How do immigrants create jobs for natives?

Economics Economics Questions
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1

A. In general, libertarians accept that immigration (related to work and not welfare), contribute to the economic growth of a country. It is said that they do not steal jobs, on the contrary they create jobs and in particular, jobs for native workers.
B. Also, it is believed that the jobs for natives that immigrants create, are highly paid jobs.

Please, can you explain to me with some examples a more detailed process that illustrates the 2 above statements? To be more specific, here in Greece during the crisis, illegal immigrants who work are the scapegoats. In most cases, they work as farm workers, as employees in gas stations & car washers, as unloaders in super-markets.

Questions:

1. Could you explain to me the process using the Greek examples I said above, please?
How low-paid farm workers, gas stations-car washers and supermarket immigrant employees, create jobs with higher salaries for natives?

2. The jobs that these immigrants create for natives, are in the same businesses?In the same industry?In different idustries?

Please, help me figure this out. Thank you…

2

I can’t give a specific example using the Greeks, but as an illegal Mexican in the USA I can give an example about things on our end.

My step father is in the contrator business. He has a basic understanding of English and poor (if any) office skills. He is good in the actual manual labor. Over several years he has saved up enough money to buy his own truck, construction equipment, brushes, etc. etc. In any given week he hires anywhere from half a dozen to a dozen men for a job. I’d average it out to say he employs 8~ workers weekly, so he responsible for having created those jobs since he supplies these workers with the capital needed for work and spends a considerable amount of effort looking for the work (the contracting business has alot of assymetric information so firms need to be constantly looking for potential clients).

He also creates higher skilled jobs by out sourcing his office work to others. He needs someone to do his invoices, tax records, etc etc.

He also provides a niche of working for larger firms that occasionally need more workers, but only on temporary basis. Most of these senior contractors are natives who do very little (if any) of the manual labor themselves. They specialize mostly on locating clients and doing the office work. The actual manual work is outsourced to people like my step father. In the absence of my step father these natives would have to divide their time between looking for clients and doing actual manual work.

Most of the jobs created are in the same industry, but I am sure indirectly jobs are created elsewhere. The specialization caused by step father (and men like him) makes the contractor industry more efficient, and thus cost clients less. Which means they have more to spend elsewhere.

I imagine that the greeks who work as farm workers, gas stations, car washing, etc. serve similar niches. I feel obligated to point out though that very few actually stay down there. My own step father started off without any savings and did do those lower end jobs like car washing. He ended up saving much of his pay until he had enough capital to start up his own firm. Illegal aliens are by no mean stationary in their occupations.

3

OK. let’s face some unpleasant, but true, realities. All other things being equal, people would rather hire “their own kind”. So why are foreigners getting all those jobs? The two possible answers are that the citizens don’t want those jobs, or that there is something stopping the employer from hiring natives.

  1. In the first case, that citizens don’t want those jobs, it means the citizens can get the same income from easier jobs, [or from not working at all if there is a govt or a charity giving them free money]. Meaning the farmers are competing with other employers [or the govt or charities] and losing. They are unwilling to raise wages high enough to draw workers away from other fields to go pick cotton in the hot sun.

Enter the foreigner. His options are limited. He needs money, and can only get hired for jobs nobody else wants. So he goes out there and picks the cotton.

This is good for everyone. The foreigner has a job. The farmer has workers. The economy as a whole has food on the table from the farms, and at a lower price than if the farmer was forced to rase wages to hire the natives. Nobody has lost a job because of the foreigners.

Have the foreigners created jobs? In a sense, yes. Because they allow the natives to keep on working at their easier jobs, instead of having to farm.

Also, since cotton is picked at smaller expense than if the natives were doing it, that means everyone who buys cotton or cotton products has to pay less. Meaning they have more cash in their wallets. Meaning they can buy other stuff, too, meaning more jobs in some industry that will provide what they want to buy with the extra money. Will those new jobs be higher paying, and go to natives? Not neccesarily. Maybe more foreigners will be hired to do some other dirty job. But bottom line, everyone has gained, native and foreigner alike.

  1. In the second case, what is usually happening is that laws have made it too expensive to hire the natives. Hiring the foreigners is cheaper, for some reason, possibly because they are hired illegally. We will assume that the natives are chronically unemployed, as is the case in parts of Europe. Do they benefit from the foreigners picking the cotton? Of course they do, because now they have cotton. If not for the foreigners, they would not have it. Have the foreigners provided new jobs for the natives? Possibly. because the farmers now have made a profit, meaning they can invest their profits and create new jobs. Hopefully some of these jobs will be taken by the natives. But even if all those new jobs are taken by foreigners, the natives still benefit, because the new jobs mean increased production, which is always good for everyone.

