One Man's Verdict on Bush's Illegal Worker Plan

President Bush, finally, has done something I like. His proposed plan to allow temporary non-citizen workers in the United States has drawn fire from almost all major media outlets (except the much more rational Economist) as a political ploy, which it very well might be. Nevertheless, this Catallarchist applauds the proposal.

There are several objections to this kind of proposal, many of which have already been thoroughly refuted. Let me outline a few.

1. Immigrants take jobs from Americans

No one claims, for example, that Wal-Mart shouldn't be allowed to sell their products for less than Target sells theirs (except for Target) and then it's easy to see that the consumer benefits. Now take the same argument and apply it to a construction company. If an immigrant will sell his labor for less than a citizen will, the client benefits.

Wal-mart didn't "steal" Target's clientele because Target wasn't entitled to the clientele. Likewise, the immigrant didn't steal the job because the citizen wasn't entitled to it. Those who would dispute this position, mainly anti-immigration conservatives, seem a lot like their liberal counterparts all of a sudden.

Now that the money is not spent on more expensive labor, it can be spent on something else. The citizen, whose labor was priced too high for that line of work, does not get that money, but it doesn't disappear down a memory hole. It goes somewhere else. Maybe it goes in the bank where it is loaned out to facilitate the creation of new wealth. Maybe it goes to the doughnut shop down the street. Maybe it goes anywhere, but it goes. Somebody gets the benefit.

2. We need more security at our borders

According to news articles, more than half of the illegal workers in USA are Mexican. Many others are from further south, and some are from China. These people are not trying to hijack planes. I grant that monitoring Islamic fundamentalists from Yemen might turn up some suspicious characters. I even grant that not everyone comes to do honest work in the USA and treat all owned property with respect. But there's a world of difference between Al Qaida and La Raza. Ann Coulter be damned; Mexicans are not the problem. Foreign workers, as shown in the above example, are doing good things and should be encouraged.

3. This is just an election ploy

This one has the most merit. It very well might be just an election ploy. But it's still overall a positive idea.

And anyway who's counting? There are hordes of true believers in the political circle, but reading almost any Congressional website will reveal shameless political ploys. If that is a criterion of the virtue of an idea, the charge-makers have some serious 'splaining to do.

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It's not so much that they

It's not so much that they steal jobs, it's that they replace the job with a pay rate which Americans can not match and this fails to encourage wealth creation. Also doesn't this preclude capital creation; why invest in machinery when the labor is cheaper?

How does this fail to

How does this fail to encourage wealth creation? Do immigrants not become wealthier when they move to the U.S. for work opportunities? And why is investment in capital preferred over investment in labor?

Econ for dummies: "The

Econ for dummies: "The paradox of Say's Law is thus that capital, the "supply side," is the only real means of improving the human condition -- both the capital to create new production and the capital to create greater productivity -- while "social" spending or regulation to artificially promote demand through high wages, the "demand side," can easily produce, or perpetuate, widespread poverty and misery."

http://www.friesian.com/sayslaw.htm

It's not so much that they

It's not so much that they steal jobs, it's that they replace the job with a pay rate which Americans can not match and this fails to encourage wealth creation.

You mean they are willing to work for a lower wage. What's wrong with that? How does that 'fail to encourage wealth creation'? Are workers not allowed to compete with other workers for jobs? Are employers not allowed to choose between different employees for the same job?

Also doesn't this preclude capital creation...?

Not at all. It frees up money that would have gone to wages that can now either be used for capital investment, or for cutting prices to consumers.

Econ for dummies: "The paradox of Say's Law is thus that capital, the "supply side," is the only real means of improving the human condition -- both the capital to create new production and the capital to create greater productivity -- while "social" spending or regulation to artificially promote demand through high wages, the "demand side," can easily produce, or perpetuate, widespread poverty and misery."

I'm not sure how you are trying to relate this quote to immigrants being willing to work for lower wages. It doesn't really say anything about savings, which are essential to capital investment.

"It's not so much that they

"It's not so much that they steal jobs, it's that they replace the job with a pay rate which Americans can not match and this fails to encourage wealth creation. Also doesn't this preclude capital creation; why invest in machinery when the labor is cheaper?"

What you just described is what goes on everyday in business markets from here to Timbuktu. Newly minted college graduates have been known to "steal jobs" from old veterans in industries like engineering and accounting. In fact, the dad of my best friend was just laid off and is being replaced by a couple young whipper snappers.

