I sometimes hear AJ listeners claim that illegal immigrants bring the wages of everyone else down and that it’s so bad and blah blah blah NWO!!1! I tried doing some web searches and couldn’t quite find anything that summarized this theory. Does anyone know what I’m talking about? And what is their logic behind it?
My guess is they’re complaining that “illegal” labour can be priced below the minimum wage. It doesn’t bring other people’s wages down, it just means they may not get employed at the rate they desire. We already know the minimum wage does this in any case.
It can bring down wages. But so what? Moreso, why don’t the illegal immigrants deserve the jobs? They’re willing to do more for less. For the good of society, wouldn’t you support this? Much more would be produced this way, and everything would be easier to get.
All costs (like the cost of living) are ultimately determined by prices. Lower wage rates → lower cost of living.
I look at it as a good thing. People are willing to work for lower wages doing crappy jobs. This would free up money for the company to hire people for better paying positions or capital investment.
Secondly, who is to say who I can hire and how much of MY money I want to contract to someone for their work?
Alex Jones listeners probably oppose illegal immigration in part because it blurs the boundary between the US and Mexico, making it easier for the two countries to be merged in the future (along with Canada) into a North American Union. There is a real movement toward this union - it is not just a conspiracy theory. The logic is that the NAU would mean less freedom, and illegal immigration helps speed up progress toward the NAU. I’m not sure about the economic logic, but it seems clear to me that open borders threatens the way of life in any country or community.
Honestly, who cares what Alex Jones spews on a daily basis. To be honest, the man has one good point and that is basically that things have gone awry. But, I don’t think you need a genius to tell you that and after that, it’s pretty obvious that Alex Jones simply has almost no understanding of sound economics. I just don’t see any point in following the man, but that’s just my honest opinion.
Anytime you increase the supply of something it will bring down price. Increase the supply of labor through immigration and you will bring down wages. However, if you consider the massive increase in wages earned by the new immigrants, the society as a whole is now better off.
The problem is we draw these arbitrary political lines and forget that we are all human beings. Open immigration makes the human race better off. We shouldn’t look at it only from an American view.
Also, cheaper labor means businesses will have more to invest, which will mean stronger growth going forward. So you will give up some wages in the short run, but will have higher wages in the long run.
Fair trade if you ask me.
This 30 page paper is a response by Walter Block to Stephen Kinsella’s article on immigration. His response to Kinsella specifically begins on p. 192. Here are some important ideas from it that have stuck with me:
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It is important to note that what opponents of immigration demand is not less statism, but more. Faced with a problem created by the state, what they endorse is precisely more of it—the very same vicious cycle of interventionism that Mises refers to: more taxation and government plunder, ID cards and travel control, fines for entrepreneurs, walls on the border and even more domestic spying. Do these measures help to reduce the burden of the state on a society? How is this a step in the right direction? It is not. It means more bureaucracy, regulations and taxes, all of which are performed under the ever-growing and omnipresent Orwellian lens of the government.
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It is also worth noting that, from an economic point of view, it does not make much sense for the government to allow entry to qualified workers only. The state does not know what kind of labor the market needs. This must be determined by employers and business owners in a decentralized manner. For example, how exactly does the state know that a high-tech engineer is needed instead of a waiter or a gardener? There is a huge demand for low-skilled labor in rich societies.
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If the market is flexible enough to accommodate dozens or even hundreds of millions of immigrants, then what is the matter from an economic point of view? If all of them find a job and a place to live it is because there is a demand for their services and a supply for their needs. Immigration, after all, only puts pressure on state-provided services; the market perfectly adjusts to changes in supply and demand. This is yet another reason to replace inefficient, state services with flexible, market alternatives.
Immigration will suppress real wages in the short run while simultaneously increasing the marginal productivity of capital. As the marginal productivity of capital rises, investment rises as well, which, in turn, will increase the marginal product of labor and therefore real wages (since the productivity of labor is a function of capital per worker); it also increases total output (GDP). This is easily demonstrated by a simple production function. Of course, I still haven’t figured out its effects on the structure of production. A massive wave of immigration may actually collapse the structure of production if the savings rate falls (which seems likely), and expand the structure of production if the savings rate rises (if the immigrants have a lower time preference).
Standard neoclassical analysis says that immigration is a positive thing. There are also growth models which claim that economic growth is a function of population growth because it increases the chances of producing a genius who comes up with a revolutionary innovation. All in all, reducing the price of labor for simple activities (working at taco bell, burger king, cutting grass, ect) is efficient (saves resources and labor for other warranted economic activities).
Looking at wages is only looking at one side of the equation. If more foreign workers come in to the United States, then sure, wages will be depressed as the supply of labor expands. However, on the other side of the equation, these additional workers will produce more goods, thereby lowering the prices of those goods. This ultimately leads to an empirical question: will the fall in real wages from increased labor supply outweigh the increase in real wages from increased supply of consumer goods? I don’t know of any studies that have attempted to answer this question specifically for the United States.
My best guess is that, for the US, an increase in the labor supply will be offset by an increase in production. This is because the US is such a capital-rich country. This is also why wages are so high in the US when compared to other countries. This wage differential is ultimately the reason why labor flees from labor-intensive countries such as Mexico and China to capital-intensive countries such as the United States.
Another thing that nativists such as Alex Jones don’t consider is the skills that many immigrants bring. Studies have shown that immigrants are, on average, more entrepreneurial than citizens. This isn’t surprising considering that many immigrants flee from quasi-socialist states like Mexico and India in order to experience the economic freedom of countries like Australia and the United States.