Tuesday, March 28, 2006

[Immigration, Labor]

Immigration's Effect on American Labor.
I run and work on a small residential construction crew, my people make about 50% what I made as a crew member 20 years ago, while there are other factors at work, the biggest and most addressable one is cheap illegal labor. Neither my crew, nor I can afford much sympathy that doesn't address our plight. If that sounds hard, try making a living doing this.
--Chuck Butcher, Democratic Candidate for Oregon District 2

"Finally, comprehensive immigration reform requires a temporary worker program that will relieve pressure on our borders. This program would create a legal way to match willing foreign workers with willing American employers to fill jobs that Americans will not do."
--GW Bush, Saturday
With regard to immigrant labor, two views depend on very different realities about what it's like in the labor market. Dubya hews the popular bidnez line, in which cheap labor is great for Latin Americans and US citizens because the former get better jobs than can be found in their home country, while the latter enjoy cheaper prices and competitive businesses. But folks like Chuck have seen an entirely different reality: because illegal aliens have no protection and must work at exploitative wages, employers are less willing to pay fair salaries, and worker salaries across the board are driven down. And, in the marketplace, businesses that pay fair wages put themselves at a fatal disadvantage.

So which is it?

According to the nonpartisan but mostly anti-immigrant think tank The Center for Immigration Studies, Chuck's view is the clear winner:
  • Of the 900,000 net increase in jobs between March 2003 and 2004, two-thirds went to immigrant workers, even though they account for only 15 percent of all adult workers.
  • In just the last year, 1.2 million working-age natives left the labor force, and say that they are not even trying to find a job.
  • The decline in native employment was most pronounced in states where immigrants increased their share of workers the most.
Ah, but will Chuck's view hold up to more Neutral scrutiny? Yes, as two Harvard economists, George Borjas and Alexander Katz, demonstrate. They find the volume and effect of Mexican labor (to which their recent study was confined) to be a serious effect on American labor. The following is from a Robert Samuelson article on their research:
Among men, about one in 20 U.S. workers is now a Mexican immigrant; in 1970, that was less than one in 100. The vast majority of Mexican workers lacked a high-school diploma in 2000 (63 percent for men, 57 percent for women). Only a tiny share had college degrees (3 percent for men, 5 percent for women). By contrast, only 7 percent of native-born U.S. workers were high-school dropouts and 28 percent were college graduates in 2000. Mexican workers are inevitably crammed into low-wage jobs: food workers, janitors, gardeners, laborers, farm workers. In 2000, their average wages were 41 percent lower than average U.S. wages for men and 33 percent lower for women....

For today's Mexican immigrants (legal or illegal), the closest competitors are tomorrow's Mexican immigrants (legal or illegal). The more who arrive, the harder it will be for existing low-skilled workers to advance. Despite the recession, immigration did not much slow after 2000, says Camarota. Not surprisingly, a study by the Pew Hispanic Center found that inflation-adjusted weekly earnings for all Hispanics (foreign and American-born) dropped by 2.2 percent in 2003 and 2.6 percent in 2004. (Pdf of the original study here.)
When Borjas and Katz dig directly into the question of whether low-paid immigrants lower the wages of native laborers, they uncovered an interesting quirk in the data. They begin with past studies, which have tended to support the Bush thesis, that immigration is good for Americans and has no effect on native laborers:
There is a great deal of dispersion in the findings reported by the various studies in thisempirical literature. Nevertheless, there is a tendency for the estimated cross-city correlations to cluster around zero, helping to create the conventional wisdom that immigrants have little impact on the labor market opportunities of native workers, perhaps because “immigrants do jobs that natives do not want to do.” It would seem, therefore, that a fundamental implication of the standard textbook model of the labor market—that an increase in supply lowers wages—is soundly rejected by the data.
But Borjas and Katz find troubles with the way these statistics were measured (averaging national data), and Borjas has a developed a new measure. His findings? Not only did immigration lower low-skill native wages, but it didn't improve high-skill native wages, either, as promised by Bush and Co.
The second column of Table 11 shows the predicted labor market effects when the supply shocks are given by equation (1). Mexican immigration, which is predominantly low-skill, accounts for all of the adverse impact of immigration on low-skill native workers. It is also worth noting that the earnings of college graduates would have fallen by 3.9 percent if there had been no Mexican immigration, as compared to the 3.8 percent decline that occurred with the actual flow. In other words, the influx of low-skill Mexican immigrants barely improves the wage of high-skill workers.
There are a number of other reasons why illegal laborers damage native laborers. As Chuck mentioned in his comments to yesterday's posts, immigrants disproportionately use social services and education while contributing little to the tax base. Because low-wage American workers depend on those social services, this is a double whammy--wages are falling, and so are available services.

