Thursday, April 06, 2006

Jose, Can't You See?

Jose, I read your recent letter in the Omaha World Herald. [free registration required] For context and clarity, I will post the contents here, before I comment:

I am a Mexican who is here legally and is going to college. Being from another country, I've found it is very hard to fit in, because people sometimes look down on you.

Many Americans see us as people who take their jobs. But the real question is: How many Americans are willing to do the "dirty" jobs? Roofing, field work, construction and meatpacking are all hard jobs.

If Mexicans are not allowed to do those jobs, who will do them?
Jose Vargas, Omaha

Who will do these jobs? Simple: those who legally reside here.

You see, there is nothing inherently "Mexican" about roofing, or any other hard work. I worked on a roofing job when I got out of high school, many years ago. Hot, sweaty labour, but it paid better than other summer jobs at the time. Of course, had the trade been dominated by illegal immigrants back then, working an underground labour market for untaxed, discounted wages, I doubt I would have done it then either. It just would not have been worth it.

You say you are in college now. Good for you. But, I hope you take at least a semester of Economics, preferably two or more. We need educated citizens, who understand how market forces work for us when we don't try to thwart them.

I don't know why, but for some reason people think the simple and immutable laws of supply and demand just don't apply to their particular economic issue. In this case, even ostensibly conservative Republicans imagine the construction, meatpacking and crop-picking trades are simply not subject to market forces.

Of course they are. If there were no illegal aliens offering to pick fruit, the fruit would be picked by Americans, probably for higher wages. Would that spell the end of apples and grapes as we know them? No, but food might be more expensive. Or, growers would innovate and find mechanical labour-free means to harvest crops. It would not be the first time necessity mothered invention.

The laws of Supply and Demand are simply reflections of human nature. Humans everywhere, of every ethnic stripe, respond to economic incentives. This color-blind aspect of our nature has been with us since we came into existence. It will stay with us as long as we are indeed human.

Would it spell the end of the U.S. economy to not have cheap immigrant labour? Not hardly. In fact, I think a pretty sound argument could be made that illegal aliens are driving down average wages in the United States, and this is itself a decidedly unhealthy trend. We prefer our workers to make more money, not less. And to be better educated and more productive, not less so.

I heard one commentator last weekend talk about how we need cheap labour to compete with China. Well, the per capita Gross Domestic Product of China is around $5,000 per year, while for Americans it is around $37,000 per year. To compete with China on wages, we would have to become incredibly poor. Besides which, there more than three Chinese for every American. We want to be wealthier, not poorer.

The only way we can continue to be competitive in the world is to be more productive. Historically, that means workers have to be better educated, and therefore worth higher wages. Bringing in millions of illegals to work for ever lower wages in unskilled trades is simply not a solution, but a growing problem. We have to be smarter than that. Immigrants who are legal-- from India and China, for example-- are typically better educated than average Americans. They add to the economy instead of taking away from it.

Here is how the illegal workers hurt us. Take a look at a house under construction in your own neighborhood. The roofing company's workers are hired as sub-contractors. They show up with fake Social Security cards, and become "contractors" instead of employees. As contractors, they don't have taxes and FICA withheld. Instead, the roofing company pays them gross wages-- with nothing withheld-- and reports this to the IRS against the phony Social Security numbers. As a bonus, the roofing company pays neither payroll tax nor workers compensation premiums on those "contractors".

At the end of the year, the roofing company issues a 1099 form instead of a W-2, which the "contractor" duly ingores. He simply does not file a tax return. The roofing company and the illegal workers all make out with this system, while those of us who obey the law take the tax hit.

With no taxes taken out, the illegal workers can afford to work for discounted wages. Those of us who have to pay taxes now carry a higher burden, and cannot compete with the untaxed workers.

Jose, when you finish college, are you going to cut up cows or roof houses? Somehow, I doubt it. You will find better paying work, and may well make a fortune for yourself and others. As for people looking down on you, that is an illusion. Think better of yourself, and others will see you in a different light. Maybe start thinking of yourself as an American, and others will see you as one of them.

Good for you. Work hard, save your money. Invest.

And welcome to America.


Blogger jci said...