Bottom line, I don’t see that is has to be the case that the natives will get better jobs because of the foreigners, or any jobs at all. But they will certainly be better off than if the foreigners weren’t around, because production is increased. And the foreigners don’t take away native jobs, because employers only hire foreigners as a last resort.

4

I’m curious; if you couldn’t find a job, would it matter whether it was a native or foreigner who “took” it? If there’s an argument for getting rid of foreigners, wouldn’t the same apply to natives?

On the topic of whether foreigners take jobs, what if you ask the question of natives? If we could somehow keep 99% of the native population from working, would that leave countless jobs open to the remaining 1%, or would there become vastly fewer jobs? I’d imagine the latter. Why would the logic be any different for foreigners?

5

I don’t see that is has to be the case that the natives will get better jobs because of the foreigners, or any jobs at all.

Foreign workers need additional managers, administration, catering, housing, healthcare, security, etc. All this creates jobs, even if less jobs than workers’ count.

6

If there’s an argument for getting rid of foreigners, wouldn’t the same apply to natives?

It even better applies to native children. After all, they came to “here” from “there”, too, and took our jobs! Get rid of the pesky kids! Somebody think of the children! Oh.

7

Dey terk a’ jerbs!

8

There must be few jobs wherever the storks bring these immigrants from. We’re doing pretty well at keeping them from working until they’re a couple of decades old, with minimum-wage laws, rights witheld until they’re 18, and importance we put on college.

9

Suppose that the country has virtually no bureaucratic barriers for immigrants.

If most immigrants are unskilled, it is because the country has high proportional wages for unskilled people than elsewhere.

The entry of these unskilled workers, willing to work longer hours and for lower wages, will reduce the costs of unskilled factors.

These costs reductions become savings, either in higher profits by the people that hire them, either in lower prices for the people that buy the products of unskilled labor.

Through the financial sector, a large part of these savings will be then allocated to the other sectors, creating opportunities for skilled native workers.

As the skilled population is already employed, or almost, part of the unskilled natives will have incentives get skills, because unskilled labor is getting less money than before, and skilled labor is getting more than before, and thus the investments of time and money in getting skills become more cost-effective.

Conversely, if immigrants are generally skilled, it is because the country has relative scarce skilled people.

We have the same effect going on in the other sense. These skilled immigrants make competition somewhat tougher for skilled locals, but create new opportunities for unskilled locals. So there is this trend of incentives for the natives to “downskill”.

However this effect is “first order effect” is largely suppressed in practice. Generally the countries with surplus of skilled immigrants are third world poor countries that have a lot to benefit from the secondary effects of the technology imported from first world countries with their doctors and engineers.

These skilled immigrants arrive with new business techniques for industrial operations, logistics, organization, marketing, etc. that are not known by the locals. These new enterprises create wealth and opportunities for virtually every one.

Many times they even import physical capital, like machinery and pre-molten structures that will help install the infrastructure of production that is not present.

And they also create economic and political pressure against the extremely corrupt local governments.

10

As a general rule, immigrants of any skill level will lower costs of labor factors for the sector they work, and these costs reductions become savings that are then invested and become new opportunities, usually, but not necesseraly, for other sectors and levels of skill.

11

Can you substantiate this claim? You’re assuming on the employers part some value outside of calculation. Employers whose calculations are interrupted by sentiments are more likley to be ploughed under than those whose calculations aren’t.

On the other hand, if we disregard the above, it seems like it’s more likely that employers will hire outside their own kind, as ‘diversity’ has become an asset to corporations. Corporations such as these (http://tinyurl.com/d8g6ojd) actively seek to expand their own diversity. This may well be an impediment to employers’ calculations but liberal phantoms have strong influence over many parts of the world, and it seems like often they can overpower peoples’ own ethnocentric instincts.

It seems like you’re restricting this analysis to one time period only, possibly assuming that businesses can’t operate profitably at a labor price above the given one for the moment. Who’s to say that people don’t want these jobs? Maybe they simply don’t want them at the given price for labor? Their abstention serves as an upward pressure on the price of basic labor, which is relieved by an influx of immigrants.

This seems to all be going under the assumption that these farms can’t operate profitably with a higher priced labor, that the only reason that farms won’t higher more expensive labor is that they simply can’t make it work. What if it’s more of a haggling process and labor-intensive companies are just kind of waiting for immigrants to come across to satisfy their own business models?

