Does America Need Immigrants?

by Russ Roberts on March 22, 2006

in Immigration

Does America need immigrants? Need? Of course America doesn’t need immigrants. Some pro-immigration people like to point out all the jobs and tasks done by immigrants and argue that if it weren’t for immigrants we’d have to do without all those things. This is mostly not true. If we closed our borders, all the things that immigrants do now would either be done by ‘native’ Americans (presumably at higher wages with resulting higher prices) or be done by machines or would not get done at all. The country would not collapse. We’d just be poorer.

Robert Samuelson, in a depressingly bad piece in today’s Washington Post, gets part of the story right when he writes:

Economist Philip Martin of the University of California likes to tell a
story about the state’s tomato industry. In the early 1960s, growers
relied on seasonal Mexican laborers, brought in under the government’s
"bracero" program. The Mexicans picked the tomatoes that were then
processed into ketchup and other products. In 1964 Congress killed the
program despite growers’ warnings that its abolition would doom their
industry. What happened? Well, plant scientists developed oblong
tomatoes that could be harvested by machine. Since then, California’s
tomato output has risen fivefold.

For Samuelson (who usually gets it right), this story proves we don’t need immigrants. And he’s right. We don’t need them. They just make life better for those of us already here. True, keeping out Mexicans doesn’t mean that the tomatoes die on the vine, never to be eaten.  But losing the opportunity to have Mexicans come and pick them means that for some period of time, tomatoes were more expensive than they needed to be.

Arguing about whether we ‘need’ immigrants is a red herring.

But that’s not the truly depressing part of the Samuelson piece.  It’s this part where he argues against a ‘guest worker’ program and immigration in general:

What we have now — and would with guest workers — is a conscious
policy of creating poverty in the United States while relieving it in
Mexico. By and large, this is a bad bargain for the United States. It
stresses local schools, hospitals and housing; it feeds social tensions
(witness the Minutemen). To be sure, some Americans get cheap
housecleaning or landscaping services. But if more mowed their own
lawns or did their own laundry, it wouldn’t be a tragedy.

Bob, what were you thinking when you wrote that paragraph? I don’t agree that more immigrants stress our local schools and hospitals and housings. If immigrants come here and pick those tomatoes and put up that dry wall and mow our lawns, they add to the economic pie, they don’t take from it. As for social tension, I’d argue that immigrants add much more through enriching American culture than they detract from our lives in the form of ‘social tension.’ Social tension is just another name for racism—why should we pander to that?

But the real problem with the paragraph is the last two lines:

To be sure, some Americans get cheap
housecleaning or landscaping services. But if more mowed their own
lawns or did their own laundry, it wouldn’t be a tragedy.

It wouldn’t be a tragedy? No, it wouldn’t be a tragedy for the Americans. A little more lawn mowing and laundry isn’t a tragedy. But what about the Mexicans? I care about them, too.

Samuelson hints at it himself without noticing when he writes that current policy creates poverty in the United States and relieves it in Mexico. But that’s misleading. The poverty ‘created’ in the United States isn’t an increase in suffering. It’s a shift in where the suffering occurs—it moves across the border. Total human well-being hasn’t really gotten worse. But the American economy gives those Mexicans a chance to get out of poverty, a much better chance than they have if they stay. That’s why they risk so much to come here. Stopping them from coming means they’re more likely to be stuck in poverty. That’s the real tragedy.

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{ 49 comments }

spencer March 22, 2006 at 4:45 pm

I'm not clear what you are objecting to.

Is it the development of machines to pick tomatoes?

I always thought a major way we raised our standard of living was by providing labor with more capital — machinery — to raise labor productivity.

Are you taking the position that we should import cheap labor rather then use more machinery and/or capital per worker to improve US labor productivity and living standards?

What am I missing? I seem to be getting the impression that your view of capitalism opposes the very things that capitalism does to improve our lives. All I seem to see on your blog are arguments in favor of cheap labor and opposition to the very things that raise our standard of living.

On the one hand you brag about the great job our modern mixed economy does to raise standards of livings, but on the other hand you always seem to favor cheap labor policies. Aren't these two positions inconsistent?

Han Meng March 22, 2006 at 5:32 pm

I was similarly disappointed in an earlier item of his, where he wrote, 'If there are "shortages" of unskilled American workers, the obvious remedy is to raise their wages…. Okay, increase it to $10 or $12. Higher wages will bring forth more workers. Perish the thought. Business groups, led by the U.S. Chamber of Commerce, clamor for more guest workers. That's a euphemism for cheap labor.'

Camilo March 22, 2006 at 5:47 pm

What's wrong with "cheap" labor if those doing it obviously want to, so much so that they're willing to risk their lives.

