Immigration and the Minimum Wage
By Bryan Caplan
First, [Bryan] says that if we didn’t get rid of the minimum wage, legal
immigrants would just get black-market jobs. That’s true, but
incomplete. Precisely because they would now be legal, they could
comfortably go to a wage board in their state and complain after the
fact and get back pay. An employer, looking forward to that outcome,
would not hire them. I pointed out here
that ironically, the way the minimum wage law is enforced is what gives
illegal immigrants (who would no longer be illegal under Bryan’s
preferred policy) an advantage in the competition for jobs. Illegal
immigrants can credibly commit not to turning in a minimum wage
violating employer. Legal immigrants can’t credibly commit.
True to some extent. But I stand by my basic point: When you price workers out of the labor market, a black market will emerge to hire them – especially if they have no other means of support. And the black labor market, like other black markets, will develop extralegal commitment devices to enforce contracts and stymie legal punishment – reputation, ostracism, and – of course – violence.
Bryan’s other error is to suggest that enforcing a minimum for
native-born people but not for immigrants would help the native-born.
No way. Would United Airlines want a pricing restriction that doesn’t
let it cut fares but lets Southwest do so?
If I said this, I misspoke. But it’s more complex than David lets on. If (a) labor is homogeneous, (b) natives are subject to a minimum wage, and (c) immigrants aren’t, then employers will only hire immigrants, and natives clearly lose. But in the real world, as I emphasized in my talk, native and immigrant labor are heterogeneous, so the welfare effects of selective minimum wages for workers are not clear-cut. Price floors that apply to wheat farmers but not corn farmers can make wheat farmers better off. Still, on balance I think David’s right.