Monday, May 28, 2007

Immigration and its discontents

One of the most bitter and ferocious debates to come out of American politics in a long while is currently taking place in Washington. The topic is illegal immigration, and specifically the bipartisan Bush-Kennedy bill now under consideration in the Senate that would grant full citizenship (provided certain conditions are met) to the estimated 12 million or more aliens now living in the country. Grassroots supporters of the Republican party are furious, saying that no amnesty should take place without the border being closed to future illegal immigration altogether. (Although the bill does have some enforcement provisions, these are vague and seem to have been added as an afterthought.) Other concerns are that American citizenship is being offered cheaply to those who have already shown themselves ready and willing to break American law; that millions of low-paid and relatively uneducated new citizens will bankrupt existing social entitlement programmes; and that the vast new electorate instantly created by the bill will vote overwhelmingly Democratic in the future, so potentially destroying the two-party system in the US.

As an immigrant to Canada, and a legal one, I can't say I have a great deal of sympathy for the aliens. My parents were forced to jump through various hoops to gain our admission to this country, and it worked out well for us in the end. I am grateful to the Canadian authorities for their generosity in welcoming us, but if they had chosen to reject us instead they would have been well within their rights to do so. No prospective immigrant has any "right" to take up residence in another country. National sovereignty dictates that only those incomers can be admitted who are going to benefit the country in some way, and that their numbers should not be so great as to place a financial or cultural strain on the existing population. There is no Divine Right of immigration, any more than there ever was a Divine Right of kings.

National self-interest alone would dictate that in the US at present there are serious reasons to hesitate over enfranchising millions of mostly poor and unskilled people, the biggest one being that their presence drives down wages for those existing citizens who are also poor and unskilled: this is a vital concern if you are a member of what remains of America's dwindling working class. But there are apparently enough influential voices among the American political and media elites who are affluent enough to stand to benefit personally from an endless supply of cheap labour, and who naturally regard the matter differently.


Rajeev said...

Some of the biggest beneficiaries of cheap labour are not the "chattering classes" but the working poor. Cheaper labour means lower prices as it decreases the cost of production.

The middle class and the rich are not so sensitive to price variation - goods for these people tend to be more price inelastic. We'll buy that Sony Playstation whether it costs $400 or $450. On the other hand, for the working poor, it makes a huge difference if a pair of shoes costs $30 instead of $20.

Economics is not a zero sum game. The more people who are able to contribute to the economy, the better off we all are. Instead of displacing people, immigration (legal or otherwise) will actually increase employment rates. America certainly has not suffered from immigration of the low-skilled - it boasts one of the lowest unemployment rates in the world.

Come to think of it, I'll probably expand this reply into a full blown blog entry when I have time. I've been meaning to do one on economic theory!

Neil said...

You're right about lower prices, of course -- we live in the great age of cheap food, clothes, and household items, at least in North America. (The price of housing in urban centres, tho', is a different matter.) I don't mean to be absolutist about these things. But low prices are only of benefit to those who are actually employed, and at a level which allows them to retain at least some disposable income.

I'm not so sure about the rich being insensitive to price variation. There's a reason people get rich to begin with, after all, and it's not because they're careless with money! While they may spend ridiculous amounts of cash on status objects such as bottles of wine or works of art or even (to use your example) Playstations, this is because there is normally only one asking price available for these things. But if comes down to paying for a service in a heavily competitive market, they will opt to go for the cheapest bid like everyone else. It is human nature and sound financial sense besides. Anecdotal evidence at least would suggest for example that nannies in New York are relatively low-paid and hamstrung by restrictive working conditions, despite the putative importance of their work and the vast wealth of their employers.

I'm well aware that economics is not zero-sum *overall*, but at the individual level it certainly can be, since in the end only one person gets the job; and it is going to be difficult (perhaps even impossible) for a legal resident offering a given service to compete with an illegal who is willing to work off the books. Because the illegal pays no taxes, and because his cultural background has led him to a different standard of expectations in (e.g.) housing, he can afford to work much more cheaply than the citizen.