I agree mostly with Dr. Roberts about the real tragedy being that Mexicans, without having the alternative to work in the U.S., would be stuck in poverty. But I would go a tad further: the real tragedy is that Mexicans have such a hard time accepting that we Mexicans are responsible for ourselves. It's always someone else's fault, never ours. At least for most of us who stay behind. Those hoping to work in the U.S. clearly feel empowered to improve their own lives. Which makes all the tragedy all the more tragic.

Russ Roberts March 22, 2006 at 5:52 pm

Spencer,

I'm all for innovation that makes life better. What I oppose is artificially inducing innovation by keeping desperately poor people from entering the United States and doing something productive. Samuelson was saying that we should keep Mexicans out of the United States because it's bad for America. One, I disagree. I think it's good for America. But it is certainly bad for Mexicans to keep them from coming here. I care about Americans and Mexicans.

H. Adams March 22, 2006 at 6:25 pm

I don't know how the University of California professor did his study, but I beg to differ. My friend, who is a systemic biologist, had decided that he wanted to spend the last two weeks of one of his summers chasing spaghetti straps and fishing the Baja, so he called me up to finish measurements on tomato yields for an experiment that he was performing for his boss. (Though it's not relevant to the story, they were trying to see the impact that this new fertilizing technique his boss proposed had on the tomato crop. They would then pay the growers %110 of the market value for a 1 ft sq^2 tomato crop) Anyway, I witnessed first hand the importance Mexicans have on our economy.
I would always remind people of this story who had strong opinions against illegal immigration and ask them do you know how expensive our food fruit and vegetables would be? They would always respond shouldn't it be their to automate the process then. I would always respond with "and if it didn't work?" I am kind of curious what people's response to this question. Let's say all the illegal immigrants left — I am just wandering — what would happen to our economy?

voorhees March 22, 2006 at 6:38 pm

If oil is in short supply, the price will increase such that alternative energy sources will become profitable to develop and make available on the market. To pursue them in an environment in which oil is abundant would be a waste of resources. Artificially causing the price of oil to increase in order to promote the development of fuel alternatives jumps the gun on development and causes the premature (and wasteful) expenditure of resources.

Similarly, as long as Mexican labor was available, it was unnecessary to develop automated tomato harvesting techniques. If it were actually cheaper to have machines harvest tomatoes, the oblong tomato would have been developed in spite of the abundance of Mexican labor. The ending of the Bracero program is an example of a Congressional decision causing the premature expenditure of resources to develop technology that would likely have been developed anyway, but at a more economically appropriate time.

Steven M. Warshawsky March 22, 2006 at 7:14 pm

This column starts out reasonably, noting that the United States does not "need" immigrants in some absolute sense, but then it degenerates into a series of extremely dubious statements that show the author cannot be taken seriously when it comes to evaluating the issues and concerns raised by immigration.

To begin with, advocates of greater immigration controls (myself included) do not support "clos[ing] our borders." That's a strawman. The real debate is over how to secure our borders to limit illegal immigration (including of terrorists and criminals), and what level of total immigration should be permitted.

No one disputes that immigration, under certain conditions, offers considerable benefits to this country. Very few people would disagree that if we stopped *all* immigration (which is about as possible as achieving absolute zero in a laboratory), the country would be "poorer" as a result. But this isn't what the debate is about.

Next, the author's bald assertion that "more immigrants [do not] stress our local schools and hospitals and housing" simply cannot be reconciled with the evidence in states all along the Mexican border. Where is the empirical support for the author's position on this point?

Furthermore, the notion that immigrants, in all cases, add more to the economic pie than they subtract, is completely implausible. Where is the empirical evidence for this position? Clearly, it is quite possible for an individual to "cost" more to society than he or she adds in terms of economic production.

Does the author really think that the value added to the economy from picking tomatoes (his example) exceeds the cost of providing an immigrant or his children with a public education or emergency room care at the local hospital? Obviously, if the immigrant had to pay for these services out of his own pocket, he never could afford them. These costs are subsidized by other taxpayers. Plainly, many immigrants cost more than they add to the economy (as do many native workers).

The author's claim that concerns about "social tension" is "just another name for racism" is nothing but a cheap shot with no analytical value whatsoever. Why is it "racism" for a people — any people — to be concerned about the erosion of its culture? Why is it *wrong* for a people to want to preserve the cultural characteristics that made it a people in the first place?

Certainly, we can debate which of these characteristics are worth preserving (and how to do so), which should be compromised, which should be changed, etc. But to declare from the start that all concerns about preserving one's culture are "racist" is ridiculous.

Finally, the author expresses how much he "cares" for Mexicans, but his solution to Mexican poverty seems to be to just throw open our borders to anyone who wants to live here. It's not clear, to say the least, how this helps us (the ones who are already living here, remember?) or them in the long-run.

