Immigration and Wages: A Socratic Dialogue
By Bryan Caplan
Glaucon: You’re an economist, right?
Socrates: Yes, I was recently promoted from philosopher to philosopher-economist.
Glaucon: You agree, then, that increasing supply reduces prices.
Socrates: All else equal, yes.
Glaucon: Well, I’ve heard some “economists” claim that immigration might actually increase native wages.
Socrates: You’ve heard correctly.
Glaucon: I can see how immigration might raise the wages of some natives. If the immigrants need housing, for example, native construction workers might benefit from the increase in demand. But immigration couldn’t increase native wages in general.
Socrates: Why not?
Glaucon: Standard labor economics says that labor demand depends entirely on workers’ marginal productivity.
Glaucon: Well, the most immigration can do is shift labor demand around. It doesn’t actually raise natives productivity. How could it?
Socrates: Perhaps immigration encourages natives to specialize in jobs where they are especially productive – and subcontract their other jobs to the new arrivals.
Glaucon: Huh? How can you equate specialization and trade with “raising productivity”? Sophistry!
Socrates: Perhaps. Would you mind helping me to clarify my thinking, dear Glaucon?
Glaucon: Well, I guess I’ve got nothing better to do.
Socrates: Very well then. Suppose a man finds a tool. Would you call it “sophistry” to say that this tool raises the man’s productivity?
Glaucon: No. What could be clearer?
Socrates: What if someone claimed that it was the tool, not the man, who was more productive than before?
Glaucon: He’s splitting hairs. Men with tools produce more stuff than men without tools. Therefore tools make men more productive.
Socrates: I see. What would you say, then, if a man domesticated an animal? Would you call it “sophistry” to say that the animal raises the man’s productivity?
Glaucon: Mmm… no. Economically speaking, an animal is merely a living tool.
Socrates: What if the man had to entice the animal to work with treats? Would that change anything?
Glaucon: Not a thing. Economically speaking, giving an animal treats to make it work harder is no different than polishing a tool to make it sharper.
Socrates: Very well. Now I ask you: What if the animal is a man from another land?
Socrates: I repeat: What if the animal is a man from another land?
Glaucon: How can you compare the two?
Socrates: How can you dispute the comparison? You admit that a tool raises workers’ productivity. You admit that an animal is a tool. Do you deny that humans are animals? Or that immigrants are human?
Glaucon: You’re being ridiculous. Animals are useful tools because they are better than humans at certain tasks. Low skilled immigrants are worse than natives at everything.
Socrates: “Everything” seems too strong. But suppose you’re right: Natives are more productive than immigrants at everything. Does this preclude mutually profitable trade between natives and immigrants?
Glaucon: You’re reminding me of an international trade class.
Socrates: Indeed. In your trade class, you almost certainly learned about the Law of Comparative Advantage. Mutually beneficial trade is possible even if one country has an absolute advantage in everything.
Glaucon: I see where you’re headed. You’re going to say that free trade is mutually beneficial, and immigration is just free trade in labor, so immigration is mutually beneficial. You know what? I’m just going to deny the premise. Free trade doesn’t benefit natives workers.
Socrates: Please go on.
Glaucon: I’d be delighted. I’m just generalizing my original argument. Wages depend on productivity, and trade doesn’t magically make native workers more productive.
Socrates: Strangely, Glaucon, I believe in the magic you deny.
Socrates: Perhaps you’re right, but let me tell you a little fable about the magic I believe in. Once upon a time, a businessman announced to the world that he knew how to turn corn into cars.
Glaucon: More magic!
Socrates: That’s exactly what the scientists in my fable say. But lo and behold, the businessman builds a factory by the ocean. Tons of corn disappear inside his factory, and thousands of cars emerge. Everyone’s baffled, but they like his cars.
Glaucon: Socrates, I’m out of patience.
Socrates: Fear not, I’m nearly finished. Hypothetically speaking, do you admit that this factory, if it existed, would have genuinely raise worker productivity?
Glaucon: Get to the point.
Socrates: Very well. One day, a journalist sneaks into the factory and discovers that
there’s no machinery inside. Just ships. The businessman’s recipe for
turning corn into cars is: export corn, import cars.
Glaucon: So his “magic” was fraudulent.
Socrates: Why “fraudulent”? I say his magic was real. Economically speaking, the businessman did figure out how to turn corn into cars – and his workers became more productive as a result. Do you deny this?
Glaucon: I suppose not. But we’ve strayed so far from our original debate, and have so little to show for it, that I wish I’d never started our conversation.
Socrates: Perhaps my reflections were fruitless, Glaucon, but yours were not. Ten minutes ago you told me, “Wages depend on productivity, and trade doesn’t magically make native workers more productive.” Now you seem to believe in the magic of trade as firmly as I do.
Glaucon: It still seems like sophistry. Of what use are a bunch of low-skilled immigrants?
Socrates: I suspect you find uses for them every day. Low-skilled immigrants pick your vegetables, prepare your meals, mow your lawn, watch your kids, and help your aged parents. You could do all these tasks yourself, but you choose not to. May I ask why?
Glaucon: I’m just too busy.
Socrates: Or in other words, without “a bunch of low-skilled immigrants,” you would be less productive. Call it magic. Call it economics. Either way, it’s real. For all practical purposes, low-skilled immigrants raise the productivity of native workers. And as far as supply-and-demand is concerned, it’s entirely possible for immigrants to actually boost natives’ wages.