Immigration and Wages: A Socratic Dialogue
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 raised 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.
Oct 4 2010 at 1:36am
The jobs you (or, Socrates) cite as being done by low-skilled immigrants in this mutually-beneficial exchange are better characterized as being done, generally, by illegal immigrants, on the labor black market. Natives are priced out of these jobs due to regulations prohibiting them from working for wages/benefits/paperwork complications that would be economically sustainable for such jobs.
So the whole setup is rather as if we prohibited prostitution, for our own women, but nevertheless more or less openly imported daughters from overseas to be our prostitutes.
It may indeed be correct to describe even such a situation as a mutually-beneficial trade, even for the prostitute. But the interesting thing to me however is why those who consider themselves “liberal”, and self-styled supposed advocates of the low-priced black-market labor being used in this way, seem all in favor of the arrangement, whereas the evil racist right-wingers seem to be against it. Shouldn’t it be the other way around?
Oct 4 2010 at 2:08am
This kind of argument makes sense on the assumption that underclass natives are capable of moving upward in productivity. If meatpacking jobs go to immigrants, former native meatpackers will become computer programmers, or something.
That’s a big assumption.
Oct 4 2010 at 2:25am
I think you are often conflating income with wages. If you bring in immigrants to do acts like cooking, cleaning or maintenance of your house, and spend more time at your job, you are better off, but your wage will decrease because you spent more hours working.
IF wages went up, that would mean greater productivity per hour, implying you could work less. The opposite of what would likely happen. Wages can go down while income goes up.
Oct 4 2010 at 2:57am
The situation you describe would not be the ideal, certainly, but it would be better than having no prostitutes at all. But in any case, if minimum wage laws were repealed, the operation of Say’s Law would create enough jobs for pretty much everyone, since the lowering of wages would mean people who had never thought to hire someone before would suddenly realize they could afford to. Hence a decrease in the wage rates would result in a surge of job creation.
The native workers need not be replaced. Suppose I make $12 an hour working at a meat processing plant, but can only work 6 hours a day because I have to take care of my elderly parents. If I hire an immigrant to care for them instead for $7 an hour, I can work an additional 2 hours at the plant and make an extra $10 total every day. For jobs with fixed salaries instead of hourly wages, substitute “work harder to earn a raise or promotion” for “work more hours.”
1. Your complaint only works for salaries, not hourly wages.
2. If you spend more time at the salaried job you’ll get more practice and get better at it, raising your productivity per hour, and hence making you more likely to earn a raise. That’s the “specialization and trade” Bryan refers to.
Oct 4 2010 at 8:52am
Nobody ever doubted that immigration benefited you if you are able to hire cheap nanny. Most people who worry about immigration worry about domestic nannies who lose their jobs to immigrant nannies. There are going to be some people who benefit in the way you describe here, and there are going to be some people who lose out because they are simply competing with the immigrants, and either end up working for a lower wage or not working at all, and are not being ‘freed up to do something more productive’.
I hope you don’t think that if person A has a job, then person B comes along and takes that job by working for less, this always actually benefits person A.
Oct 4 2010 at 9:11am
This was an entertaining read.
I’m surprised to see objections raised in the comments section. This is Econ 101 stuff.
Oct 4 2010 at 9:12am
Interesting post, Bryan. But I almost wonder if it is a double-edged sword. I mean, if you’ve shown that increasing labor supply doesn’t usually reduce the price of labor, then it makes me wonder if we need to check all the other times when we use supply and demand graphs.
If a movie glamorizes orthodontic work, and so more students study to become orthodontists, would you say it raises or lowers the salaries of orthodontists? I mean, if you give an existing orthodontist a tool, he or she can sell more braces, right?
(I’m not being a wiseguy. I’m saying your post seems plausible, but if it’s right, then the issue is deeper than the immigration question. It’s disturbing that what appeared to be a straightforward supply-and-demand analysis led to the wrong answer.)