Hello Roger, this is another college student(UNC-chapel hill) speaking and I have a few thoughts about some things you wrote. If we were to live in an America that somehow(because I find this difficult to imagine) were to deport all the illegal Mexican/Central American immigrants providing their wage-labor and services, I have no doubt in my mind that wages would increase as a result of the(brownless)American workforce taking on these jobs. For example, picking fruits for long hours in incredible heat is something that a migrant does out of sheer necessity; how productive do you think your average American worker would be in these conditions? My gut instinct tells me that there wouldn't be any - unless wages were to substantially increase from what they are now then no one that lives even a decently comfortable life would want to do that and producers are going to be hardpressed to raise wages and reduce working hours when in today's capitalist society they are motivated purely by profits. In today's world, profits drive everything and companies are outsourcing low-skill jobs to third-world countries for a simple reason: reducing the input cost increases the profit. The same logic is being applied to these domestic jobs/services - not only are they reducing input costs but you can also expect/demand higher productivity from them due to the abundancy of labor! I don't foresee these immense amounts of immigrant workers from Mexico and Central America being replaced by the domestic workforce. I guess the reason I don't is because I find it too difficult to imagine wealthy (white)landowners taking this cut in profits. Things that come to my mind before that were to happen would be a black market of low-skilled labor/immigrant laborers from other areas filling the gap/low-skilled Americans accepting these lower wages. These are just some thoughts that popped into my head during a slow day at work.

charlie ibarra

9:10 PM  
Blogger Roger Snowden said...


First off, thanks for posting your thoughts. One thing odd strikes me about your thoughts-- they seem to center around skin color. There are plenty of non-white landowners and business people in America. Do you think their profit motives somehow differ from those of whites? I just don't see this as a race issue in any way.

I do agree it is hardly imaginable millions of illegals are going to be summarily evicted from this country. The American people could not stomach it. Even though I don't like illegal immigration, I, like many other Americans, naturally feel a great sympathy for Mexicans and others who are here, working hard, doing their best to knock out a living.

Profits are determined not only by input costs, but price as well. If those (whatever color) business owners suddenly all lost their cheap labour source, prices would likely go up. As long as consumers are willing to put up with higher prices-- thus demand holds steady-- those businesses will make the same margins. Of course, it is entirely likely demand will go down, as the Law of Demand teaches us. Still, with all competing businesses having the same adjustment to their costs, they won't have much choice in the matter. But, they might find ways to get the same work done with less labour, and compete that way.

Regarding producers being hardpressed to raise wages, that has been happening in this economy all along, precisely because of capitalist profit motivation. The producer wants to make a profit, and can't do that very will if workers are miserable. The main reason labour union membership in this country has been falling for so long is that companies actually have to compete for employees, and the best, most productive employees are also most profitable for their employers. You have to pay for quality. In the early, formative years of this economy, commercial monopolies were common, and workers had little or no leverage in a "company town". By unionizing, the workers gained leverage and things got better. Those days are long gone. Now, employers have to compete, and unions are dying. Only a few years ago, computer programmers basically ruled the world, until the dot-com bust. Even today, programmers are highly paid professionals, and not unionized at all. Those highly paid, highly skilled technical people are very profitable for their employers.

I don't think abundance of labour necessarily means higher productivity. Actually, a dearth of labour often forces innovation and subsequent substitution of capital for labour (ie, we use fancier machines to leverage fewer workers), and that is how productivity increases. Normally, that capital investment requires the labour to be more skilled, and therefore worth more money. Fewer workers doing more "intelligent" work. At least, that has been the history of the world.

Consider farming in the nineteenth century. We could not import workers fast enough, and when farm machines began to appear, farmers could do much more work with fewer workers. Productivity went through the roof, and continues to do so to this day. Did that progression of productivity result in more poverty, or greater wealth?

What keeps productivity down is abundant supply of cheap labour. Why invest in the design of sophisticated machinery when you can hire intelligent and articulated people, cheaply, to do the job for you? Just like abundance of cheap oil retards development of so-called alternative fuels. It was only the overharvesting of whales and the resulting rise in whale oil prices that led to the use of petroleum 200 years ago. If we truly do run out of oil, you can bet a cheaper substitute will be quickly developed.

But, you are right in thinking a mass exodus of cheap labour is not actually going to happen. But not because of some economic necessity, rather our collective sense of humanitarianism.

9:53 PM  

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