Moreover, as a policy matter, the author's approach is completely unrealistic. So, ultimately, the author seems more interested in showing us what a great, compassionate fellow he is, than actually thinking deeply about the many difficult issues presented by immigration.

save_the_rustbelt March 22, 2006 at 8:36 pm

At one time immigrants, and especially the illegals, truly did jobs Americans did not want, or when Americans were not available at the right place and the right time.

Now illegals are taking permenant jobs, espcially in construction.

So Americans don't want to be carpenters, roofers, drywallers, painters? Bull.

Illegals work for artifically low wages, never report safety violations and never call the wage-and-hour office when they are cheated. The employers evade taxes. A perfect employee for the Cafe Hayek crowd?

MikeE March 22, 2006 at 9:56 pm

"Stopping them from coming means they're more likely to be stuck in poverty. That's the real tragedy."

I admire your concern for the Mexican underclass, why Im supposed to be more concerned about them as opposed to fellow citizens is where Im not clear. Maybe we should all become tenured profs?

TLB March 22, 2006 at 11:24 pm

I believe the two authors of this site are in Virginia.

I believe they'd have a bit different and more fact-based perspective on the issue of strained infrastructure if they lived in the U.S. southwest.

The post also confuses "immigration" with "illegal immigration".

And, if you "care about the Mexicans", why do you support illegal immigration?

II does neither us nor the Mexicans much good. It entrenches the corrupt Mexican oligarchy and allows them to avoid reforms. It brings poor peasants into a rich country and subjects them to the great possibility of worker abuse and a much greater risk of workplace injuries and deaths than American workers.

As for the $10 lettuce canard in one of the comments, are people still pulling that line? Labor costs are only about 10% of the price of a head of lettuce.

And, since illegal immigration leads to massive political corruption in the U.S., I think I'd pay $1.50 for lettuce if it meant that we could avoid corrupting our political system.

Dennis March 22, 2006 at 11:25 pm

So, should we rid ourselves of the pretense of immigration law all together? Seriously, if it is so great for the illegal immigrant, & for the native economy (and therefore the natives), why bother artifically inflating the price of government to enforce laws that are largely ignored, and apparantly holding our economy back?

The one thing I noticed in the original post, was the artful dodge of the word 'illegal', or even 'undocumented'. There is a large difference between wanting to stop illegal immigration, and wanting to stop immigration in total. That's like saying someone who fears the prospect of "President Hillary" must fear having a woman as President!

Paul March 23, 2006 at 1:02 am

What are "artificially low wages"? Wages that reflects the actual supply of labor, rather than what we wish the supply of labor were?

expat March 23, 2006 at 1:24 am

Why the special concern for Mexico? Why not much poorer countries like Bangaldesh or Vietnam or just about anyplace in Africa? Five billion of the world's six billion people are poorer than the average Mexican. If you are a true globalist your vision should extend beyound the southern border of the US.
http://www.vdare.com/sailer/050710_five_billion.htm
(…)
In reality, almost five billion people (4,976 million to be precise) live in countries where the average per capita gross domestic product is lower than Mexico's mean of $9,600. (These numbers are from the CIA World Factbook, and are calculated in terms of purchasing power parity
(…)

http://www.vdare.com/walker/mexico_the_rich.htm
(…)
Mexico is the richest nation in Latin America when measured by GDP, and by a wide margin: in 2001, Mexico's GDP was the highest in Latin America, a substantial 22.5 percent more than runner-up Brazil. When GDP per capita is the gauge, Mexico is second only behind Argentina.

Half of all Latin American billionaires, 11 out of 22, are Mexicans.
Mexico is the quintessential banana republic—a corrupt oligarchy of arrogant rich, a tiny middle class and millions of poor people, around half of whom live in poverty.

But Mexico is not poor overall. It has the resources to improve itself.

Economist Gary Hufbauer of the Institute for International Economics recently noted that Mexico has tax collections that amount to only 14 percent of the country's gross domestic profit, compared with the U.S. level of 25 to 28 percent.
(…)

Vincent March 23, 2006 at 6:19 am

1) the question is not the good one: a "country" has no peculiar needs. Only individuals who are part of the country have needs. And if they have "needs" for immigrant labor force, or "opportunities" to hire them, what's the problem ? Why should there be legal distorsions favouring people with one passport over others ? if two willing people want to contract together for work, why should state interfer with it ?

2) Since European Union enlargement (2003), in Ireland, Polish, latvian, estonian (& so on) workers have taken many job offers in the building industry. The result: "Irish" employement in theses area has actually raised. And salaries of Irish employees have improved more than in "low immigration" sectors. Why ? Because best Irish workers have turned into first level team managers, managing polish and eastern european teams, so they get better wages.