Oct 4 2010 at 10:48am
” for example, native construction workers might benefit from the increase in demand. ”
I have never heard anyone say that American born construction workers wages increased in the last decade. Do you have any evidence this happened?
“Perhaps immigration encourages natives to specialize in jobs where they are especially productive”
Perhaps Americans who used to do work like construction are now unemployed. This would explain the high rate of unemployment for black males.
” it’s entirely possible for immigrants to actually boost natives’ wages.”
The US had a lot of immigration in the last decade and the average natives wages were not boosted. It is also possible for immigration of low skilled workers to boost government on social services and raise natives taxes because the workers’ families receive more in benefits then they pay in taxes. I don’t have to write a silly dialogue to explain this I just have to point at California.
Oct 4 2010 at 12:43pm
“I don’t have to write a silly dialogue to explain this I just have to point at California.”
Otherwise empirical people seal themselves off from the real world when cheering for open borders. It all becomes hypothetical.
If the average worker gets such a great boost to their marginal productivity from having cheap illegal immigrant labor nearby, why are they all running away from, rather than toward, California and Nevada?
The rich surely benefit, and we don’t have to even know the mechanism (perhaps more hours pays more in a superstar / scalable industry, where a tiny edge over competitors makes all the difference), just the fact that they flock toward such regions and are eager to open borders.
Economists may not value inequality as good or bad, but human beings do. We were already plenty rich before the open borders era of the past 20 years, so big deal if we have to “revert” to that, provided inequality plummets and all the other hidden and not-so-hidden costs of open borders evaporate.
Oct 4 2010 at 12:53pm
It’s disturbing that what appeared to be a straightforward supply-and-demand analysis led to the wrong answer.
People are not fungible commodities.
With a fungible commodity — say, iron — the highest valued uses command the same price as the lowest valued uses that still exceed the marginal cost.
But with a commodity that can be distinguished — say, diamonds — the highest valued uses command higher prices than the lowest valued uses. If the only use for diamonds was as cutting instruments, no one would care about the 4 C’s.
Not only can people be distinguished from each other, they can self-distinguish from each other and, in fact, they can choose to be a different commodity altogether.
The more people with the more varying skillsets, the more the ability to distinguish them from each other, the more their ability to distinguish themselves from each other, and the more their ability to find new higher value opportunities.
Complementarity and comparative advantage are everything here. Except in the narrowest of perspectives, they completely trump supply and demand.
Oct 4 2010 at 12:58pm
Here’s how I put it on a comment thread a few years ago…
The position I think is defensible is the following:
Oct 4 2010 at 1:27pm
Yikes! Now people who don’t share your preferences aren’t really human beings? How progressive of you.
Oct 4 2010 at 1:43pm
Economists may not value inequality as good or bad, but human beings do.
Unless it’s inequality between people on one side of a border and people on the other side of the border?
Oct 4 2010 at 2:34pm
The human mind has, if anything, a cognitive bias against interaction with foreigners. Therefore, it seems likely that open-borders types have unusually unbiased minds, rather than the other way around.
Screw equality, I want my Internet! And my anime! And my massive DVD box sets of horror movies that went for $15 per videotape 20 years ago! I love all the advances of the past 20 years and would gladly quadruple inequality to keep them (providing absolute wealth stayed the same/increased of course)!
And don’t forget further advancements. Do you really want your descendants to have the same level of wealth as you? Wouldn’t it be great if they had more? I personally want my descendant to be immortal cyborgs at the very least, so I’m in favor of pretty much anything that raises absolute wealth, standard of living, and productivity for everyone.
And look, even if wages do fall, that means that producers can afford to charge lower prices, which in turn means that the cost of living will stay the same, or even lower, raising real wages/purchasing power. That’s why mechanization didn’t decrease our standard of living. From an economic perspective there is no difference between importing immigrants and inventing a new type of machine to do work, since humans are the most advanced, all purpose machine there is.
