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Prosperity Springs from Growing Abundance and Not from Contrived Scarcity

Posted By Don Boudreaux On July 25, 2012 @ 10:52 am In Growth,Innovation,Myths and Fallacies,Seen and Unseen,The Economy,Work | Comments Disabled

Here’s a letter to an e-mail correspondent, Mr. Ernie S_______:

Dear Mr. S_______:

In your e-mail to me you complain that “government is holding down wages and thus inflation by letting in millions of poor and uneducated workers who have taken over entire formally [sic] well paying unionized industries such as the building trades and meat packing.”

I’ve some questions for you.

First, are you aware that the steady decline in the percentage of workers who are unionized began in the mid-1950s when immigration was modest – that is, long before the current upsurge in immigration which began in the last quarter of the 20th century?

Second, if it is harmful government policy to allow firms to substitute lower-paid workers for higher-paid workers, is it also harmful government policy to allow firms to mechanize their operations whenever such mechanization results in the substitution of lower-cost machines for higher-cost labor?  Is it harmful government policy to fund, or even to permit, the training of engineers who invent production methods that enable less-skilled workers to perform tasks that formerly required high-skilled workers?  Is it economically harmful government policy to allow homeowners to repair their own plumbing, to rewire their own kitchens, and to treat their own sniffles given that the direct effect of such do-it-yourself activities is to reduce the demand for high-wage plumbers, electricians, and physicians?

If you answer “no” to any of these questions, you should recognize that there’s nothing economically harmful about government allowing firms to hire lower-wage immigrants.  Economically, the labor-market consequences of immigration are identical to those of these other activities – namely, greater output at lower costs.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA  22030

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