be better off giving those citizen-workers both the incentive and and the means to move into other occupations that are (at present) less subject to such displacement or elimination.

[Dantheman]

dmbeaster:

"Businesses are hiring all these undocumented workers not out of some deep-seated desire to break the law. They're hiring undocumented workers because businesses need workers in order to do business, and there isn't enough legal help around.

Sheer ignorance.

Businesses are happy to break the law because its the cheapest labor -- in some areas they may have to because all the competition does and undercuts them."

Exactly right. And part of why it is so cheap is that the cost to employers of being caught employing illegal workers is negligible. It is only by raising the cost to the employers of being caught (Charles's sticks) that any other actions in the immigration field can be successful. Otherwise, there will always be the same incentives for businesses to hire illegal workers (because they will be paid less and because they will not complain to OSHA of violations of workplace safety rules) and the illegal workers will keep arriving (because the wages and working conditions are still better than where they are now), undercutting any plans to deal with immigration issues above board.

francis:

"i'd be interested to know what percentage of corporate income goes to labor costs these days, and how that's changed over time."

I recall Angry Bear showing charts about this a few months ago, with the result being that the current recovery is unusual (possibly unique) in that the proportion of corporate revenues going to labor has not increased. I'll search the archives and post a link if I find one.

And von, dismissing responses out of hand (as you have now done to both felix and frank) does not improve anyone's understanding, nor is it becoming of a host. They have a substantial body of facts on their side, from the labor force participation rate to stagnant real wages, all showing that there is no shortage of unskilled labor in this country which requires increased legal immigration to increase the supply of unskilled workers. No matter how much you feel insulted by their words, responding to their arguments is the only way to persuade others.

[Dantheman]

Here's a link to a useful chart on percentage of national income going to wages and salaries over time from Brad Delong's site.

It's not the chart I was thinking about, but it's a useful set of facts for this discussion. It shows wages are decreasing in the last few years, while total compensation is largely flat (the difference being in benefits and reflects the rising cost of health insurance), which is unusual (to say the least) for an allegedly tight labor market.

[Jonas Cord]

Just a dumb question from a foreigner: What percentage of the employed illegal immegrats are payed less than the official minimum wage?

It's not a dumb question, and I'm quoting it here because I think it's pretty important.

It costs an employer about twice the minimum wage to hire someone legally at that rate when you factor in their taxes, unemployment, workers comp, etc. Never mind the cost of paperwork involved.

While randomly reading economic statistics online for the past few years, I've noticed a disturbing trend that I'm not seeing anyone address. My theory is as follows: illegal immigrants are infringing upon the jobs teenage citizens used to be widely employed in.

This has bad long-term effects on the economy. Teenage employment is on the decline, meanwhile the earlier someone starts working, the more likely they are to have a good paying job in the future if they lack a college or even high-school degree. Meanwhile, teenagers pursuing higher education are able to procure better jobs by the time they reach college age should they need to work their way through it.

Until I read the stats on this, I hadn't put it together with my anecdotal experience. All the boomers I knew growing up (my parents age group) had all worked in the tobacco fields as teenagers if they had come from working class families. They had all managed to become educated, middle or upper middle class people. I am quite certain that class mobility is inhibited by the current state of affairs.

[LizardBreath]

It only allows immigrants to stay in this country for a limited time, and only so long as they are working for the employer that sponsors them. Contra Charles, they won't be living without fear of deportation. Anything that they do that irritates their employer makes them a candidate for exactly that. If said employer starts bending labor rules, or workplace safety rules, do you think that the employees are going to feel free to speak up about it?

Exactly. What this plan creates is an underclass of workers without enforceable legal rights (of course, our current system of not enforcing immigration laws with respect to employers does the same.) We have minimum wage and other labor laws in this country because we believe that working people have a right to be treated decently -- I see no reason to override that democratically made decision on the basis of hysterical predictions that the economic sky will fall if wages are no longer depressed by a pool of illegal semi-slave labor.

[Platypus]

illegal immigrants are infringing upon the jobs teenage citizens used to be widely employed in.

This is something I've been thinking about too, and it raises lots of questions. To what extent is young-citizen labor the alternative to immigrant labor? Is the supply of the former sufficient to make up for the latter? If low-wage occupations become the domain of the young instead of the foreign, will this increase the existing economic divide between young and old, and what are the social/economic consequences of that? Does it increase the already-scary worker:retiree ratio, or otherwise contribute to our rush toward gerontocracy? I don't know exactly where such thoughts lead, but I don't think the conclusions are likely to favor the anti-immigrant crowd.