Oct 4 2010 at 2:56pm
If people weren’t at least somewhat fungible, they couldn’t be retrained to do other work. We’d be stuck doing whatever we were initially trained to do. This is obvious nonsense. It would result in an endless recession, whereas recessions end in no small part because human capital has been reorganized precisely because it can be retrained.
Here’s the bottom line of the story: others doing work for you cheaper than you could do it yourself frees up money to do other things, enriching you. This causes, over the long term, an increase in wealth (or, if you will, wages relative to other prices).
I can give a personal example. Because of the high cost of daycare, I am staying home with my two children rather than teaching adjunct, because I would have lost $400 per month by going to work. With my Ph.D. in the humanities, being a daycare worker for my children — as much as I love being with my children — is clearly a misallocation of my human capital. (For those who are inevitably going to complain: my daughter was in daycare, and she absolutely loved it, and she keeps asking when she’s going to go to school, so my having to be a daycare worker doesn’t improve her life, either; I’m not sure the 1 yr old has an opinion yet.)
Oct 4 2010 at 3:04pm
“I’m in favor of pretty much anything that raises absolute wealth, standard of living, and productivity for everyone.”
How do you know that importing low skilled workers increases the standard of living for the native born? California has had a lot of immigration in recent decades. Has its level of economic growth increased faster per capita? Can the average Californian afford a house more easily now rather then before the huge increase in immigrants? If all these immigrants are beneficial to the standard of living why are the native born leaving CA?
” economic perspective there is no difference between importing immigrants and inventing a new type of machine to do work”
Machines do not receive Medicaid and public schooling. That means there is a huge difference for taxpayers.
Oct 4 2010 at 5:52pm
Agree with RPLong. I thought this was great, you could start a trend with these.
Oct 4 2010 at 6:06pm
Socrates: “Suppose a cook finds a jackhammer… His productivity will go up! Joy!”
Glaukon: “Why? If he finds a frying pan, sure, but a jackhammer?”
Socrates: “Oh, I forgot. He can sell the jackhammer and buy a frying pan! Joy!”
Glaukon: “Okay, but suppose it’s raining jackhammers. The price of jackhammers becomes negative, because everyone has to pay people (or work extra hours) to clear them off their driveways. How does that help the cook?”
Socrates: “Hmmm. Give me a moment…”
Glaukon: “What about a farmer? To grow a crop he needs land, seeds, rain, and farmhands– all in proportion. If you give him extra land he’ll leave some of it fallow. If you give him too much rain his crop will rot in the field. Aren’t workers like rain? A certain number are useful but too many are a problem– their wages may drop below nil because they start stealing for subsistence. They can cost more than they’re worth!”
Socrates: “Hey, I’m the teacher in this dialog! I say too many workers are never enough!”
Glaukon: “Tell me again about comparative advantage. It explains gains from trade, yes?”
Socrates: “Right. Both sides of any free trade benefit.”
Glaukon: “What if there are externalities? Say, if one trader’s production process emits pollution which can affect the other trader? Where do you account for those?”
Socrates: “Well, we analyze them as hidden price components, according to the Coase theorem.”
Glaukon: “Does the Coase theorem say we can always make externalities disappear?”
Socrates: “Not unless transaction costs are zero, and sometimes not even then. In the real world transaction costs are never zero, and rent-seekers constantly intrigue to increase them.”
Glaukon: “An simple good might come with an externality like pollution created while manufacturing that good, right?”
Glaukon: “A laborer might come with externalities too, right? I mean, his employer keeps him occupied for 40 hours per week, but he might get into drunken brawls on the weekends.”
Glaukon: “Or he might produce children and demand public assistance to feed and school them, threatening to riot or to train his kids to steal if refused the subsidy he demands?”
Glaukon: “Have you heard of the Earned Income Tax Credit?”
Socrates: “Yes. It is a wealth-transfer scheme. By threat of violence, the IRS forces high-wage workers to subsidize low-wage workers with children.”