3) I'm not an economist, but immigration seems to me like a good way to let employable people meet valuable assets in countries where this combiantion might be the most profitable, just as freedom of circulation of money, ideas and goods do. So immigration increases global wealth. Fears over short term difficulties created by immigration should not hide it's long term ultra-positive scorecard.

JohnDewey March 23, 2006 at 6:22 am

Expat,

I wish to improve the economic conditions of Mexicans because that low-income country shares a huge border with us. For me, it has nothing to do with charity. It's in our nation's interests that the Mexican standard of living improve and political tensions there decrease. IMO, the U.S. will benefit in the long run if Mexicans working in the U.S. amass capital to later use in building Mexican business. That's not what happens with all illegal immigrants, but it is certainly happening with some.

JohnDewey March 23, 2006 at 6:46 am

Mr. Warshawsky,

It is unfortunate we all too frequently use the term 'racism'. I wish the terms 'race' and 'racism' would fade from our language. I think the notion of race is a silly invention.

Social tension about immigration is real, and involves emotions for some that warrant the use of a stronger word. I'm just not sure we know enough about the motivation of Minutemen to conclude that 'racism' is an accurate term to use.

Though I agree with the rest of Professor Russell's post, I also would have preferred that he not equate 'social tension' with 'racism'.

JohnDewey March 23, 2006 at 6:58 am

"And, since illegal immigration leads to massive political corruption in the U.S., I think I'd pay $1.50 for lettuce if it meant that we could avoid corrupting our political system."

TLB, I don't understand what you mean by "massive political corruption"? Are low-income illegal immigrants bribing our politicians? I don't think corporate America is bribing politicians in order to increase illegal immigration. Many are advocating increased legal immigration, but that's not corruption. Are government officials falsifying documents for illegal immigrants?

I do realize that many illegal immigrants are using false documents to obtain jobs. But that's just simple lawbreaking, right? It's not really political corruption, is it?

bbartlog March 23, 2006 at 8:35 am

For an economist you seem remarkably unconcerned about the negative externalities that illegal immigration can bring with it. But in any case:

1) In remarking that the real tragedy here is that of the Mexicans left behind in poverty, you clearly abandon the Austrian idea that human utility is incommensurable. That's fine, it's an inhuman position to being with. Permit me the same luxury.
2) Those of us who are not Catholic saints or boddhisatvas generally care more about the well-being of some set of people closer to us than that of the bulk of humanity. You (I imagine) care more about the welfare of people in your family than that of someone you've never met in Mongolia. Similarly, the majority of Americans cares more about the welfare of other Americans than that of Mexicans. You may call this racism if you like, but it is more or less a human universal.
3) Returning to point 1), I am entitled to weigh the suffering of low-wage American workers whose wages are lessened as being greater than that of investors whose returns are reduced or consumers whose groceries are more expensive.

So: I agree with you that human suffering would on the whole be reduced if Mexican immigration continued unabated, and further that US economic growth would be maximized. But since the former is due to reduced suffering in a group I care less about, while the benefits of the latter accrue disproportionately in this case to people whose utility returns on money appear to me to be relatively diminished already, I can't support your policy.

There are also arguments about the long-term political effects of immigration in a democratic society, but leave that under externalities for now…

bbartlog March 23, 2006 at 8:44 am

Short addendum: I'm well aware that someone could use the same logic I did, assuming they felt solidarity with the American wealthy but not the American underclass, to support illegal immigration. The problem has no specific logical solution independent of group loyalties, unless you go back to treating human utility as incommensurable or else treat all human utility as equally important to you. But the former is more or less a facade no one can maintain for long, while the latter is at odds with all we see of human behavior; so I'm afraid there is no clean solution.

Half Sigma March 23, 2006 at 10:06 am

Many of the excellent comments above have said what I want to say, and probably better. But I agree with the following points:

(1) Duty of U.S. lawmakers to be more concerned with the welfare of American citizens than the welfare of citizens of Mexico and other foreign countries.

(2) Cost of services provided ($10,000 per year to educate a child, plus healthcare, other social services) can far exceed the value of labor.

(3) Externalities: unskilled non-English speaking Mexican immigrants, legal and illegal, cause a disproportionate share of crime and other problems.

(4) Erosion of U.S. culture: this is another externality.

(5) Cheap labor discourages investment in labor-saving capital.

(6) Etc.

Stew March 23, 2006 at 10:45 am

It is unfortunate that your concern for illegal immigrants doesn't extend to those law abiding immigrants who petition for visas at the US Consulate in their native countries and patiently wait up to 5 years or more to gain legal entry. You also ignore the work of economist George Borjas, a legal Cuban immigrant,who has clearly demonstrated the fiscal impact of illegal immigration on US taxpayers. A good example of illegal immigration's negative impact is the changes that have occurred in the city of Maywood, CA.

