IMMIGRATION: What to do?
The Following Commentary was delivered by Professor Michael Meeropol over WAMC radio in April of 2006.
CUTTING TO THE HEART OF THE IMMIGRATION POLICY DEBATE[1]
I believe we can begin to get a handle on the issue of immigration by describing it in terms of supply and demand. There is a very great supply of potentially hard working individuals who live in countries where opportunities to work hard and rise to comfortable living status is limited.[2] There is a demand on the part of American businesses and individuals for workers who are willing to work at significantly lower wages than the customary wage expected by an average American. This law of supply and demand, trumps the laws against illegal immigration. The result is that there are approximately 11 million people in the US illegally, most of them working.[3]
Allegedly these individuals are in the US working at jobs that according to President Bush and many others “Americans won’t do.” The truth is that there are plenty of difficult, dangerous jobs that Americans routinely do. (Coal mining for example) The problem is that the jobs that these people take don’t pay a wage high enough to attract Americans. Americans would work in laundries or in restaurants for $15 an hour, just as they work in construction, in steel mills and in meatpacking for $15 to $20 an hour. In the 19th century, coal mining and the iron and steel industry were routinely employing the latest immigrants and paid very low wages. That is why both industries suffered through a tremendous amount of conflict over attempts to unionize during that century. By the mid-20th century, with the success of labor organizing, these industries began to pay good wages and they became places where young workers wanted to work. It should be obvious to everyone that if, by some turn of events, the average nurse’s aide in a nursing home, the average dishwasher in a restaurant and the average worker in a laundry were to receive $15 to $20 an hour, American citizens would be flocking to those jobs.
I would like to make a novel proposal. If we really believe there are lots of jobs that Americans won’t do and that we have an absolute shortage of citizen or legal immigrant labor in our country, then let’s make two major changes. Let’s raise our immigration quotas dramatically (starting with legalizing all individuals who can prove they have been working in the United States for five years) and at the same time, raise the national minimum wage to $10 an hour.[4]
Crazy idea, you say? Let me remind everyone that if we just were accounting for inflation and raised the minimum wage today to the same level in purchasing power as it had been in 1968 (when it reached its post World War II maximum), the minimum wage today would have to be $7.44 an hour.5] Since 1968, worker productivity in the United States has basically doubled.[6] Even a $10 an hour minimum wage is a lower cost per unit of output in 1968 for the average employer paying minimum wage.[7] Were American businesses in deep trouble in 1968? No they weren’t. Corporate profits were 10.86% of GDP and the “business failure rate” was actually quite low.[8] In other words, a minimum wage that was the equivalent of $7.44 in today’s dollars coupled with labor productivity that was significantly lower than it is now was not harming American business. [9]
With a $10 an hour minimum wage, immigrant workers would have to compete with American workers for those jobs, but if American workers truly didn’t want to take them, then the immigrants would, along with the higher incomes. Why don’t we make these policy changes? In part because there are powerful interests who like the fact that there is a large and growing group of people in the US who are so desperate that they are willing to work for much lower wages than is customary and necessary for a decent standard of living. This is a trend we should definitely fight against, but not by the punitive “build a fence, keep ‘em out, catch ‘em and deport ‘em” approach which has already proven impossible to enforce. My alternative approach which recognizes the dignity of all workers, immigrant and native is far superior.
[1] In the face of President Bush’s recommendation that Congress adopt an “guest worker” program, there have been conflicting bills in the two houses of Congress. The House of Representatives has actually passed one with an emphasis on punitive efforts to stop illegal immigration and make life more difficult for those that are here. The compromise Senate proposal that appears to be in trouble seems aimed at creating a path to permanent residence and citizenship for many people currently here and working illegally. These two alternative approaches represent the fact that we as a nation appear terribly conflicted about the issue of immigration. We know that our country is a nation of immigrants that has been enriched, and become rich because of the great waves of immigration that have come to the Western hemisphere – both the voluntary and the involuntary immigration (better known as the slave trade). At the same time, there is a sneaking suspicion among many that the current rate of immigration of people not following the rules set out by our immigration laws is a danger to our long run economic and even societal health
[2] We call these lesser developed countries, underdeveloped countries or sometimes just POOR countries – though it’s important to note that even in the poorest of countries there are some very rich people.
[3] The Immigration and Naturalization Service estimated from the 2000 census data that there were approximately 7 million immigrants in this country illegally, but most commentators today are using a figure closer to 12 million for their estimates. See “Estimates of Unauthorized Immigrant Population Residing in the US: 1990-2000. You can find an executive summary of this document as well as a link to that document at http://uscis.gov/graphics/shared/statistics/illegals.htm.