Glaukon: “Tell me, Socrates, if low-wage workers require forced subsidies from other workers to feed their families, aren’t we seeing an externality? I mean, since low-wage employers are paying less than subsistence wages and forcing taxpayers to make up the difference, aren’t the taxpayers incurring an externality of the low-wage employer/employee trade?”
Socrates: “I suppose so.”
Glaukon: “Why would taxpayers want more below-subsistence workers around?”
Socrates: “Well, according to Coase all we have to do is arrange transparent pricing and get rid of transaction costs and… well, if we just change all our public policies things will be fine!”
Glaukon: “Should we get rid of EITC before or after we allow in a flood of below-subsistence workers?”
Oct 4 2010 at 6:38pm
A point I seldom see in these immigration debates is that every immigrant brings both a supply of labor, and a demand for labor. By definition the number of jobs is always exactly equal to the number of people, with prices clearing the market, assuming no government interference.
It is unhappiness with the market clearing price (the going wage for your skill set) that people are really expressing when they find reasons to speak against immigration.
[I have yet to find a fellow Iowan worried about immigration from Missouri.]
Oct 4 2010 at 6:38pm
Socrates: “Does it look like EITC is going away with closed borders?”
Socrates: “Would it be easier to disqualify immigrants from receiving EITC or to get rid of it altogether?”
Glaukon: “Disqualify immigrants of course.”
Socrates: “Would it be easier to disqualify immigrants from receiving EITC or to greatly free up migration?”
Glaukon: “Disqualify immigrants from EITC of course.”
Socrates: “Then wasn’t your question about getting rid of EITC before decriminalizing migration kind of silly?”
Oct 4 2010 at 6:56pm
I have yet to find a fellow Iowan worried about immigration from Missouri.
How about a Connecticuter worried about immigration from Mississippi, where the average wage is half? Or from Puerto Rico, where it is a quarter?
Oct 4 2010 at 8:33pm
MikeP, my friend, I’m talking reality and you’re assuming the can opener. Immigrants are eligible for EITC now. If you and your fellow open-borders advocates are so smart, why don’t you abolish EITC (even if just for immigrants) before you open the borders? Or even just make both changes at the same time, in a single statute? If you did that it would help your credibility a lot.
Up to now you haven’t even gotten taxpayer relief “into the bill” on Capitol Hill (the last amnesty bill actually included more subsidies for low-wage immigrants), yet you want everyone else to support the most radical element of your program!
The truth is that excluding immigrants is “easier” than restricting welfare programs, especially when the prospective employers of immigrants want them to be subsidized to keep their wage demands down.
EITC is not the only objection to open borders. It’s a proxy for a host of similar objections. Low-wage immigrants and their children represent a huge assault on taxpayers, and open-borders advocates just assume all that away. I’ve posted many links to unimpeachable real-world factual sources on this stuff, and solid theories to explain the facts. Open-borders advocates have posted nothing but Libertopian drivel.
(Many people have pointed out that large natural experiments like California since 1980 show that low-wage immigration is disastrous. Open-borders advocates don’t point to even a single post-WWII counter-example. Why not?)
A few days ago Nathan Smith explained that “utilitarian universalist” morality requires open borders. Do you think so too? Does it bother you that “utilitarian universalism” is obviously non-adaptive?* Why do you think other people should follow a “moral” program which promises nearly the same effect on inclusive fitness as suicide?
*I suppose I should explain for people just blundering into this. A true utilitarian universalist (hereinafter “U/U”) would treat his kin no better than strangers. While he was distributing his surplus at random, non-U/U parents would be subsidizing their offspring and collateral kin. Within a few generations the descendants of non-U/U’s would greatly outnumber the descendants of U/U’s. Evolutionary theory predicts that today’s U/U advocates are mostly wolves in sheep’s clothing: they hope to persuade other people to distribute their surpluses at random, “throwing the race” to the fake U/Us’ kin. Why do you think an Ivy Leaguer like Obama spouts U/U nonsense on TV, then “calls in favors” to get his own precious spawn into the old alma mater?