Trevor March 23, 2006 at 12:29 pm

Cafe Hayek has proven invaluable to improving my understanding of free market economics. However, such debates as this are ultimately rendered useless unless distinctions are made between legal and illegal immigrants.

Instead of giving illegals a free pass by conflating them with immigrants who abide by our laws, we should campaign more strongly (and, admittedly, likely to no avail) for the elimination of the minimum wage.

Artificial increases in labor rates, in conjunction with the safety net provided by the welfare state and the government's refusal to confront illegal immigration head-on, only encourage employers to hire illegal labor.

Only when Americans are allowed to work for less than the minimum wage will we truly discover whether Mexicans are doing the jobs Americans "refuse to do."

Ann March 23, 2006 at 12:30 pm

"Stopping them from coming means they're more likely to be stuck in poverty. That's the real tragedy."

No, the real tragedy is that Mexico and other poor countries won't fix their systems, so that people could stay home (if they wanted to) and still lift themselves out of poverty. At the country level, most poverty is self-inflicted, and those that suffer most from it are the local poor, including both those that stay and those that leave to try to build a better life elsewhere.

I generally support expanded legal immmigration into the US, but 1) we can't take everyone; and 2) they shouldn't be forced to leave their homes in order to have a decent life. The real tragedy is the corruption of the Mexican government.

Scott March 23, 2006 at 12:47 pm

I always thought the reason for publicly funding education for children for the overall benefit of society, not specifically the parents of those children. Therefore the "public good" of educating a child should not matter wether it's the child of an illegal immigrant or the child of a "native" American. The benefits of education accrue to the children in particular, not their parents, and society in general.

Scott March 23, 2006 at 12:57 pm

RE: "2) they shouldn't be forced to leave their homes in order to have a decent life."

I'm not particularly fond of that kind of reasoning. There is a similar situation up here in Canada that some provinces are facing. The Alberta economy is booming as oil sands production is continually being ramped up to meet growing U.S. demand. As a result there is a massive job shortage in many industries and people from other provinces are flocking to Alberta to work. I cringe every time I hear someone say, "It's not fair that we should have to uproot our family to go to Alberta where the jobs are." My question is, what is the "fair" solution if one part of the country/world is in need of workers and another has excess workers?

cb March 23, 2006 at 1:06 pm

Does anybody have any links to actual data regarding crime commited by illegal immigrants and social costs consumed by illegal immigrants.

Warning – useless anecdotal evidence ahead

I live in TX and my mom is a nurse for poor mothers via Medicaid. I doubt illegal immigrants commit a disproportionate share of crimes, they tend to keep to themselves. Their kids, on the other hand, are subject to the same pressures all inner city kids face. But overall, Mexicans seem rather conservative, even if they don't vote that way. I would guess that they consume quite a bit of social services. My mother has plenty of stories of people coming over the border to get surgery, or whatever, and then going back. The males anyway, some of them, go back and forth as it suits them. I would guess that in a couple of generations, these immigrants will be an asset to the country, just like all the southern Europe immigration a century ago. It's certainly reasonable to talk about amounts, though, you can have too much too fast. And why H1-B Visas are limited to such a small number is beyond me, THAT is stupid.

cb March 23, 2006 at 1:09 pm

"The Alberta economy is booming as oil sands production is continually being ramped up to meet growing U.S. demand."

What, you guys don't drive? China and India's growth has nothing to do with it? Oh yeah, all those stupid SUV's.

John Dewey March 23, 2006 at 1:09 pm

Trevor,

I'm all for eliminating the minimum wage. I agree it distorts markets and leads to higher unemployment of unskilled teenagers. That's particularly true in small southern towns, where the cost of living is extremely low.

My friend who hires illegal immigrants in housing construction tells me he pays considerably more than minimum wage. That's true even for the lowest skilled workers. He tells me he would gladly hire U.S. citizens, but that the only ones willing to work for the going wages are usually either undependable or unproductive.

Isn't it possible that minimum wage laws would change nothing about illegal immigrant hiring practices? From what I've read, most illegal immigrant workers eventually obtain documentation that allows them to work in jobs covered by our labor laws.

Aaron Krowne March 23, 2006 at 1:10 pm

How do illegal immigrants make us less poor given that most of the cost "savings" they provide comes from tax evasion? This seems like a zero sum game to me.

Its not like we don't have enough people at the low end of the labor market to fill their places (thanks to a trend of factory shutdowns in the past decade). These people don't live expensively. So you can't argue that illegal immigrants' unique benefit is that they are willing to live cheaply.

Its tax evasion, pure and simple, and anyone who doesn't have an illegal employee is paying for it.

save_the_rustbelt March 23, 2006 at 2:06 pm

"Voicing displeasure with those who will do your job for less than you, no matter who they are or from where they come, does not change the fact that Labor is a commodity to be bought and sold, in competition."