The guest-worker program is good for large business owners, who can cut costs and achieve a competitive advantage with low-wage labor. But for American workers, there's no upside. Bush is wrong about immigrants taking only jobs no one will do; worse, because they're willing to do that work so cheaply, American workers have seen their own wages fall, just as Chuck predicted.

This post is getting long, so I'll defer thoughts about what can be done until later.


iggi said...

the only bonus about getting them into the system is that they may actually start paying taxes and contributing to the social services that they consume.

then again, many who could be in the system now are not so that may not help at all...

fred said...

I noticed the LTE's in the Oregonian today replying to the rallies in Los Angeles over the weekend. The first thing that struck me (prolly because I'm always on the lookout for it) was the racism running quietly below the surface. I believe of the 4 letters highlighted, 2 made the assertion that [paraphrased] if you were to arrest the protestors, 99% would be illegals...[end para]

Of course, as Chuck has been pointing out--there are two currents at work here: the racism one, and the economic one, and they're both on the same coin.

It's patently obvious that *illegal* workers are defacto slave labor; and their presence ensures that all wages are depressed "Chuck (or Emilio), I'd love to hire you as a framer/plumber/mechanic for $15/hour, but I can pick up 4 illegals for that price. Hell, even if I didn't, Tom would, and he would underbid me for the job. You understand what I'm sayin'?"

So, instead, Chuck/Emilio take $8.50/hr just to make sure they still get something on the table.

But Chuck's employer (and his employer) aren't about to do anything to end the influx of illegal labor any more than they are going to stop complaining about said illegal labor. Because making sure that people are so dead-set against it ensures that it remains an underground labor force. And it's such an easy button to push, without any real way to alleviate the problem.

Because the problem is the wage, not the wage-earner. And by remaining illegal and so easily demonized (as Chuck says "neither my crew nor I can afford much sympathy."

For those that benefit from illegal labor, it's a win-win. Because (and here, at last, I see a point coming) this posturing and puffing and "solutioneering" that the right (Bush) and the racist Right (Tancredo, et al) amount to the same thing. Bush knows that his temporary worker plan is pig lipstick for himself (see, I cares bout the latinos. I like beisbol too...) while at the same time it has no chance in hell of passing the Far Right (who see it as the gates opening for the brown hordes) and for the working class, who know that it's codifying sub-minimum wage earners.

And if you really think that building that fence would somehow keep those illegals out, I have a bridge for you. In the end, it's only a symbol of repression, but a barrier to nothing.

Because if the illegals stopped getting in, the wages would have to come back up. And if that happened, why not just bring the wages up in the first place, protect all the workers, and put pressure back on the emigrant countries to solve their own poverty? It would be much cheaper than building a wall and much more beneficial to the working class both here and in Latin America.

Xrist. This thing is longer than Jeff's original.

Jeff Alworth said...

Heh, yeah--it's a topic that somehow inspires you to ramble on. Fred, I think you're right on this up to a point: "For those that benefit from illegal labor, it's a win-win. Because (and here, at last, I see a point coming) this posturing and puffing and "solutioneering" that the right (Bush) and the racist Right (Tancredo, et al) amount to the same thing."