An good system of morals should be stable across generations, even under natural selection. U/U is obviously unstable (in fact, obviously nuts). A system based mainly on the negative form of the Golden Rule and Tit-for-Tat may be stable. Any stable system has to allow for kin-preference and still promote coöperation, which is required for the division of labor to promote wealth. Since kinship basically fades with distance, a moral system which allows treating faraway people differently, though still decently, is much more plausible than U/U.
Are immigration restrictions morally acceptable? Sure! Foreigners aren’t (generally) close kin. To attack them at home is immoral (Obama-supporters please take note: the Iraq war is immoral). To exclude them from our homes is plenty moral. They want to exclude us too (especially those Iraqis), and that seems moral to me. Good fences make good neighbors. We can exchange businessmen and tourists without “open borders” for mass migration.
Oct 4 2010 at 9:32pm
This is a non-issue, at least compared to other financial idiocy by the government. The only reason people think this is a big deal is because it makes for a dramatic story. The actual frequency of it happening compared to other bad spending is far too small for anyone to want to focus their time on, if their goal was to save taxpayer money.
It’s the same way everyone whines about welfare when the giant leeches on our tax dollars are Medicare and Social Security. “Poor people are stealing from us” makes a more dramatic and appealing story than “our parents and grandparents are stealing from us,” so it gets more press, even though it is far less important.
If you really cared about saving taxpayer money you’d be finding a way to deport those blood-sucking senior citizens, not whining about immigrants who, on average, pay in more than they take out.
Unfortunately, people support policy based on how good a story it makes, not how frequent the problems it’s supposed to solve are.
And just in case that argument doesn’t satisfy you here’s another one: Stopping someone from coming here because they might receive tax money is like trying to force someone out of your neighborhood because a guy who mugged you frequents their store. It’s pointless because if you managed to get them to leave, the mugger would just frequent somewhere else. You should try to stop the mugger from taking your money in the first place, not trying to stop him from giving it to people.
In the same way, you should get mad at the government for taking your money, not mad at the people it spends it on. If it didn’t spend your money on them, it would spend it on something else stupid.
Unfortunately, California has a major confounding factor, namely an incompetent far left government that spends way too much money on stupid stuff. Its doesn’t work as an experiment because there are multiple variables. In order for it to work you’d need to find a place with a government as idiotic as California’s, but with less immigration and a similar population size (do you know of any such places, I’m genuinely curious?).
We can examine the causes of people leaving in California, though. From what I understand, its mainly no job opportunities due to strangling regulations and massively powerful public employee unions. Those are both problems that the natives created themselves.
Oct 4 2010 at 10:15pm
In order for it to work you’d need to find a place with a government as idiotic as California’s, but with less immigration and a similar population size (do you know of any such places, I’m genuinely curious?).
Or, alternatively, you could find a place with a similar population size and comparable immigration characteristics without as idiotic a government.
Kenneth A. Regas
Oct 5 2010 at 12:43am
Perhaps everyone can agree that, with regard to illegal immigrants from poor countries:
1. The illegals largely displace or suppress the wages of native workers who offer lower value to the employer (not as smart, or hard-working, or reliable, or …). Supply and demand rule. The product is low-value labor.
2. These natives are generally ill-equipped by nature and nurture to do higher-valued work. So via lower employment and/or lower wages their lot declines.
3. The average physical standard of living of the natives as a whole probably goes up, and it certainly does for the relatively prosperous.
4. It is entirely a value judgment whether the outcomes just described are desirable or not.
I don’t like these outcomes but expect that many readers of this blog like ’em fine.
p.s. My argument in a single sentence: A business traveler to Vermont told me upon her return, “Several hotel employees reminded me of my mentally retarded granddaughter, who can’t find work here in California.”
