Here’s a letter to the Financial Times.
Editor:
Oren Cass’s attempt to discredit economists’ support for a policy of liberal immigration is flawed (“Mass immigration is not the silver bullet economists think it is,” July 10). For example, consider this question that he poses rhetorically: “If employers believe they will always have access to a large pool of readily exploitable labour, why would they shift their business models and operations towards better jobs or invest in higher productivity?” Mr Cass thinks it obvious that the answer is that ‘they never would.’
But he’s mistaken. A larger labor force creates a larger market which, as Adam Smith taught, encourages greater specialization. Greater specialization, in turn, increases worker productivity and wages. Further, low-skilled workers aren’t only substitutes for machines, they can also complement machines and, thus, encourage mechanization. Northwestern economist Joseph Ferrie documented that “the transformation of manufacturing from manual to mechanical methods occurred most rapidly in [geographic] areas where a large unskilled labor force suddenly became available in the 1840s and early 1850s.”*
Consider also that immigration in the US throughout the 19th century was largely unrestricted, and rates of immigration were often very high. Nevertheless, real wages rose. Data on wages for the first half of that century are sketchy, but better for the second half – over which time (1850-1900) real hourly wages roughly doubled,** as the per-capita size of the US capital stock also at least doubled.***
Mr Cass’s understanding of economics is too simplistic.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* “A Historical Perspective on High-Skilled Immigrants to the United States, 1820-1920,” in Barry R. Chiswick, ed., High-Skilled Immigration in a Global Labor Market (Washington: AEI Press, 2011), page 37.
** I’m on vacation, and hence away from my books, so for estimates of wages I relied on Claude.
*** Calculated from Table 4.3 in Robert E. Gallman, “The United States Capital Stock in the Nineteenth Century,” in Stanley L. Engerman and Robert E. Gallman, eds, Long-Term Factors in American Economic Growth (University of Chicago Press, 1986), along with U.S. Census Bureau numbers on population: 23.2 million in 1850 and 76.2 million in 1900.