I see no reason to override that democratically made decision on the basis of hysterical predictions that the economic sky will fall if wages are no longer depressed by a pool of illegal semi-slave labor.

Are wages currently being depressed by immigrant labor, or is there an ongoing effort to inflate wages by reducing the supply of such labor? I for one do not accept your attempt to frame the issue in terms of immigrants imposing a negative on citizens. There are multiple actors here, and multiple motives.

[dmbeaster]

otmar:

Good question -- the answering is surprising, and says something about just how low the minimum wage is. I live in Southern California and have exposure to the use of illegal immigrants in all sorts of construction activities and service industries.

Many illegals are employed at minimum or above minimum wages and treated as legal employees because they utilize phony social security numbers. The employers remain intentionally ignorant since they are happy to have the workers, but they retain the veneer of compliance with immmigration laws. They are definitely compliant as to tax withholding, workers comp, etc. laws as to these employees because, surprise!!, the penalty for violating these laws is much more severe than looking the other way as to illegals, and they get enforced against employers unlike immigration laws.

As a lawyer, I have advised businesses on compliance with the many laws regulating their employees -- businesses are much more concerned about compliance with pretty much all laws regarding employees except the immigration laws (with a few minor exceptions). There is just zero enforcement at the employer level, and/or else zero consequence to employers for violations (again, with a few exceptions -- those who are serially employing numerous illegals, or who intentionally seek them out).

Day labor hiring of illegals (the real market test -- these guys are paid in cash and are ghosts in the machine) typically runs above minimum wage rates -- like $8 to $10 per hour. (Federal minimum wage is $5.15 per hour which is so absurdly low that some states have imposed higher minimums -- $6.75 in California). This is particularly true for various unskilled construction type activities -- guys with skills can get more. Some guys might work for less, but you are going to get slackers, or not get them until later in the day when they will go for it in lieu of no work that day.

Of course, these guys only work episodically, so I imagine they would take less for long continuous employment.

Jonas Cord makes the excellent point that the real cost to an employer of a legal employee at minimum wage is a good chunk more than the simple wage. So paying cash to an illegal at $8 is a bargain to the employer.

[von]

Sure, I got the 70s reference, I was just wondering if you had, in the long and storied history of labor supply shocks, an example of what you are describing.

The long history of labor supply shocks? Sure, there're many examples of labor supply suddenly increasing, but there are not so many examples of a sudden decrease in labor supply -- and, of those examples that do exist (e.g., Iran after the revolution [women suddenly removed from the market]; WW2; etc.) the data either is either lacking or inapposite. We do see that where union power increases, the result is a decrease in employment and output and a substitution of capital for labor. (F'instance, go to DeLong's website, and search the pdf documents for "Procylical_Productivity.pdf"; you'll not that he also uses the 70s oil shocks in his analysis of labor market supply, although, for his purposes, he finds them partially inapposite.) A reduction in the total supply of "workers" (legal and illegal) will result in similar effects.

What this plan creates is an underclass of workers without enforceable legal rights (of course, our current system of not enforcing immigration laws with respect to employers does the same.)

Lizardbreath, I have no idea where the hell you're getting this from. My whole point is to bring current illegal immigrants into the legal marketplace so that they get the same enforceable legal rights as everyone else. In other words, you haven't just missed the point, you've attributed to me the exact opposite point.

For those who think I'm endorsing breaking the law, please recall that arguing for a change in law is not the same as arguing for one to break the current laws.

Finally, if I've been a bit short, it's because most of the comments seem to bear no relation to the argument that I'm actually advancing. Please read the post before you jump in with both arms a-swinging.

[von]

Jonas Cord makes the excellent point that the real cost to an employer of a legal employee at minimum wage is a good chunk more than the simple wage. So paying cash to an illegal at $8 is a bargain to the employer.

Yes, which is why it is to the advantage of legal workers to bring illegal workers into the marketplace.

[von]

Teenage employment is on the decline, meanwhile the earlier someone starts working, the more likely they are to have a good paying job in the future if they lack a college or even high-school degree.

College correlates to wage growth better than teenage employment, and the studies I've seen suggest that teenage employment generally results in poorer school performance and a consequent drop in college attendance. In other words, I'll gladly substitute more college graduates for teenage employment.