Oct 5 2010 at 4:07am
Two things: I don’t follow the analogy in your first argument about raining jackhammers. Illegal immigration doesn’t rain down and clutter up driveways, illegal immigrants are almost entirely self-mobile (otherwise they wouldn’t have managed to illegally immigrate) and can get themselves off driveways.
Also illegal immigrants create their own demand. Each illegal immigrant has not only a pair of hands, but a mouth and a mind. So they can be sold food, they can be sold shelter, they can be sold entertainment.
What about a farmer? To grow a crop he needs land, seeds, rain, and farmhands– all in proportion.
Your Glaukon doesn’t know much about farming. If the proportions change, the farmer can change his techniques. Eg if you have a lot of land and not much seed, you can spread your seed out a lot further, diminishing the need for fertilisers. If you have little land and a lot of seeds, you can grow hydroponically or in greenhouses. If you have few farmhands you can develop farms that don’t need much labour (eg sheep grazing). If you have too much rain, start growing rice in rice paddies.
Aren’t workers like rain?
Nope, workers come with their own demand (see above). Clearly Glaukon not only doesn’t know much about farming, but he doesn’t know much about the human body, if he thinks that workers are like rain.
Tell me, Socrates, if low-wage workers require forced subsidies from other workers to feed their families, aren’t we seeing an externality?
First support your argument that low-wage workers require forced subsidies from other workers. Were low-wage workers starving to death before the EITC? How about the starvation level in the USA in early decades of the 20th century, before immigration started being limited?
: “Why would taxpayers want more below-subsistence workers around?”
Irrelevant to the question, if people manage to illegally immigrate, I’m pretty confident that they’re capable of working hard enough to earn at least their subsistence. (There will be a few unfortunates who immigrate and then get hit by a truck or something and wind up so injured that they’re incapable of working, but this is as true of legal migrants and native workers as illegal migrants.)
I’m really not impressed with your Glaukon. He seems remarkably ignorant.
Oct 5 2010 at 7:46am
Kenneth A. Regas, what you miss is that the illegals not only come with labour, but with demand for labour. Illegals need food, in much of the world they need shelter, and they’d like entertainment. So as illegals enter, total demand rises.
Furthermore, to the extent that the illegal workers displace native workers who offer lower value to the employer, they increase the employer’s profits. This either means that the employer has more money to spend, increasing demand, or attracts other people to be employers in that industry, competing away the excess profit, and thus lowering prices to consumers, who have more money to spend, some of whom are the native workers who offer lower value to the employer, increasing demand.
The new entry of illegals also allows more specialisation for those native workers who offer lower value to the employer. Eg perhaps a person’s intelligence is too limited to do a proper chef’s job in the kitchen, but they’re entirely capable of being a kitchen hand. As demand for the restaurant’s services go up, the restaurant can afford to hire more staff, including kitchen hands to help the chef, division of labour wins out (and the chef’s time is being saved for the more specialised tasks requiring his/her greater knowledge, so productivity goes up again).
So the rise in demand can cause the wages of the native workers who offer lower value to the employer to rise, both by rising demand generally, and by the rising demand allowing greater specialisation of labour, allowing said employees to find jobs better suited to their talents.
In other words, I don’t agree with your statements 1 and 2.
Oct 5 2010 at 9:00am
Here is the legislation I would like to see:
1. A new class of visa that allows unlimited entry, exit, travel, residence, and employment to anyone who passes a nominal background check. Other visas do not need to change at all.
2. This visa is explicitly not a citizenship-track visa. One can hold this visa while waiting for a citizenship-track or other visa as one wishes.
3. Holders of this visa are explicitly ineligible for any targeted welfare. Furthermore, citizen children of holders of this visa are also ineligible for any targeted welfare until they are at least 18 and have lived more than half their life in the US.
4. “Amnesty” is simply the application for and granting of this visa to illegal immigrants.
Would that make you happy?