You will tell me at this point that the citizen must move somewhere else where there are fewer illegals, retrain himself for a different job or get used to a lower standard of living. Each of these options carries with it a tremendous dislocation, and I don't believe that people were meant to live this way -- continually being blown around the world in search of work, having to learn new skills every 5-10 years as the market changes (obviously this becomes less easy and less financially feasible as one grows older), or being compelled to continually diminish one's expectations as wages are driven down. The very efficiency of capitalism is also what makes it terribly disruptive under certain conditions.

Why not just enforce the damn border (surely a basic principle of national sovereignty and security?) keep immigration to a manageable level, and thereby alleviate some of these problems? Because we're worried about losing a few points off the GDP? Who the hell cares?

Rajeev said...

A few points of the GDP is a pretty big number. The US has a $12 Trillion GDP. Suppose that it's growth slowed down by 0.1% - this translates to $12 billion less for the economy.

Very conservatively speaking suppose that about 10% of that $12 billion were going into job creation - that translates to $1.2 billion or at least 120,000 jobs. So some guy living in the mid-West who suddenly sees a factory open up in his town might care that the GDP was 0.1% higher.

So even a slight reduction in the the GDP results in fewer jobs being created.

Besides which, forget about low skilled workers coming in and reducing the standard of living and taking jobs away (mostly jobs that Americans don't want anyway).

Automation and outsourcing are the biggest source of immediate job losses in the US (although even these are more than made up for by job creation in other parts of the economy). Should we erect tariff barriers or create laws about how business owners should run their businesses (thereby trampling on fundamental property rights)? Or should we reduce the development of new technology? Neither alternative sounds particularly palatable to me.

One question you could ask is why there is illegal immigration to begin with. If there wasn't a shortage of workers in the US, there would be no demand for labour, meaning the incentive for illegals would drop dramatically - unless they are provided with social benefits (which they shouldn't have).

As far as social benefits go - this is a different kettle of fish. And here you and I would probably agree. If we impose rules that only tax-payers for x number of years qualify for social benefits for y number of years, it might solve this problem.

Neil said...

Rajeev: It's a common myth, and by now little more than a cliché, that illegals "do the jobs that Americans don't want". Naturally tho' there were Americans doing these jobs in the past, before illegal immigration became such a big problem. The difference was that back then they weren't doing it so cheaply. The phrase you quote contains a nasty insinuation in it (tho' of course I know you are innocent of it) that white people in the US -- because it is they who are meant -- are somehow effete and incapable of doing hard manual labour. And yet immigrants of European origin and their descendants mined coal, picked fruit, sewed garments, cleaned offices etc. for decades and even centuries in the US. Where I live, in Cape Breton, there is an almost 100% white population of Northern European descent -- so who does all the jobs that Americans (and I assume by extension, Canadians) don't do? Of course, they get done anyway, even without the presence of those industrious Mexicans.

There is no inherent shortage of labour in the US, because (and as a free-market proponent you already know this) labour is a commodity subject to the law of supply and demand like any other. What is commonly defined as "labour shortage" means that the price of that commodity has gone up to such a level that businesses start to feel a pinch. The shortage, in other words, is not of labour, but of labour that is deemed to be acceptably cheap. For example, nowadays in the Alberta boom-towns you can make $20 an hour serving coffee at Tim Horton's. But there is not a "shortage" of coffee servers in the sense that the shops are closing down or thousands are going without their daily caffeine fix. You might think it is a bit much to pay someone $20/hr. to pour coffee, but obviously there is enough money being generated in the oil-patch to make it feasible in a way that it wouldn't be elsewhere.

As for trampling on "fundamental property rights": ever since the days of the chimney-sweep boys we've being doing just that, and it's a good thing too! It's not the trampling itself that's the problem, but the degree and usefulness of gov't intervention in the economy. I happen to believe that the economy exists to serve the people, rather than vice versa, so I can't in principle be opposed to government interference or regulations that are drawn up and administered wisely (as alas all too few of them are.)

All of which being said -- perhaps we ought to move this discussion out into the blog itself?

Rajeev said...