There are 2+ billion poor people in the world, so let's open our borders and let all of them come here whenever they want to.

This will certainly lower the price of our labor commodity.

save_the_rustbelt March 23, 2006 at 2:14 pm

On another note, if a class of people is de facto exempt from obeying thw law, why should the rest of us obey the law?

If I want to steal the computers from the Econ Department at George Mason, and put the computers to a more productive use, why should I be treated any differently than an illegal alien who is allowed to work inthe U.S. without sanction?

Slippery slope indeed.

John Dewey March 23, 2006 at 2:17 pm

Aaron, help me out here, OK? What taxes are low income illegal aliens avoiding? Wouldn't most qualify for earned income tax credits rather than owe income taxes? These workers are paying sales taxes, property taxes (in their rents), and gasoline taxes.

I assume, then, you meant that employers are not paying FICA/medicare taxes. At least not for those employees who will never receive social security or medicare benefits. Of course, many illegal immigrants and their employers are paying those payroll taxes because the workers provide bogus social security numbers.

If a very non-restrictive guest worker program were available, our nation would continue to benefit from immigrants' production. The government would take in more FICA/medicare revenue. The downside would be that our social security and medicare liability would rise sharply. It is low income employees who have the highest benefit to contribution ratio.

I disagree that alien workers could be replaced by workers from shutdown factories. It's unlikely such workers could handle the physical demands of many immigrant jobs. It's also unlikely they would accept such work at the pay levels it would be offerred or in the locations available. I think our unemployment level – currently 4.2% – is near 40 year lows.

Scott March 23, 2006 at 2:30 pm

save_the_rustbelt, so if the law were changed so that anyone and everyone who wanted to emigrate to the U.S. was allowed to, that would solve your concern, right?

Ann March 23, 2006 at 2:34 pm

Scott -

You made a good point. There are times when workers need to move.

But rich countries don't need and can't take all the poor people on the planet. Surely people in Mexico and in the many other poor countries could be doing something productive at home, if their governments would just get their acts together.

When I lived in Hong Kong, I had a maid from the Philippines. She earned as much as a domestic helper in Hong Kong as she would have made as a mid-level bank manager at home. But Hong Kong mostly accepted only women from the Philippines, which meant either that the women came after having children but then had to pay someone else to raise their children in the Philippines, or else they came before being married and probably gave up all hope of having their own family someday. Either way, it seemed that the sacrifice was large.

There are times when labor needs to be mobile. But with poor countries, the need is created artificially by bad government. How is that optimal?

save_the_rustbelt March 23, 2006 at 2:58 pm

"I assume, then, you meant that employers are not paying FICA/medicare taxes. At least not for those employees who will never receive social security or medicare benefits. Of course, many illegal immigrants and their employers are paying those payroll taxes because the workers provide bogus social security numbers."

At the end of each year the SSA and the IRS cross-reference payroll tax returns with W-2s. Any phony SS numbers should pop a red flag.

Any minor discrepancy gets an inquiry from the IRS.

This leads me to believe one of these two are correct:

1. the employers are not paying payroll taxes, or

2. the IRS is not following their enforcement procedures

I tend to believe #1.

save_the_rustbelt March 23, 2006 at 3:02 pm

"save_the_rustbelt, so if the law were changed so that anyone and everyone who wanted to emigrate to the U.S. was allowed to, that would solve your concern, right?"

No I wouldn't support that, but it would be interesting when all of Hayek-ers lost their jobs to see the reaction.

We would of course have to revoke tenure for economics professors and let the free market provail. :-) )

Scott March 23, 2006 at 3:33 pm

save_the_rustbelt, while I'm not pretend to speak for all "Hayek-ers", I feel comfortable enough with my skills and abilities to compete with anyone from any corner of the globe in the free market. I don't feel the need to rely on government force to keep my job protected.

John Dewey March 23, 2006 at 3:38 pm

rustbelt,

What I've read is that many social security numbers and the names on the payroll are real. They just don't belong to the employee using them.

Here's a link describing the possibilities available to illegal aliens:

http://www.vdare.com/guzzardi/ids.htm

I don't agree with the views expressed by Guzzardi, but you might.

save_the_rustbelt March 23, 2006 at 3:48 pm

"What I've read is that many social security numbers and the names on the payroll are real. They just don't belong to the employee using them."

If that were the case the genuine holder of the number would, within about two years get a letter from the IRS document matching program asking why the income was not reported on the holder's income tax return.

Because I don't see much this happening I am guessing the income simply is not reported.

save_the_rustbelt March 23, 2006 at 4:15 pm

"save_the_rustbelt, while I'm not pretend to speak for all "Hayek-ers", I feel comfortable enough with my skills and abilities to compete with anyone from any corner of the globe in the free market. I don't feel the need to rely on government force to keep my job protected."