That said, I would open the borders before fixing welfare if that’s the only way the borders could be opened. Two reasons:
a. I find the insult to the individual rights and potential standards of living of prohibited prospective migrants far greater than the marginally higher taxes some would pay for the meager welfare they might receive.
b. A new population that made welfare untenable is highly likely to muster the political will to shrink welfare.
Are immigration restrictions morally acceptable?
No, they are not. Sorry.
Kenneth A. Regas
Oct 6 2010 at 12:43am
Thank you for engaging my points. Let’s do some math, Ricardo style.
Let the economy make two products: kshirts (thousands of shirts) and cars.
Let the populace consist of two sectors: Yang (75% of population) and Yin (25%).
Let standard of living be the per capita consumption of kshirts times consumption of cars.
Let sector productivities be as follows:
Yang making cars: 10 cars/year/capita if pursued full time
Yang making shirts: 12 kshirts/year/capita
Yin making cars: 3 cars/year/capita
Yin making shirts: 10 kshirts/year/capita
This is a classic Ricardo model.
If Yang and Yin did not trade (ie. specialize), the sector prices would be 1.20 kshirts/car among the Yang and 3.33 kshirts/car for the Yin. Without specialization, the sector results would be as follows:
Yang build 5 cars and 6 kshirts per year per capita, for a 30.0 std of living.
Yin build 1.5 airplanes and 5 kshirts per year per capita for a 7.5 std of living.
But, being countrymen, they do specialize, let’s say at a trading price of 1.55 kshirts/car. (Forced to pick a price for argument sake, we’ll pick the geometric mean of the sector prices, which then doesn’t care whether cars are priced in shirts or vice-versa.) When the dust settles we have:
Yang build 5.78 cars and 5.06 shirts/year, trading 0.68 cars/year for 1.06 kshirts/year.
Yin build 0 cars and 10 kshirts/year, trading 3.17 kshirts for 2.05 cars/year.
Yang consumption = 5.10 cars + 6.12 kshirts/year –> std of living = 31.2
Yin consumption = 2.05 cars + 6.83 kshirts/year –> std of living = 14.0.
Hurray! Specialization is a huge boon to the Yin and the Yang win, too.
Now add newly arrived impoverished foreigners, roughly equivalent to a increasing the Yin proportion of the population. Let’s say the addition makes the new proportions 60% and 40%, which would be the result if immigration doubled the number of Yin while leaving the number of Yang unchanged. The trading price goes up, to 1.81 kshirts/car, and the sector results are:
Yang build 6.63 cars and 4.05 shirts/capita/year, trading 1.30 cars for 2.35 kshirts. Consumption is 5.33 cars and 6.40 kshirts/year for a std of living of 34.1.
Yin build 0 cars and 10 kshirts/capita/year, trading 3.52 kshirts for 1.95 cars.
Consumption is 1.95 cars and 6.48 shirts/capita/year for a std of living of 12.6.
Ooops! The new Yin added to total demand, but when the dust settled the standard of living achieved by the Yin, old and new, is lower than before the new Yin showed up. The Yang, already ahead, are now more so. The newcomers are quite happy of course, because back home they were doing much worse.
This math works every time you overload a sector of the economy. The depression of the market value of labor in the affected sector always swamps the improved overall standard of living, for people in that sector.
One has to be careful assigning sectors, of course. People can change jobs. But that retarded granddaughter isn’t going to take my job, and the rising tide you imagine she will benefit from (the kitchen job) doesn’t make up the decline in sector wages.
Cheap foreign labor is a boon to the prosperous, not so much for the poor.
Again, thanks for engaging.
p.s. If you want to go further with this, e-write me at email@example.com.
Oct 6 2010 at 12:45pm
Ken, you don’t have any productivity effect from division of labour, with your growing population.
Kenneth A. Regas
Oct 6 2010 at 8:52pm
Actually I do account for productivity increase due to “division of labour”, via the actual mechanism that produces that increase. Productivity doesn’t increase because the sector efficiencies at various tasks change, but rather because the sectors are allowed to specialize in what they are relatively good at and trade for everything else.
