Permanent underclass
After reading another frustrating piece on our failure to curb illegal immigration (hat tip: Boudicca), I decided it was time to share some of my thoughts on the nexus between minimum wage laws and illegal immigration.
I think our adherence to minimum wage laws, combined with our unwillingness to police our own borders, could create a permanent underclass in this country.
My case begins with the simple economics of supply and demand. Let's say a company has a need for unskilled labor. The labor pool for this is exceedingly large, and they only need a handful of workers for the particular need. In addition, the productivity increases the new employees brings are not very large, but large enough to warrant the new hires. As a result, it isn't economically feasible to pay these workers any more than, say, $5.00 per hour.
Now let's say all of this happens in a state where the minimum wage is $6.50. Let's go one step further and say this is a state that borders Mexico (or Canada, but... really, now). So what does a business do? Does it follow the legal requirements and employ citizen labor at 30% above maximum cost? Or does it take advantage of a lax regime of immigration enforcement and employ, ahem, 'undocumented workers' at less than $5 per hour?
The choice to employ the illegal labor is harmful in two ways. It deprives citizens (some of whom may be legal immigrants!) of employment, and it puts the illegals into a shadow zone: they have no legal rights whatsoever and are at the mercy of their employer's good will. The employer can always claim that they didn't know, but the workers have no such alibi.
Of course, for the worker the risk of getting caught is worth the reward of the job. So from this comes a thriving industry in human trafficking and its attendant evils; from this comes the environmental devastation of the borderlands; and in short order, we have an entire underworld of illegal activities as crime begets crime.
Let's put the focus back on the citizen who would have provided the unskilled labor. What is their lot? Marginal employment to unemployment. Their communities' infrastructure suffers, because the public funds are exhausted providing emergency services to deal with the illegal population. So the resources simply aren't there for education, basic law and order, and other simple needs. Things aren't going to get any better for them.
The end result is an underclass comprising two groups, one citizen and one foreign. Both are locked in place and both feel threatened by the other. If the situation threatens to become permanent, we have a recipe for societal meltdown.
What can be done? Change the laws! Allow more legal immigration and act more effectively in dealing with illegal. Don't just expel the workers, penalize the companies severely. At the same time, abandon the notion that raising the minimum wage (or setting one in the first place) will automatically increase actual wages and employment, as it often has the opposite effect. Instead, let's allow companies to set wages based on the market and the pool of legal labor.
It's not the whole solution, but I think it's a start.
I think our adherence to minimum wage laws, combined with our unwillingness to police our own borders, could create a permanent underclass in this country.
My case begins with the simple economics of supply and demand. Let's say a company has a need for unskilled labor. The labor pool for this is exceedingly large, and they only need a handful of workers for the particular need. In addition, the productivity increases the new employees brings are not very large, but large enough to warrant the new hires. As a result, it isn't economically feasible to pay these workers any more than, say, $5.00 per hour.
Now let's say all of this happens in a state where the minimum wage is $6.50. Let's go one step further and say this is a state that borders Mexico (or Canada, but... really, now). So what does a business do? Does it follow the legal requirements and employ citizen labor at 30% above maximum cost? Or does it take advantage of a lax regime of immigration enforcement and employ, ahem, 'undocumented workers' at less than $5 per hour?
The choice to employ the illegal labor is harmful in two ways. It deprives citizens (some of whom may be legal immigrants!) of employment, and it puts the illegals into a shadow zone: they have no legal rights whatsoever and are at the mercy of their employer's good will. The employer can always claim that they didn't know, but the workers have no such alibi.
Of course, for the worker the risk of getting caught is worth the reward of the job. So from this comes a thriving industry in human trafficking and its attendant evils; from this comes the environmental devastation of the borderlands; and in short order, we have an entire underworld of illegal activities as crime begets crime.
Let's put the focus back on the citizen who would have provided the unskilled labor. What is their lot? Marginal employment to unemployment. Their communities' infrastructure suffers, because the public funds are exhausted providing emergency services to deal with the illegal population. So the resources simply aren't there for education, basic law and order, and other simple needs. Things aren't going to get any better for them.
The end result is an underclass comprising two groups, one citizen and one foreign. Both are locked in place and both feel threatened by the other. If the situation threatens to become permanent, we have a recipe for societal meltdown.
What can be done? Change the laws! Allow more legal immigration and act more effectively in dealing with illegal. Don't just expel the workers, penalize the companies severely. At the same time, abandon the notion that raising the minimum wage (or setting one in the first place) will automatically increase actual wages and employment, as it often has the opposite effect. Instead, let's allow companies to set wages based on the market and the pool of legal labor.
It's not the whole solution, but I think it's a start.
posted by Joshua @ 10:55 PM
1 Comments:
The NYTimes Magazine ran a coverstory on the minimum wage not too long ago, which we can all still access here: http://www.nytimes.com/2006/01/15/magazine/15wage.html?ei=5090&en=f7043a8ee7bc6102&ex=1294981200&pagewanted=print One of the most interesting parts of the article, in my mind, occurs in the sections entitled "The Economists Are Surprised" and concerned the raising of New Jersey's minimum wage in 1992 while Pennsylvania maintained its wage. Contrary to all expectations, " Their data demonstrated that a modest increase in wages did not appear to cause any significant harm to employment; in some cases, a rise in the minimum wage even resulted in a slight increase in employment."
I'd encourage you all to take a look, as it's an excellent article. And free.
That said, I'm all for clamping down on illegal immigration. However, we need a broader view than just looking at the effects of any policy changes here, as it's important to understand why people come to this country in the first place. And that's going to take us to the effects of free trade and globalization on countries like Mexico and no discussion of the Mexican economy and immigration is complete without discussing remittances from US-based Mexican families back down South of the Border.
And now I need to go back to working, sadly.
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