Scott:

Me either, but that is not the case for everyone. And since the government interferes in almost everything anyway it seems to me government should not be in the business to reduce prosperity for some while increasing it for others. If so eventually there will be a political backlash and we may get policies which are more harmful.

I am neither against immigration or trade, but I am opposed to economic suicide because we play by the rules while others do not.

If we are going to have laws, the laws should be enforced. If politicians want to repeal the laws, they should do so openly and honestly rather than simply ignoring them.

If politicians want to reduce the prosperity of some Americans to bosst the prosperity of other Americans they should do so openly and honestly. Not likely.

Scott March 23, 2006 at 4:34 pm

"If so eventually there will be a political backlash and we may get policies which are more harmful."

Isn't that extortion? That's kinda like the mob offering "protection" for your business and if you don't pay it they burn down your building? Why should we agree to that?

What's wrong with saying to someone, contrary to what you may want to believe you do not have an inalienable right to keep your current job at your current wage in perpetuity? If someone is concerned about losing their jobs to low wage workers then they have 3 choices, improve their productivity so as to justify their higher wage, lower their own wage or find another job.

Now, obviously there should be concerns about national security and all potential immigrants should have background checks to ensure they aren't threats. However, assuming they pose no national security threat, why shouldn't they be allowed to become productive members of society? Isn't that one of the things that made the U.S. and Canada so great, being able to absorb millions of immigrants from around the globe? How many of us North Americans would be here today if there were the same restrictions on immigration in place when our parents, grandparents, great-grandparents, etc. came?

John Dewey March 23, 2006 at 5:21 pm

rustbelt,

I think the fraudulent documentation racket is much more sophisticated than you seem willing to admit. If you are steadfast in your belief that illegal immigrants cannot game the system and outwit the IRS, then I guess it's pointless to try and convince you otherwise. Why is it so hard to believe that employers might be doing something correctly? and that the illegal immigrants might be the ones breaking the law?

Aaron Krowne March 23, 2006 at 5:22 pm

John Dewey:

I am mostly referring to FICA and state income taxes (which are generally regressive, in fact–but that's a debate for another time).

I do not artifically separate out any taxes on income, because the government itself makes no such distinction, routinely raiding various bundles of money as needed to pay for anything.

I don't know what the precise cumulative amount of these income taxes would be for illegal immigrants, but I am not convinced it is insignificant. If I was a researcher in economics instead of another field I would make this a personal topic of investigation.

Anyway, you are wrong about the unemployment rate, it is actually around 5.5%, and this number was only arrived at by gradually counting fewer and fewer non-working categories as unemployed over the past decade, and doing other suspicious things like diminishing sampling in inner cities. I believe the real unemployment rate is probably north of 10%.

Your point about our existing laborers not willing to take these jobs at these wages confuses cause and effect and begs the question: without a pool of people allowed to "break the rules" to accept lower wages, wages for the jobs in question would become higher (and in fact, this effect would necessarily trickle up the labor market in a diminishing manner).

Coverage of illegal immigrants is probably showing up in health care costs, as well.

I actually favor switching to a consumption tax to solve this problem and (many others) and eliminate any questions about fairness, rather than setting up elaborate controls to try to squeeze carrying costs out of illegal immigrants.

By the way, if the jobs are so dangerous that we can only get people to do them illegally, doesn't that baldly admit that we're allowing our economy to become dependent on violations of human rights?

I have no problems with immigration, but I see no convincing argument that we should encourage it to take place illegally, and whats more, turn that into a veritable institution.

save_the_rustbelt March 23, 2006 at 5:47 pm

"think the fraudulent documentation racket is much more sophisticated than you seem willing to admit. If you are steadfast in your belief that illegal immigrants cannot game the system and outwit the IRS, then I guess it's pointless to try and convince you otherwise. Why is it so hard to believe that employers might be doing something correctly? and that the illegal immigrants might be the ones breaking the law?"

30 years of tax practice and being a tax professor for a part of that time makes me suspicious.

If the employer's Form 941s don't agree with the W-2s the IRS will bounce out an inquiry letter. If the SS numbers don't line up the employer gets an inquiry from SSA.

If the illegals steal a legit number eventually the document matching program will hit the person holding the legit number (an auto worker in Ohio will get a letter asking about his unreported income from Salinas CA.).

If the employer is doing everything right and the employees present phony documentation this should still trigger an inquiry and/or enforcement action.

You post did give me one thought. If the taxes are paid on bogus ID numbers the government probably keeps the money anyway. Hmmm.

John Dewey March 23, 2006 at 6:43 pm

Aaron,

Let's make a pact. I'll be tactful if you will try as well. No one likes to read a sentence that starts "Anyway, you are wrong …", even when they are. Let's just be civil.