[von]

We do see that where union power increases, the result is a decrease in employment and output and a substitution of capital for labor.

BTW, you see similar effects where there is licensing or other government restrictions on employment. (Which is not to say that all such restrictions are illegitimate.)

[LizardBreath]

Von -- if you had read the post I quoted by J. Michael Neal, you might have understood my point. These workers can be deported essentially at their employers option -- do you really think that they will be able to get their legal rights against those same employers enforced? ("Sure, you can go to the Labor Department and complain that you aren't being paid overtime. After they process your complaint, I may have to send you a check, if I can figure out what your address is in Mexico. Still want to complain about it?")

We've had guest worker programs before (the 'braceros' program) and they worked exactly as I've described -- they got treated like serfs and cheated out of their wages.

Look, if we have a real labor shortage, let in more legal immigrants. If we can't afford to have our work done by people with the legal ability to protect themselves, then that work shouldn't get done.

[von]

A final bone to pick:

A lot of commentators (and Michelle Malkin) argue that passing a new law that would (for instance) send executives to jail for employing undocumented workers is merely "enforcing the law." I don't know what universe these people live in, but, in my dictionary, passing a new law is not "enforcement" of existing laws; it's passing a new law.

[von]

L-B, the catch-22* that you and J. Michael Neal assume can be easily corrected simply by providing for whistleblower protection. And, since Bush has not yet fully outlined his proposal, it's unfair to assume that it must be opposed because it will contain that catch-22.

*"The best catch there is," per Joseph Heller.

[LizardBreath]

Yes, which is why it is to the advantage of legal workers to bring illegal workers into the marketplace.

???? Importing a population of illegal workers who are cheaper to employ and less troublesome because they can't complain about violations of law benefits legal workers? What are you talking about?

[von]

See my comment on catch-22, L-B.

[LizardBreath]

providing for whistleblower protection.

If any version of this plan is ever seriously proposed that would allow a guest worker to remain in the US indefinitely while engaged in a dispute with her employer and either continue to receive wages or to freely seek other employment, take yourself out to dinner at the best restaurant you can find in your city and email me for my address so you can send me the check.

Really, what do you envision in terms of whistleblower protection?

[LizardBreath]

Sorry about the italics.

And your comment about whistleblower protection doesn't apply. If it's cheaper to hire an illegal at $8/hr than a legal worker at $6, that does not drive up wages for legal workers. Where whistleblower protection comes in on this point I can't imagine.

[cleek]

They are definitely compliant as to tax withholding, workers comp, etc. laws

you can withhold FICA (for example) for a person with a phony SSN ? does the IRS/SSA simply not care in cases where a SSN isn't actually associated with a real person ?

[Dantheman]

LB,

I am reading von as saying making currently illegal workers into legal ones through such a program. If I am misreading von, I'm sure he will advise.

On the other hand, von hasn't addressed my point that unless we do something to deal with incentives to employ illegal workers, new illegal workers will come in to fill the newly legalized workers' places.

[LizardBreath]

Wait -- maybe I do understand you on the second point. Did this:

Yes, which is why it is to the advantage of legal workers to bring illegal workers into the marketplace.

mean, more literally, to remove illegal workers from the marketplace by making them legal, which would make them just as expensive to hire as legal workers? Because if that is what you meant, yes, that would benefit legal workers. But any plan which places control over a worker's immigration status in the hands of her employer won't have that effect.

[Dantheman]

von,

"Finally, if I've been a bit short, it's because most of the comments seem to bear no relation to the argument that I'm actually advancing. Please read the post before you jump in with both arms a-swinging."

With respect, I would have more sympathy for you if you hadn't started your post with a lengthy and barely disguised bashing of Democrats. If you're going to swing first, don't be surprised when people swing back.

[Jonas Cord]

Von,

College correlates to wage growth better than teenage employment, and the studies I've seen suggest that teenage employment generally results in poorer school performance and a consequent drop in college attendance. In other words, I'll gladly substitute more college graduates for teenage employment.

Of course college correlates to wage growth better than teenage employment alone. But for those who aren't likely to go to college straight out of high school, things will be quite better for them in their early adulthood, which actually would increase their likelihood of getting to College, albeit a bit late. The track of school to college to good job simply has too many derailments for us to put all of our eggs in that basket.

And from what I've seen, schools are not at all accomodating to teenage employment (most students are not allowed to substitute a job for an afternoon sports team, which is completely absurd.)

