Immigration Part II

As I demonstrated in the previous posting, the average Mexican working south of the border can expect to make only $4.00 a day. (Actually $4.08, but who's counting?) Working eight hours per day, this translates into an wage of 51 cents per hour.

Given the picayune size of this wage, it would appear that Mexico has serious poverty. Indeed it does. According to the CIA World Factbook, 40% of Mexicans lived below the poverty line in 2003. (Only 12% of Americans shared the same plight.) Mexico's gross domestic product is one-tenth that of the United States GDP, and about 1/4 of its population is underemployed. (See http://www.cia.gov/cia/publications/factbook/geos/mx.html#Econ.)

In short and simple terms, the United States is rich while Mexico is poor. ("Gee, Matt, thanks for the tip.") In light of this stunning revelation, what would you do to fix this poverty if, let's say, you were running the Mexican government?

You might create a minimum wage--or if there is one, raise it. But really, what good would that do? Assuming for a moment that corruption wouldn't be a factor--that bureaucrats enforcing the minimum wage law wouldn't turn blind eyes in exchange for a few pesos--Mexican employers would see this as a barrier to their already hampered trade.

If Mexico were to set its minimum wage to what it is in the U.S., the majority of Mexican employers would see a 900% increase in labor costs (i.e., a jump from $0.51 to $5.15 per hour). To compensate for this increase, these employers would either have to (1) raise the price of their products, (2) cut their profits, or (3) go out of business. Ideally, they would cut their profits, but human nature doesn't work that way, and we all know this. This leaves price increases or business closures--neither of which are good for the poor. Presently, the Mexican economy could not support a minimum wage anywhere near ours. Until they experience a tenfold increase in their GDP, Mexican workers should not expect a tenfold increase in their average national wage. (Hey, the money has to come from somewhere.)

OK, then, Mexico can't grow its way out of this mess anytime soon. Now what?

When I was a child in Mississippi, our public schools were required by law to give achievement tests each year. Legend has it that one school district (which shall remain nameless) would conveniently allow special education students to stay at home on the day of testing. The principal reasoned that if they didn't take the test, the average score for the school would be higher.

By this same logic, if Mexico were to direct the poorest of its people to the United States, its average wage would increase and poverty would drop. In fact, this is what the Mexican government is doing. Reportedly, the Mexico City has distributed pamphlets that explain how to cross into the United States. If these reports are true, the approach of the Mexican government is clear. They intend to export poverty to the United States.

To solve this problem, the U. S. could increase security--making our southern border tighter than Michael Jackson's face--but would that by itself solve the problem? Oh yes, it would be a good start, but would it be enough? Or could that approach cause greater problems?

If the southern border were hermetically sealed, poverty in Mexico would increase in the short term. Not only would there be greater demand for scarce Mexican resources, the flow of American greenbacks into Mexico would steadily decrease as there would be less Mexican workers sending dollars back home. With a sealed border, transfers of wealth from the U.S. and reciprocal transfers of poverty from Mexico would decrease. With all things being equal, Mexico would get poorer while the United States gets richer.

As the disparity between rich and poor increases, so will the desperation. Before long, a band of impoverished Mexican rebels will reason that they have nothing to lose. After anointing some Pancho Villa wannabe, they will wage a daring attack on our sealed border. In response, the American military will blow them away. An international incident will follow as Mexico City will demand some sort of reparations. The U.S. will ignore these demands--until, that is, Hispanic Americans protest by the millions in New York and Los Angeles and Miami. Then, Washington will make some favorable overture to the Mexican government. When word leaks to the countryside that the Gringos have lost face, Pancho Villa's next successor will stage another attack, and the cycle will continue--until finally Washington is perturbed enough to declare a Second Mexican War.

My little hypothetical may be a bit of a stretch, I know. But it does illustrate that a mechanical solution---while necessary in the short term---is not a long term solution. When enacting a zero-tolerance approach to illegal immigration, we must also create positive incentives for Mexicans to stay in their home country (unless, of course, they immigrate legally).

It is a paradox. If we wish to save jobs in America and secure our borders at the least expense, Mexican workers must find better opportunities at home than they would otherwise find in the United States. In the short term, this may yield job losses in the United States, as factories are built in Mexico. But at the end of the day, a wall of factories lining the Mexican border may be less porous than a wall of bricks and mortar.