Until legislation comes on the table. Then paths diverge and motives emerge. It's a bad deal for the right, a boneheaded wedge issue they themselves created.

And yeah, Iggi, I'm actually sympathetic to this position, too. This is the one element of the issue that may wedge the left, but I think there are solutions that get protections for workers AND doesn't flood the labor market with rock-bottom wages. More on that...

fred said...

Now you notice I don't have a solution in those 600 words. I don't know that there is one (at least one that's politically viable). That's not going to stop me from spewing forth another 600 words on the topic. Too much caffeine or something!

Part of the problem going forward is 'globalization' and the intensely capital-friendly way we went about implementing it. Since that's water under the bridge already, it makes fixing things that much harder. It's not like we're going to back in the next 50 years...

I hate to go all "Friedmanesq" on you, but he is right--albeit in a very limited way--that globalization lifts the living standard in the 2nd and 3rd worlds. And eventually, it will create a system in which the standard of living world-wide is roughly equal.

Too bad that means that as the tide rises in India and China, it sinks here; because capital is able to move freely, but labor is constrained, capital will continue to seek markets in which the lowest cost of production wins out.

In markets in which capital can't leave the country, it means that labor is (in this case illegally) imported from low-cost areas.

Until either: the standard of living rises everywhere else or labor is free to move to where the standard of living is lower, we're (being the "industrialised" world) going to be chasing the standard of living down to meet them rising to us. In our case, it will make it very, very painful.

Now it's not at all difficult to, say, move to Mexico, get a job, and live there as an American ex-pat...And that means not as a "visa'd" worker, but as an "illegal" worker. But it's not like you're going to be making bank.

On the other hand, if you live someplace where a house starts at $15000, and you can go across the border, work for ten years, and basically jump-start yourself into the middle-class from peasantry, why wouldn't you?

The solution is to partly ensure that the border is open in both directions to free labor (yes, I understand the stresses that this will force on the poorer country--which needs to be addressed), comparable fixed costs (environmental laws, etc) and that labor needs to be garanteed the same protections as non-immigrant labor.

That means protection in the form of minimum wages, accessability to organized labor, environmental and health standards, and better education for all.

And yes, real wages are going to take a long time to come back to their historic highs (if ever). Then again, as it stands, those days might be far and away gone, anyway.

It's very likely we're looking at a standard of living adjustment in the coming years the likes of which we've never seen, anyway.

Cold comfort, indeed. It could just be that capital is trying to milk^H^H^H^Hsteal those last few dollars from us before the collapse, anyway.

Yeah, I guess this topic is anti-immodium of the keyboard for me. I think that you're right, the legislation is a bad idea by the rethugs to tear themselves apart--but it seems to me that the real beneficiaries--those who employ illegals--don't really mind the crazy racists and the 'you really love me' GOP majoritists destroying each other on this, as long as the status quo remains.

Between the fear of the brown and the fear of the starvation, it's double-plus good.

Back to work before I get (more) depressed.

iggi said...

i know someone who knows someone (that old story) who runs a crew of Mexican contractors...all of them are illegals and the money comes under the table from the construction jobs they're working.

the ringleader of the whole operation makes more a month than i do in six. cold hard cash which is then distributed straight to the workers. none of it is touched by the state or fed which means none of it is taxed.

these guys have families, i'm sure. social services are being consumed yet they're not paying into them. this is where the system breaks down...i don't mind paying for minorities and poor families, but i expect them to chip in when possible - just as i do.

hell, even when i lived in grinding poverty, some of my money went back to the man.

i'm just saying. it's not racist to want them to contribute, it's just the social contract.

Chuck Butcher said...

I seem to have started a continuation of conversation, I am gratified to not have the race card tossed about. Thanks for the "Reply" article.