12

How does anyone “create a job” for someone else? How would two people create “jobs” for each other? How do three people do it? Ten? A hundred?

What is a “job” and who/what do you expect should be “creating” it for you?

You can’t use present day Greece as an example for anything (free) market related. It’s state is its economy.

13

Jargon,

I’m not sure we disagree. You admit that there are ethnocentric instincts. That’s all I’m saying. Not every country is out to quash them. And yes, I’m talking about absent the meddling of govts to pressure for diversity. BTW, all the possible drawbacks of ethnocentricity that you mention. also exist if an employer, for whatever reason, decides to go for diversity for its own sake.

Who’s to say that people don’t want these jobs? Maybe they simply don’t want them at the given price for labor? Their abstention serves as an upward pressure on the price of basic labor, which is relieved by an influx of immigrants.

That’s what I’m saying, too, if you read carefully.

What if it’s more of a haggling process and labor-intensive companies are just kind of waiting for immigrants to come across to satisfy their own business models?

You are saying that maybe the natives want to work at the going wage, but the employers don’t want to hire them at that wage, because they can get immigrants cheaper.

I’m going with the assumption that if we ignore the very short term and the isolated instance, an employer will pay someone what he is worth, meaning what he is worth to the employer. He won’t try to get someone at a great bargain [ = I pay him a dollar a day and he makes me a million dollars a day], because then the competition will hire the worker and pay him more. I refer you to http://mises.org/rothbard/protectionism.asp , in the section on “Fair Trade”. I also remember Walter Block talking about how Mexican workers who worked for a pittance in California were lured away by employers in Minnesota [I think], who found it worth paying the moving expenses plus a higher salary just to get those workers. Sorry I don’t have the link.

So that the employer won’t “wait for the Mexicans to cross the border next week”.

14

Hey Dave,

I think that ethnocentric instincts are overpowered by liberal doctrine that diversity is an asset. Why are we assuming away the government influence on employers that does exist today?

I’m not trying to sound confrontational, but what is this then?: “In the first case, that citizens don’t want those jobs”

Pretty much. An employer might hold out on a certain business model on the prospect of increased immigration and consequent flooding of the unskilled labor market.

There may be cases where an employer can lure away workers to a faraway state such as Minnesota, but I really don’t see that as a realistic precedent on which to base one’s stance on immigration, that employers in all forty-eight states will bid away immigrants from border states if the farm-wage there is too low. Immigrants don’t have a lot of money for traveling, the uncertainty is an impediment, the lack of knowledge is an impediment. I believe block, but it seems like a very incidental example. In heavily interventionist markets like ours I think that the assumptions of such high intensity competition and high speed of information proliferation are suspicious.

I don’t see a restricted immigration policy as a matter of protectionism. Employing Hoppe’s explanation of exclusion as an exercise of property rights and the taxpayers ownership of public property, I see restricted immigration as a parrallel to an exclusion by way of property rights. I’m not advocating here that the flow of goods should be restricted.

15

Jargon,

There are two issues here. First, does there exist a right of exclusion of immigrants? I wasn’t discussing that, nor was the OP. Similarly, I wasn’t talking about what someones stance should be on immigration, and neither was the OP.

Second, what are the economic effects of immigration? And of course, the answer is that in a free market everyone will be better off economically from an increase in the labor supply, just as they would be by the increase of any factor of production. If we found more oil, or gold, or any other commodity, we would be wealthier. Same with more labor. My earlier posts were elaborating on that point.

The section I alluded to in Rothbard’s article is not about protectionism, nor about immigration, but about how wages are determined. I cited it in defense of my thesis that employers don’t wait around hoping for a bargain, because there are no bargains. People are paid what they are worth to the employer. He has to pay that, because if he doesn’t, someone else will. It’s a praxeological argument [= uses deductive reasoning].

I didn’t see where you refuted the praxeological argument. You only addressed the example Block gave. The point of his example was not that it would happen every time [although Mexican workers seem to have found their way to every state in the union], but rather exactly the opposite. He wanted to show the power of the economic force he was describing, that extended its long arm half way across the country. Obviously, you don’t need Minnesota to raise wages. It will happen locally as well.

You asked where am I saying that natives will take the dirty jobs if they are paid enough, which was your point. I said it right here: “They are unwilling to raise wages high enough to draw workers away from other fields to go pick cotton in the hot sun.” The implication being that higher wages will draw workers.