For the record, I'm enthusiastically pro-legal immigration but yet I simply cannot find a way to believe that condoning illegal immigration makes any kind of sense.

[von]

Really, what do you envision in terms of whistleblower protection?

A civil cause of action in the event of a termination for whistleblowing -- as is the case under other whistleblower laws. (I'm open to other ideas as well, although I agree that forcing the employer to continue to employ the alleged whistleblower is not realistic.)

mean, more literally, to remove illegal workers from the marketplace by making them legal, which would make them just as expensive to hire as legal workers?

Yes. But, so we're clear: Keep in mind that by bringing illegal workers into the workplace, wages for legal workers will decrease. Presume that there are 12 million unskilled workers: 6 million are illegal (paid a wage+benefit mix of $6/hr.) and 6 million are legal (paid a wage+benefit mix of $8/hr.). If the illegal workers are brought into the legal market, we can expect legal worker wages/benefits to stabalize around the $7/hr mark, without a significant loss of employment.

[Dantheman]

"Really, what do you envision in terms of whistleblower protection?

A civil cause of action in the event of a termination for whistleblowing -- as is the case under other whistleblower laws."

I have trouble believing a litigator would suggest such a solution provides meaningful rights for a party who is likely to be deported during the pendency of his civil cuase of action, as a guest worker with no current job is not likely to be permitted to remain in this country.

[LizardBreath]

A civil cause of action in the event of a termination for whistleblowing -- as is the case under other whistleblower laws.

So, a mimimum wage agricultural worker, deported as a result of a dispute with her employer, would be entitled to sue the employer for, oooo, maybe tens of thousands of dollars in back wages, if she could, from her location in Mexico, get a US lawyer to take the case and could pay them? As protection, this is pretty damn empty.

[LizardBreath]

Sorry about the bold, this time. Mayber I should give up on HTML formatting for the day. And Dan -- exactly.

[von]

Fair point, DtM.

[Dantheman]

"But, so we're clear: Keep in mind that by bringing illegal workers into the workplace, wages for legal workers will decrease. Presume that there are 12 million unskilled workers: 6 million are illegal (paid a wage+benefit mix of $6/hr.) and 6 million are legal (paid a wage+benefit mix of $8/hr.). If the illegal workers are brought into the legal market, we can expect legal worker wages/benefits to stabalize around the $7/hr mark, without a significant loss of employment."

And when 6 million more illegal workers come in to the country and are willing to work for $6 per hour, does that mean the legal ones now need to reduce their wages to $6.50? And so on, and so on until we've raced to whatever bottom we can find illegal workers willing to work at?

von, that's exactly why felix and frank's comments are relevant -- the effect of increasing legal immigration while not removing incentives for illegal immigration (as so many Republican proposals are at bottom) is a transfer from the lower classes to the upper ones.

[Dantheman]

"that's exactly why felix and frank's comments are relevant"

francis's comments too. Sorry about the omission.

[felixrayman]

The long history of labor supply shocks? Sure, there're many examples of labor supply suddenly increasing, but there are not so many examples of a sudden decrease in labor supply

Wars, disease (Spanish influenza, etc.), emigration, or even decreased immigration - surely you can find an example where one of these caused the effects you describe? Depression can certainly result in emigration, but I'm not aware of any good examples of emigration causing stagflation.

For those who think I'm endorsing breaking the law, please recall that arguing for a change in law is not the same as arguing for one to break the current laws.

Calling for increasing the current number of inspections of employers is not changing the law any more than stepping up patrols around banks due to a rash of bank robberies is changing the law.

[Sebastian Holsclaw]

It seems to me that a few of you are working under the assumption that the jobs being done on the cheap now will continue being done at a much higher price. I'm not sure that is true. My choices aren't illegal low-price maid and legal high-price maid, another choice is no maid. (Who am I kidding? I can't even afford an illegal low-price maid). Housing prices certainly can't stand much more upward price pressure without something breaking, so the choice isn't necessarily between low price construction and high price construction. Less construction because fewer people can afford it is an option too.

[Dantheman]

Sebastian,

Speaking for myself only, I have not made such an assumption, and certainly both von and platypus have pointed out the fallacy of that assumption above.

[Frank]

Sebastian- You need to be more specific about who you think the people making that assumption are. I know I didn't, and its pretty clear that Felix knows enough economics that he isn't making that assumption either.

Really I don't see any sign that anyone in the thread has made that assumption.

