Immigration Part IV

I wish that I could address other topics, but how can one ignore the hundreds of thousands of people who are protesting for a more relaxed immigration policy.

A very brief recap. The Mexicans are poor. They need jobs desperately. A job paying $2.00 per hour would create an above-average lifestyle back home. So they flock across the borders in droves to search for willing accomplices--American employers who do not wish to pay $5.15 an hour. Selling their labor on the black market, they create a win-win situation for themselves and for their employers. The employer saves 40% to 70% on labor costs; the worker gets a 200% to 400% raise.

Up to now, I have addressed ways to reduce the flow of illigal human trafficking across our southern border by giving the Mexican more incentive to stay at home. In particular, I have augmented the basic premise for the implementation of NAFTA way back in 1993.

Back then, Presidents Bush (41) and Clinton both argued that a prosperous Mexico would purchase more U.S. goods and services. In turn, this would increase our prosperity as well. A rising tide lifts all boats. If the mobile home next to your stately manor is replaced by a mansion, your abode will see an automatic increase in its value. As our neighbor's prosperity increases, so will our prosperity.

The corollary to this principle vis-a-vis immigration is that a man living in a nice home will not leave his manor to scourge through his neighbors dwelling. If Mexico had more jobs, less corruption, and greater productivity, it would enjoy greater prosperity. With less poverty, there would be less incentive for Mexicans to cross our borders. Indeed, when was the last time you heard about illegal aliens from Canada?

Up to now, I have addressed positive incentives to reduce illegal aliens' demand for U.S. jobs. Now, I will address positive incentives to reduce the supply of jobs for illegal aliens.

Why would any U.S. employer even consider hiring an illegal alien?

I'm sure there is a "Christian" dynamic. Here I am-- a rich man with need for labor--watching a grown man beg for work at my feet. Should I turn him away? What would Jesus do? (I submit that Jesus would house him, clothe him, feed him, and then turn him over to the BICE. After all, we are supposed to "render unto Caesar that which belongs to Caesar...")

I seriously doubt that 12 million illegal immigrants have been given jobs simply because of Christian charity. No. There is an economic dynamic here.

Imagine, if you will, what would happen if Congress were to abolish the minimum wage?

By placing artificial floors on the price of labor--floors that were above the fair market value, Congress created greater incentive for the poor to find work. Discouraged workers who had abandoned all hope of working now had reason to pound the pavement. In and of itself, that's great! (People should never lose hope.) However there was an unintended consequence. As the cost of labor increased, so did the supply of workers. Moreover, as businesses saw a marked increase in labor costs, some employers reduced their hiring demands. Thus, a surplus of labor formed.

Today, our minimum wage attracts labor from parts of the world where $5.15 per hour is living "high on the hog." Like a magnet, it pulls illegal aliens across our borders. The added addition of illegals to our labor market depresses the fair market value for entry-level wages. Concomitantly, this drop in fair market value increases opportunity costs for the employer. But for the minimum wage, the employer recognizes that he could save $2.00, $3.00, maybe $4.00 per hour for each illegal alien he hires.

The employer figures that with twenty employees, he could save up to $166,400 per year by hiring illegal aliens. Before long he realizes that if his competition does the same thing, his competition would be able to lower his own prices. If that happens, he knows that he won't be able to compete. So, the employer hires illegal workers under the table.

Or maybe the employer is a decent guy who doesn't want to break the law. So he hires Americans at $5.15 per hour. But as he feared, he soon could not compete. So he shuts down his factory altogether. Either way, the American worker now has less opportunities--even though he is now entitled to a minimum wage.

Please do not misunderstand me. I am not advocating the abolition of the minimum wage. However, I want to illustrate the trade-offs that we must be willing to expect if we intend to set artificial, minimum prices for labor.

Assuming a paradigm where we are unwilling to deploy resources to secure our borders, where we are unwilling to invest capital into Mexico for the express purpose of creating prosperity south of the Rio Grande, where we are reluctant to allow guest workers across our borders, where we are unwilling to criminalize the hiring of illegal aliens---assuming that the present situation does not change, we have two options...

(1) We either can perpetuate a price floor that is ten times the average Mexican wage and still have illegal immigration from our neighbor to the south, OR (2) we can abolish or otherwise reduce our minimum wage and experience reductions in illicit border crossings.