None of us believe that there is anything morally or ethically wrong about it, no one was forced to do anything -- this is how competition works.

Furthermore, these novices will mature into experienced and efficient engineers that will in turn create wealth down the road.

Actually (if you're still reading this thread), in your mind how is wealth created? My guess is that you see economics as a zero-sum game.

Also, why did you use that example from the Freisian school?

it would not matter if Bush

it would not matter if Bush said the sky is blue. they'd claim he is lying to protect the 'big money interests' of "x". just another sad example of how voting and listening to politics is worse than an abject waste of your valuable time on earth.

(1) Yes, they work at a

(1) Yes, they work at a lower wage. Which they consume all of to survive instead of putting any aside for savings. Is that what you are encouraging?

(2) Capital creation. It doesn't answer the issue that if you keep cheapening the labor pool why I should invest in manufacturing plant.

(2a) The purpose of that quote is that if we don't create or increase investment in capital, we will not create wealth as effectively. It is the backwards societies that struggle for full utilization of labor instead of capital.

(3) I used that website on Say's law because (1) it is one of my away messages and (2) I like the graphical illustrations on the page. I'm not grinding axes by picking their explanation of Say's Law, and a link to Google is less effective.

(2b) Is something wrong with the Frisian school?

(4) I don't believe wealth is a zero sum game. I believe some go out, take risks, and when they succeed wealth is created. I fail to see how opening our border facilitates risktaking. I fully endorse a policy of brain-drain from the rest of the world, but what are we draining here with a policy like this?

I'm sorry, 2b should be 3a.

I'm sorry, 2b should be 3a. I mislabeled.

Brian, Say an employer who

Brian,

Say an employer who used to pay $15/hour to his workers can now pay $7/hour due to immigration. What happens to that money he saved as labor costs?

the most important message

the most important message he is sending is that a lot of people are going to have to work at LOT cheaper/harder in the future to keep the crumby job they have.

Brian, this has been pointed

Brian, this has been pointed out several times by now, but I want to make it absolutely clear. When a worker can be replaced with another worker who will do the same job for less money, the difference in wages is freed up. This money is not burned or stuffed under a mattress--it can go to capital creation. In fact, the replacing can lead to more capital creation because more money is available to be invested in capital. Do you argue that replacing old elevators (which required elevator operators) with newer ones (which did not require operators) was good or bad for capital investment?

(1) The 8$ is saved by the

(1) The 8$ is saved by the company. Thanks, it's not like I've taken Microeconomics.

Remember that since capital is fixed and labor is variable, the pool of labor will be increased. That isn't bad per se, what is bad is the "sticking" that companies will do with labor pools instead of increasing manufacturing plant. Because labor is less productive than capital (you stamp metal slower than a machine), I fail to see how this expands output.

I could be wrong, but merely throwing more cheap labor at the situation doesn't seem to create wealth. Increased efficiency of capital (full output), like Hazlitt mentioned, seems to be the goal if we want to create wealth.

it has created more wealth

it has created more wealth for the corporation or owners. thats all that needs to be done. what they do with it is irrelevant, its been created for their usage. its no different than replacing workers with robot welders, ultimately. the emotional us vs them mentality has to be removed from the discussion. workers are workers, and if one will work cheaper so be it.

(1) Yes, they work at a

(1) Yes, they work at a lower wage. Which they consume all of to survive instead of putting any aside for savings. Is that what you are encouraging?

That is not true. Many of my engineering buddies (which is just about everyone I know, including roommates) save a great deal of their money. Besides, if you're going to moan about individuals not saving, groan about "Americans" in general who are currently saving less than 2% of their income and have mucho debto. Of course that brings up another discussion about instant gratification, the State (and how it promotes or rather, fails to promote long-term savings) and time-preference.

(2) Capital creation. It doesn't answer the issue that if you keep cheapening the labor pool why I should invest in manufacturing plant.

It's not my job to convince you to invest in anything, you do your own due diligence. If you spend everything you have without saving/investing you'll eventually run out of capital. The plant owners/managers (if they're half-way intelligent) will understand this and come up with ways to save money and reinvest for the future.

One of the ways you can save money is replacing the technology with something more efficient, whether that is through machines or "humans" is really a moot point (though I doubt machines will create picket lines). And following this, outsourcing this technology or labor to cheaper mills/plants is nearly the same (geography withstanding).