Are you thinking that no one will choose to pay a legal wage for any of the afected jobs?
Is that what you wanted to imply?

[LizardBreath]

I think this:

If we can't afford to have our work done by people with the legal ability to protect themselves, then that work shouldn't get done.

indicates that I am aware of the possibility you refer to.

[toby]

Employers willing to bend rules are always going to find people that are willing to work off the books at rates lower than what the market dictates. Everyone also assumes that there are enough people in the US with legal immigration status to staff even the most unpleasant of jobs (something I do not believe to be true).

By expanding the scope of the Service Contract Act to include services provided to private interests you could at least force contractors to pay all employees, at a minimum, wages and benefits as dictated by the DOL. Contractors would need to be compliant for all payroll employees in order to keep their books clean.

Of course contractors could still hire illegal aliens - but they would have to be 100% off the books.

[alex]

Cleek:

Your employer sends a big FICA check off to the government with SS numbers attached. The earnings are credited to the various accounts and all the money gets thrown in the pot. If the SS number belongs to somebody's dead grandmother, well, the cash is still green...and they're not the DOJ, are they?

The last time I heard about this figure (very indirectly) there had been about $200 billion collected from illegal workers. One of the reasons there is such lax enforcement of the labor laws is that the feds need the money--and it's not like these folks are going to come around and try to get any of it back.

von:

You will note that the proposed guest-worker program does not only apply to low-wage, low-skill jobs. If one's profession is not locally regulated and licensed (lawyer, plumber, doctor, and not much else) one could, no matter how specialized, soon find themselves facing someone from Estonia who is perfectly happy to do their job for half the money.

And please: the idea that our current Congress would not write a piece of legislation heavily tipped against labor....what color pony would you like with that? They're trying to get out from under the whistleblower laws we already have.

[Platypus]

Are you thinking that no one will choose to pay a legal wage for any of the afected jobs?

I think it's a pretty safe bet that not everyone (a weaker version of the same claim) will be willing or able to pay a legal wage for the jobs currently filled by immigrants. The converse (that every last one of those jobs will remain filled) seems highly unlikely, but that axiom does indeed seem necessary to support many of the arguments here even if it hasn't been explicitly stated.

[Frank]

Platypus- Nope. No one has claimed that none of those jobs would go away if employers had to pay a legal wage. I'd prefer a living wage. Even if that meant that some illegal imigrants had to give up working here and go back to Mexico.

I find the idea that the economy will be depressed if we can't hire people for sub-subsistance wages wrong and disturbing.

[save_the_rustbelt]

"Just a dumb question from a foreigner: What percentage of the employed illegal immegrats are payed less than the official minimum wage?"

Probably a high percentage. Hard to track.

Many illegals are also required to reimburse employers for expenses, and pay smugglers and assorted other thugs for the proviedge of being here.

Also, many employers of illegals do not bother with such legal niceties as OSHA rules, workers comp, Social Security, etc.

[trilobite]

von, you'll no doubt dismiss this with some remark about how I'm not worth answering or don't understand economics, judging from how you've been dealing with comments in this thread. But hey, you say you want a market solution? Don't reward employers for obeying the law, and don't change the laws to undermine the labor market. Instead, use the market to enforce the law. How, you ask? Simple.

Qui tam.

Every employer who employs illegal workers is robbing the government of tax money. Let the first worker to blow the whistle collect some modest portion of the fine that the employer will be assessed, as a bounty for turning him in. Make sure the percentage is high enough to ensure a good living for many years back in el Sud. Or include an amnesty & citizenship offer in the bounty.

Then step out of the way of the courthouse steps so as not to get trampled by the mad rush of people turning their exploitative employers in for the reward.

After a few months, nobody will dare hire illegals.

This is possibly the easiest public policy issue to solve in existence. All that is lacking is the will.

[von]

Yeah, I overreacted to Frank's and F-R-M's remarks. My bad.

Trilobite, as for "Every employer who employs illegal workers is robbing the government of tax money" Not necessarilyu so. Many (most?) undocumented workers use fake SS numbers, which means that the employer is paying payroll taxes -- albeit into an account that (in theory) will never be drawn on.

[felixrayman]

Yeah, I overreacted to Frank's and F-R-M's remarks. My bad.

Meh. My remarks contained a great deal of snark with any content they may have contained. To your credit, after consuming the frosty beverage, you responded to the content of said remarks while dismissing the snark.

Well done.