Monday, December 05, 2005

Immigrants, Unemployment and Foreign Outsourcing

A lot of people get very upset with illegal immigrants and want to do anything to stop them as well as send those here already back home. I don't really know their arguments but frequently they go on about how it is costing US workers their jobs. Completely ignoring the fact that our current unemployment rate is still at a very low 5% and that no American wants to do most of the jobs held by immigrants, illegal or legal.

Walmart has recently drawn some heat because companies it hires to handle some tasks such as store cleaning have hired illegal immigrants. You can argue whether or not Walmart knew about this but the bottom line is that the company doing the work was the low bidder for the job and they hired the cheapest labor they could find. This is the exact same thing that every other company in America and the world does. How do you think companies keep racking up growing earnings? It isn't simply by increasing sales of products, frequently it is by reducing costs.

When is the last time you heard an American say they would pay more to help prevent illegal immigration? Similarly, you have heard the belly aching about jobs moving overseas yet when was the last time you offered to pay more to keep a job in the US?

Even with all the jobs moving to India, China and the Phillipines we are hardly hurting as a nation. Sure, there are pockets of the country either by region or particular skill set that are doing poorly but that will always be the case. Economies grow and change which results in some skill sets being left behind and new ones stepping in to fill the gaps. How those left behind react and are absorbed by the new economy is always stressful with some being left out, a painful experience both for the individuals and the country witnessing it, that is an issue we should address.

Until each of you is ready to step up and accept lower profits from your companies, higher costs for your purchases, lower incomes and so on, stop complaining about immigration and foreign outsourcing. It is here to stay as long as their are incentives and our lifestyle is so rich in comparison to most of the world we will continue to have both.

1 comment:

Cousin said...

The argument against illegal immigration is far more complex, but even taking this post on it's own terms it's simply not true. Americans have loudly said they are willing to (allegedly) pay more in order to increase salary: it's called the minimum wage. Indeed, most polls show a majority want to increase it. If all we cared about was economic efficiency and cost savings for Wal Mart, we'd abolish the minimum wage tomorrow. Then we would allow people from poorer nations, like Africa or south Asia to underbid the current illegal aliens (a recent study showed most illegal aliens from Latin America were not impoverished but simply left their old jobs for higher paying ones here). It should also be noted that the cost of illegal immigration isn't shared equally, it mostly falls on African-Americans, who used to work many of the jobs now filled by illegals (think nannies, restuarant workers). The only time African-Americans advanced economically at a faster rate than the general population was during the 1990's boom, when there was pressure on unskilled labor wages (though prices hardly skyrocketed then). So illegal immigration has two effects: it costs some Americans jobs and it lowers wages for all American workers. True, some of this is made up by lower prices for products/food/etc., but all studies I've seen indicate it's a net loss (even before you factor in the drain on government services).

That leaves an important question unanswered: "How do you think companies keep racking up growing earnings." I wish it were by cutting labor costs, but it's more because the entire economy is being subsidized by foreign investment, mostly Asian, most of that from China. Let me run up a $400 billion credit card charge and I'll give you a booming economy too -- until the bill comes due. The big question is when that will happen -- our generation or the next.

As Henry Ford realized, ultimately wealth has to circulate for a free market economy to sustain itself. When it doesn't, the voters yank wealth down in very inefficient ways (see England and national health insurance, which was also the hot issue here during the Bush I recession). To the extent illegal immigration pushes up wages and has a residual effect on prices, at least it's redistributing wealth through the free market mechanism.

Finally, there's an issue of principle with illegal immigration. No less a capitalist than Ayn Rand said that the most destructive force in the universe is nonobjective law. Turning a blind eye to wanton disregard for our immigration laws is an example of that.