The newcomers improve their lot by being allowed to trade with high-output locals here from whom they had been separated. The losers are the low-end workers who were already in that trade and now see new competition which inevitably reduces the price (wage, etc.) they can charge.
That’s why the retarded granddaughter might find work where illegals are scarce, and definitely won’t where they are plentiful.
Oct 8 2010 at 9:41pm
Tracy W, since you were kind enough to answer, I will reply.
First, jackhammers. Bryan Caplan (through his dialogue) said, roughly, that a tool increases a worker’s productivity, a domestic animal is a living tool which also increases productivity, and a human worker may be analyzed, for certain purposes, as a kind of superior domestic animal– still a tool which increases a worker’s productivity.
I pointed out that a surfeit of tools (“jackhammers”) may decrease productivity.
A surfeit of domestic animals may do likewise. Consider a blind man. One seeing-eye dog might boost his productivity a lot. A second or third might even add some productivity. But more than that and instead of the dogs working for the blind man he working for them. Why? Because dogs are living creatures with volition and (quite legitimate) desires. If someone doesn’t feed them, they’ll try to eat the neighbors’ livestock– or children. Too many guide dogs will reduce productivity, not increase it. (Have you heard of “range carrying capacity?” No rational person wants an excess of any domestic animals.)
The same problem arises with humans and you yourself said why:
“…illegal immigrants are almost entirely self-mobile … [they] create their own demand. Each illegal immigrant has not only a pair of hands, but a mouth and a mind. So they can be sold food, they can be sold shelter, they can be sold entertainment.”
Yep. And if their productivity is too low to command enough wages to purchase the things they desire, they will steal them. Also they will join mobs supporting demagogues who demand redistribution of income and wealth.
We can shoot surplus dogs, but not excess humans.
“Your Glaukon doesn’t know much about farming. If the proportions change, the farmer can change [all sorts of suff].”
He can’t change all that stuff either (a) quickly, or (b) cheaply. Sure, if you assume the farmer has perfect prescience and unlimited capital he can do anything you say, but in real life, no. If too much rain comes after planting and before harvest the farmer is sunk. If new greehouses would cost more than he can borrow against the risky security of future crops, he’s sunk.
Workers can be like rain. Look at Rhodesia (Zimbabwe). The “workers” there took over highly productive farms, barbecued the breeding stock, turned the seed corn into porridge, and now languish in a desert of their own making begging foreigners to send them food.
“I’m really not impressed with your Glaukon. He seems remarkably ignorant.”
Well, at least he’s looked around the world and seen Lagos and Rio de Janeiro and Mexico City and Port-au-Prince and…
Have you googled up those satellite photos of the Haiti/Dominican-Republic border? Nothing could illustrate the problem more clearly. The only difference between Haiti and the D.R. is the character of the people. The two countries are on the same island.
The higher-IQ population of the D.R. lives in a lovely and productive tropical landscape. Few are starving. Their annual per-capita GDP is $4400 and they are 89% literate. The top 10% of Dominicans garner 29 times as much income as the bottom 10%.
The (much) lower-IQ population in Haiti exists in a muddy desolation. Many are starving. Their annual per-capita GDP is $660 and they are perhaps 60% literate. The top 10% of Haitians garner 72 times as much income as the bottom 10%.
The Dominican Republic restricts immigration from Haiti because Haitian immigrants would resemble a plague of locusts.
Glaukon has done some reading about the real world. He thinks everyone should. The real world is more complex than Libertopian theory supposes: people in the real world are not all equal in capacities or desires. Some are smart and future-oriented. Some are stupid and incapable of planning. Real world people compete for resources and favor their kin over strangers.
They used to say “a conservative is a liberal who got mugged.” Nowadays we might say that an immigration-restrictionist is a liberal or Libertopian who once travelled in the third-world.
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