"It's a common myth, and by now little more than a cliché, that illegals 'do the jobs that Americans don't want'". Not such a cliche. Studies have been done in the UK where advertisements were placed in newspapers for "low skilled" jobs such as cleaning etc. I can't remember the exact number but the overwhelming majority of applicants were recent immigrants (mostly from Africa, Romania or Poland). When I find that study, I'll include the hyperlink.

It's a basic question of economics - if you are desperate enough, you would be willing to do most types of jobs. Generally, immigrants who often lack close ties in their adopted countries are more willing to be flexible. Residents (regardless of colour or sex or flavour preference for gummy bears) who tend to have a slew of relatives and friends to help them tend not to try so hard. Immigrants are among the hardest working people in most countries where they are not coddled by a generous welfare state. As for the comment about any insinuation that white people not working hard, I should remind you that many of the immigrants I'm talking about are also from Russia, Romania, Poland, etc.

It's also a way up the social ladder. First generation will do the menial jobs to get by (like the Patels who run the corner shops in the UK), their kids go to school and university and become professionals and their grand kids take up fine arts or sociology and their great grand kids take up online gaming and don't bother with work or school.

I would say that rather than blocking or limiting immigration (you never know if the child of that unskilled worker coming in is the next Einstein), there should be limits placed on the type and amount of social benefits allowed to migrants and comprehensive help given to the native population who might have been displaced. But as I said in a previous post, automation and outsourcing have the greatest impact on the unskilled - not immigration.

The assertion that immigrants steal jobs isn't really backed up by facts. In a 1994 study entitled "Setting the Record Straight on Immigration and Immigrants," the Urban Institute in Washington reported its conclusions based on an analysis of U.S. Census Bureau figures. The institute reported that immigration actually "increases the labor market opportunities of low-skilled, native workers."

Also one study, by the accountancy firm
Grant Thornton
, concluded that as much as one percentage point of UK growth in 2005 and 2006 was contributed by migrants.

So there.

Neil said...

I have the feeling that to some extent we've ended up addressing two different (tho' clearly related) issues. My original post was about the proposed immigration amnesty bill in the US, and the effect that it will have both in making overnight citizens of at least 12 million illegals of mainly Hispanic origin and in encouraging many more to cross the southern border in anticipation of a future amnesty (which seem to take place every 20 years or so.) I am not attacking the fact of immigration per se -- obviously I can't since, as I've pointed out, I'm an immigrant myself -- but am addressing the uncritical idea that immigration is always and everywhere a wonderful, fantastic thing of which we always need more and more and more.

You, being based in Europe, tend to think of immigration in EU terms. But the challenges of immigration to, say, the UK are somewhat different to those in the States. Immigration from Muslim countries over the years has resulted in a massive security headache for the native British population, but most other incoming groups are reasonably well-adjusted, skilled or professionally educated so that they can contribute to the economy and -- this is most important -- none of the groups are massive or monolithic enough to potentially alter in a radical way the state of the host society. Tho' better- quality immigrants from Russia, India etc. are present in the US as well, they are not the focus of the immigration debate, or of my concerns either as it happens.

To recap, my points are:

1) Work tends to get done in any society whether or not lots of immigrants are present -- even if labour costs are then more expensive. There are no such thing as jobs that Americans won't do, provided they are paid enough;

2) It's a basic principle of national sovereignty for any government to have control over its borders and its immigration policy -- not a violation of some mysterious "rights", whether political or economic or otherwise;

2a) Immigration policy can and must be tailored to suit the conditions prevailing in a country at any given time, and it must be sure to take special consideration of the economic needs of the host population;

3) Immigrants, being as you say more "flexible" or desperate, will tend to work more cheaply and thus get preference in employment over legal or native-born residents, in accordance with the basic self-interest of employers (and please note that I didn't say this was "stealing", by the way.) Where this goes wrong is in encouraging the idea that native residents must make themselves competitive when labour prices are being driven down to the bottom;

And 4) Immigration that causes massive shifts in the cultural landscape should be discouraged, regardless of its effects on the economy.

So there!