Here's the statement from the BLS February 2006 Employment Situation Report:

"Nonfarm payroll employment grew by 243,000 in February, and the unemployment rate was little changed at 4.8 percent"

I had misread the report and provided the rate for adult men. I'm not sure why your figure of 5.5% differs from the BLS report. I'm not ready to defend the BLS number, but I'll accept it before any others.

I mentioned the physical demands of the work done by Mexican immigrants. I didn't mean the jobs were dangerous, just physically taxing. I've done a lot of different jobs in my life, and I'm somewhat familiar with work done in factories and plants. Very few of those jobs are as physically demanding as agriculture work or meat cutting or brickmaking or roofing. I just don't believe the average middle aged American factory worker could replace most Mexican workers, at least not without a huge loss in productivity.

GFK March 23, 2006 at 6:51 pm

I dig this blog, but you are very wrong here.

Illegal immigration DOES stress our schools and hospitals.

Most illegals get paid cash and don't pay taxes.

Meanwhile, they send their kids to public schools for free. The pregnant women have their babies at pulbic hospitals where they don't pay their bills. They then qualify for WIC and get free food for their kids at the expense of taxpayers.

Not only do illegals not pay taxes, but they don't get auto insurance. Everyone in Southern Cal or TX knows someone whose car has been totalled by an illegal.

illegals add some value, but they have serious costs as well.

Leith Kronenberg March 23, 2006 at 7:13 pm

Hi Professor Roberts. Your blog is great, as usual, but I must take issue with one of your points in your most recent post.

You wrote:

I don't agree that more immigrants stress our local schools and hospitals and housings.

While there is no definitive estimate of how much illegal immigration costs, there are most certainly stresses on both local schools (see the ELL debate currently going on here in AZ) as well as hospitals and other infrastructure. There are also huge additional negative externalities to currently allowing illegal immigration such as increased auto theft and property crime (AZ and NV have the country’s highest levels) as well as increased collision risk associated with undocumented (illegal) Mexican drivers.

For example, my wife was involved in an accident with an undocumented Mexican woman who ran a stop sign and totaled my wife’s truck. The woman had no ability to communicate in English, no identification, and no insurance, was given 4 tickets which went unpaid, and released to go do it again. My wife’s insurance went up significantly as a result even though she was not at fault, and the Mexican woman paid nothing.

Now imagine this repeated on a macro scale daily throughout the Southwest. That’s a significant cost passed on to legal residents.

I certainly agree that there are many contributions made by immigrants, both legal and otherwise, but the argument that forcing many to remain in Mexico only shifts the suffering back there versus having more opportunity here is bogus; yes, the US certainly offers them more opportunity, but at a significant burden to current US legal residents, and not to mention displacing legal workers and snotnosed teenagers who don’t know what yardwork is about. I’m oversimplifying somewhat here, but your point logically proceeds to not having any borders, which is probably impossible and very naive. We have a legal process for accepting immigrants for a reason.

So there clearly are many significant monetary and social costs associated with our current illegal immigration problem, not just the economic output and benefit contributed by immigrants working here.

Leith Kronenberg
Olin ‘96
Mesa, AZ

TLB March 23, 2006 at 9:42 pm

JohnDewey: TLB, I don't understand what you mean by "massive political corruption"?

Here's an example: Banks are giving home loans to illegal aliens. They make money off that. They're making money off illegal activity: entering illegally, working illegally, using illegal documents.

Would banks willingly give up the wonderful new market of giving home loans to illegal aliens?

Or, will they donate to those politicians who look the other way and refuse to enforce our immigration laws?

Obviously, the second is true.

Therefore, companies that make money off illegal activity are in essence paying off those politicians who allow the illegal activity.

In small town I'd imagine it's a bit more direct, with the local boss paying off the local law enforcement: don't mess with my workers.

JohnDewey March 24, 2006 at 4:59 am

TLB,

I think I understand now. You are saying that because some banks are providing mortgages to immigrants, they must be paying off politicians. Am I correct in that you've not heard about any indictments of bank officials? or seen any evidence of bribery? but that you're assuming there must be political corruption?

From what I've read, the banks do require documentation that immigrants are here legally. The problem, of course, is that documentation is very easy to acquire. The banks are probably not making a big effort to verify the documents are valid. But is that really political corruption? Why would banks need to pay off politicians if they are complying with the law?

I'm not arguing that there is no bribery of officials at local levels. That may be happening. Or it may just be that local law enforcement has more important things to worry about. Trying to round up 10 million illegal aliens – illegal aliens that seem to be hardworking and productive members of society – just might not be their number one priority. Certainly they are pursuing illegal aliens who commit crimes of property and violence.

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