(2a) The purpose of that quote is that if we don't create or increase investment in capital, we will not create wealth as effectively. It is the backwards societies that struggle for full utilization of labor instead of capital.

Well I don't have much to say about the utility of labor versus capital (without capital you can't fund labor and without labor you can't make capital), but I didn't get that meaning from reading the quote, it sounded almost like something Henry George would say.

(3) I used that website on Say's law because (1) it is one of my away messages and (2) I like the graphical illustrations on the page. I'm not grinding axes by picking their explanation of Say's Law, and a link to Google is less effective.

Have you read Say's Law in full, not the abridged Keynes edition?

(2b) Is something wrong with the Frisian school?
Oh, I'm sure there is. They probably didn't have any mamacitas or allow movie night. Just give me some time and I can come up with something (off the top of my serious head, I have never run across a "Frisian" who is known for their economic insights).

(4) I don't believe wealth is a zero sum game. I believe some go out, take risks, and when they succeed wealth is created. I fail to see how opening our border facilitates risktaking. I fully endorse a policy of brain-drain from the rest of the world, but what are we draining here with a policy like this?

Well, first off, stop saying "our" border -- aside from the threat of force, the State does not own the land bordering Tejas and Mexifornia. Secondly, the State caused the problem in the first place by restricting and intervening in what would have been controlled via market processes -- and by granting various individuals special "rights" like subsidies and the ability to plunder one another. In fact, State intervention also screwed up the labor market through "minimum wage laws" which create an underclass group of individuals who cannot work for the market wage. In turn, believing it can dictate who is and who is not a special super duper individual with neat-o rights (citizens) those that do not sign the magical papers and swear allegiance to some cloth are castigated and in turn become members of "black market" class, many of whom turn to labor activities valued at sub-"minimum wage."

So this would be a non-issue if the State stopped screwing the pooch and wanting to use the State to regulate more will just cause more problems.

The labor cost is not *less*

The labor cost is not *less* with illegals. Their health care costs 8-20 (depending on whose estimate) times what it does for citizens... primarilly due to no health insurance, and care being dealt our of ERs. Potential for restitution following crimes, is also less, further burdening property insurers.

Illegal alien labor is lower cost, only because the client avoids most of the costs he/she would have to pay for a citizen.

The illegal status is also exploited, to pressure the illegal into working for lower wages.

It used to be that teens and college students did service work. Can still be, and probably better than having them avoid formative work experiences, and illegal profits for employers at the expense of the rest of us.

Our non-working welfare roles easily fill current illegal positions.

We need to ween ourselves off the illusion that produce is cheap... its not.

When illegals become legal,

When illegals become legal, they form unions, and immediately up their pay. Why do they not do this as illegals.... 'cause they do not have the leverage.

Cheap illegal labor is a lie. Only the direct client of this labor benefits.... by shifting costs he would experience as an employer onto other tax payers.

This illegal labor issue also impacts the prostitution industry. Illegal nannies can be raped at will, and have little recourse due to threat of deportment. Solution: force those suburban guys down to the donkey show in TJ like the rest of ....

The labor cost is not *less*

The labor cost is not *less* with illegals.

Then why do employers like to hire illegals?

If illegals are a drain on "our" welfare system, that is only because the welfare system exists in the first place. One can support immigration while at the same time opposing entitlements and welfare.

I hope y'all are right.

I hope y'all are right.

Cheap illegal labor is a

Cheap illegal labor is a lie. Only the direct client of this labor benefits.... by shifting costs he would experience as an employer onto other tax payers.

Then the mechanisms by which he shift costs to tax payers need to be removed - namely welfare, public education, and entitlements.

(1) The 8$ is saved by the

(1) The 8$ is saved by the company. Thanks, it's not like I've taken Microeconomics.

Well, I haven't taken Microeconomics, so maybe I can learn something from you. You misunderstand my question - what happens to that $8? How does the company use that savings?

I could be wrong, but merely throwing more cheap labor at the situation doesn't seem to create wealth. Increased efficiency of capital (full output), like Hazlitt mentioned, seems to be the goal if we want to create wealth.

But the employers "throw" cheap labor at the "problem" for a reason. They benefit. The cheap labor benefits. Consumers benefit. The losers are the workers displaced by cheap labor, but in any expanding economy, this is a natural occurrence. They have to learn new skills and move on to more productive jobs.

And this is my website. Eric

And this is my website.

Eric Wright o

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