Supply and demand versus illegal immigration

One of the advances of 20th Century business policy is the post-Depression concept of using government to assist rather than hinder the law of supply and demand. It has been observed that human beings have the propensity to resort to sneaky and often illegal methods to increase profits or reduce costs, and that those practices tend to interfere with what might be called the inside-the-box application of market forces.

I hasten to note that if we view the system globally, those sneaky and illegal methods can well be viewed as manifestations of the same laws, and that getting caught and punished may, in the (very) long run cause adjustments in the system. In fact, the laws I want to talk about could well be seen as exactly the kind of adjustment predicted by global supply-and-demand processes.

The specific set of laws of interest here are labor laws, laws passed to better the lot of workers. These include minimum wage laws, laws regarding unions, laws regarding medical care and on-the-job safety, and laws regarding discrimination.

Normally, if you have a class of job that is viewed by workers as very undesirable because it is physically strenuous and dangerous and seasonal, the benefits given to individuals who do that work would have to go up. This is simple supply and demand in the labor market. In some types of undesirable jobs, we already see those pressures at work. For example, plumbers and sanitation workers have been paid well in most places in the US for quite some time.

However, there is a large set of jobs where pay and benefits have remained very low, even illegally low, namely, the jobs filled by illegal immigrants.

Employers, given a choice between remaining in our "box" of labor laws and saving a lot of money by hiring illegal undocumented workers for substandard wages, tend in large numbers to break the law.

In effect, this practice has forged a leaky connection between many different "boxes", or economic systems, the largest two being Mexico and Canada, our immediate neighbors. These leaks allow the substance of each system to invade the others, and all of the systems are distorted by these invasions.

In our system, the natural cycle of movement among the various economic levels is impeded, because there is an increasing lack of viable low-end jobs for our native workers. If all of the jobs taken up by illegal immigrants had to be filled by legal residents, and therefore at competitive levels of pay and benefits, two things would happen. Efficiencies would be made to reduce the number of workers needed and to improve the experience of doing the work, and a large number of jobs would be available at the low end of our economic ladder, but jobs with benefits, healthcare, and middle-class salary levels. People who now go into crime or on the dole would be able to earn a good living by doing those jobs.

The solution to all this is not to tighten the immigration system, to build fences and so on. The solution is to enforce existing labor standards and hiring laws. In other words, we need to plug this enforcement hole so that it is no longer viable to seek workers who get less than a legal, living wage with the kinds of benefits that Americans should be able to expect.

Some might object: paying farm workers or day laborers enough money to attract legal residents might increase illegal immigration because they could make more money. This could be true, if the change is done in a half-assed way, for example, forcing employers to increase wages, but not enough to entice legal workers, and/or by not enforcing labor and hiring standards.

In order to be effective, employers at every level, from people who might hire a day laborer to build a fence up to agricultural giants who hire lettuce pickers, have to understand that it will personally cost them more to break our labor laws than they could ever save by doing so.

I would say that the best way to approach the problem is through a tax. That is, even though it is not legal to hire an undocumented worker, the practice could be taxed enough to increase the cost to that of the competitive standard, plus a penalty of, say, 10% for each year from the time the offense occurred to the time the tax was paid. Under this system, there would be no tax on hiring illegal workers, if they were paid enough money in wages and benefits. This is the case because that practice does nothing to encourage illegal immigration. The normal enforcement of laws regarding hiring of undocumented aliens would still apply as it does now, but in parallel to the tax system.

This tax would normalize the application of labor market supply and demand; it would in effect plug the holes in our economic system that is sucking in so many undocumented workers and leaking out money and jobs for our legal residents. I would rather deal with those leakages at the legal/conceptual level than try to create physically impermeable borders.

I just saw this article describing how employers who want to hire legal workers do not receive the support they need to actually allow workers to be checked. Apparently, these are employers who are already paying a fair, competitive wage, who have been hiring workers who use false documents. Under the proposal I am making here, there would be no penalty for those employers. From my perspective, they are not increasing the flow of illegal immigration. In this case, the problem is solely with the government to enforce its laws regarding immigration, including the obvious computerized cross-checking of records.

One area where I have not been in step with my colleagues on the left has to do with a good national identity card. I am in favor of this and always have been. It needs to have cutting-edge security technology, and it must be backed with a good sample of demographic and physical data. However, it must also be convenient and free of charge to all legal residents. The reason I am in favor of this is that once it is in place, a number of items on the long-standing left agenda will be facilitated (lower-cost, more standard healthcare coverage; less intrusive border crossings; better checking of gun purchasers...). And, in this case specifically, it could allow us to dispense with things like border fences and sweeps of factory floors by the Migra.

Greg Shenaut

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