As for why ignore the govts fight for diversity [although this fight is only for the benefit of the voting class. You don’t see people fighting for inclusion of Hottentots and Mauris in the diversity mix, only women and blacks and Hispanics and other groups with a large voting block], the answer is simple. First , it is important to understand the nature of an economy absent govt meddling. Second, this diversity scam only exists in countries with a large minority who has voting rights. Not every country is like that. Very few are. The OP mentioned Greece. Do you think there is a diversity movement in Greece? Or Russia? Or Japan? Or China? Or anywhere in Europe or Asia?

16

Dudes, you’re overcomplicating things.

Working immigrants are imports on human capital, labor factors.

These imports happen because there is demand for these kinds of capital.

Of course if you own capital in the industry that is importing capital, the new capital is going to hurt you.

If you’re a farm worker and you have to compete with mexican peasants willing to outwork you and outprice you, you’re pretty much fucked.

Just like the domestic toy maker companies that were obliterated by chinese imports.

You may feel like converting your capital to some other industry, given the competition from imports.

Your ability to do so will depend on circumstances.

But generally the effectiveness of the new human capital imported is generating prosperity and part of this prosperity is being saved as capital and being used to open new oportunities in other sectors, that you may seize.

17

Hey Dave,

Sorry for the late response. I’ll get into this further down in my post.

An increase in the labor supply for whom? All that happened is that some people crossed a border into a different country. But the country of their origin and the country of their destination are in relations of free trade (kind of). To be honest I’m not well-read on the specifics of NAFTA and it may not be free trade at all, but as far as I gather, it is free trade but with built in contracts and ‘rationalizations’ of trade. But the point is that, if NAFTA is free-trade, there is no net gain or loss of labor when feet cross borders, only a reallocation of labor from one firm to another.

Ok, an employer pays his employees what they are worth to him. But an influx of uneducated people into a region will certainly lower the market wage for unskilled labor. Perhaps the employer cannot pay new Mexican immigrants below the market wage. Indeed he can’t. But the influx of immigrants depresses the market wage by increasing the supply of labor. So yes, an employer will wait for immigrants to cross the border because it would depress unskilled wages in general.

And yes it may be bid away from the locality to distant higher wages, but it is much more likely that due to the insufficient funds, information, and appetite for risk of most immigrants that they won’t move very far from the border.

I’m not disputing that labor is a price like any other and that over time supply approaches equilibrium with demand. But how could employers in Minnesota have been able to lure workers away from border states if the wages there were at the market level due to the bidding of competitors? This situation to me seems analagous to those who advance the neutrality of money. After the new money has worked its way through the economy, its purchasing power will be equal for all recipients. But in the meantime, its purchasing power is not equal for all recipients as price change is enacted by the exploitation of those purchasing power discrepancies. So too is it with labor: as new labor crosses the border, there is a glut of unskilled labor in border states, depressing unskilled wages, which is eventually worked out by the price action of employers from border states and non-border states bidding up wages. But in the meantime, unskilled wages for the ‘first recipients’ of immigrants will be like the first recipients of newly printed bills: lower than the market wage that the new supply of workers demands, and yet lower than the market wage that the old supply of workers demanded.

Point taken.

I can see your point with Asia and Russia, but Europe most definitely has the diversity fever. Sweden offers apologies to the muslim world about ‘Draw Muhammed Day’, they call themselves a multicultural society, men are forbidden from peeing standing up and there is Hatespeech legislation. In the UK you can also go to jail for saying something non-PC. Actually I’m pretty sure that many European countries will jail you for saying something non-PC. They have a different more severe flavor of diversity fever. Just take a look at the battles between rightist political parties and the mainstream in Europe to see.

On Exclusion: The reason that I felt I should include that bit about the right of exclusion is thus: our economic conclusions are necessarily based on the legal system at hand. Regular economics lies on a foundation of semi-private property mixed with politics, Mises’ analysis of socialist calculation rests on a fundament of total state property. If we are analyzing immigration in a Libertarian context and also supposing unrestricted immigration, I believe we are contradicting ourselves. Removing law and the decisions that people make within their legal authority will make our economic analyses meaningless. So I introduced the right of exclusion in private property to set the precedent for the economic outcomes which follow therefrom. You were saying that we ought to see how things turn out sans government interference. The legal precedent determines the market data on which employers and employees act. You were supposing one legal precedent and its concordant market data, and I was introducing another legal precedent.

18

But how could employers in Minnesota have been able to lure workers away from border states if the wages there were at the market level due to the bidding of competitors?

Because the local wage in California did not take into account the need for labor in Minnesota.

Going over your reply, I don’t think I disagree with any of it.