[4] This won’t just affect minimum wage workers. One of the things that occurs when the minimum wage is raised, is that individuals who previously made just a bit more than the minimum wage would also get raises. Thus, people who were making $10 an hour would probably find themselves making, say, $12 an hour. I am indebted to my colleague John Anzalotti, Professor of History at Western New England College for making this suggestion and inspiring me to explore it and its possibilities.
[5] For a table of the real and nominal values of the Federal Minimum Wage, check www.epinet.org and go to the menu on the left identifying their minimum wage research and click on Table 5, The Real Value of the Minimum Wage, 1947-2005.
[6] See Economic Report of the President, 2006: 340. The index of output per hour of labor for the nonfarm business sector went from 66.9 in 1968 to 136.8 in the third quarter of 2005.
[7] This is a little complicated but in the end rather easy to understand. An employer is interested in earning profit on the items produced. Leaving out all sorts of fixed costs, the labor cost of producing a unit depends both on the wage per hour AND on the number of units produced during that hour (the labor productivity). If in 1968, a worker earning $7.44 an hour produced 10 units of some item in an hour, then the unit labor cost of the item would be 74.4 cents. If that minimum wage worker were to improve her/his productivity at the same rate as the national average, then today that worker would produce 20 units in an hour for a unit labor cost of 37.2 cents. A raise to $10 an hour would represent a 50% raise over $7.44 which would raise the unit labor costs to somewhere around 54.2 cents – not even as high as it was back in 1968.
[8] For corporate profits as a percentage of GDP see Economic Report of the President, 2006: 312, 313. For comparison’s sake, in 2004, a quite good year for corporate profits, they represented 10.33% of GDP. For the Business Failure Rate, see Economic Report of the President, 2004: 395. After peaking at 64 per 100,000 enterprises in 1961 at the height of the previous recession it had fallen to 39 in 1968 and continued to fall in 1969 despite the rise in the minimum wage in 1968. The business failure rate is a good measure of how difficult it is for small businesses to stay in operation. Most business failures are in the small business sector.
[9] And, in general, American workers were doing quite well in terms of increases in their incomes and their general standard of living. A much higher proportion of the work force was covered by union contracts, had defined benefit pension plans and significant job security.
CUTTING TO THE HEART OF THE IMMIGRATION POLICY DEBATE[1]
I believe we can begin to get a handle on the issue of immigration by describing it in terms of supply and demand. There is a very great supply of potentially hard working individuals who live in countries where opportunities to work hard and rise to comfortable living status is limited.[2] There is a demand on the part of American businesses and individuals for workers who are willing to work at significantly lower wages than the customary wage expected by an average American. This law of supply and demand, trumps the laws against illegal immigration. The result is that there are approximately 11 million people in the US illegally, most of them working.[3]
Allegedly these individuals are in the US working at jobs that according to President Bush and many others “Americans won’t do.” The truth is that there are plenty of difficult, dangerous jobs that Americans routinely do. (Coal mining for example) The problem is that the jobs that these people take don’t pay a wage high enough to attract Americans. Americans would work in laundries or in restaurants for $15 an hour, just as they work in construction, in steel mills and in meatpacking for $15 to $20 an hour. In the 19th century, coal mining and the iron and steel industry were routinely employing the latest immigrants and paid very low wages. That is why both industries suffered through a tremendous amount of conflict over attempts to unionize during that century. By the mid-20th century, with the success of labor organizing, these industries began to pay good wages and they became places where young workers wanted to work. It should be obvious to everyone that if, by some turn of events, the average nurse’s aide in a nursing home, the average dishwasher in a restaurant and the average worker in a laundry were to receive $15 to $20 an hour, American citizens would be flocking to those jobs.
I would like to make a novel proposal. If we really believe there are lots of jobs that Americans won’t do and that we have an absolute shortage of citizen or legal immigrant labor in our country, then let’s make two major changes. Let’s raise our immigration quotas dramatically (starting with legalizing all individuals who can prove they have been working in the United States for five years) and at the same time, raise the national minimum wage to $10 an hour.[4]
Crazy idea, you say? Let me remind everyone that if we just were accounting for inflation and raised the minimum wage today to the same level in purchasing power as it had been in 1968 (when it reached its post World War II maximum), the minimum wage today would have to be $7.44 an hour.5] Since 1968, worker productivity in the United States has basically doubled.[6] Even a $10 an hour minimum wage is a lower cost per unit of output in 1968 for the average employer paying minimum wage.[7] Were American businesses in deep trouble in 1968? No they weren’t. Corporate profits were 10.86% of GDP and the “business failure rate” was actually quite low.[8] In other words, a minimum wage that was the equivalent of $7.44 in today’s dollars coupled with labor productivity that was significantly lower than it is now was not harming American business. [9]
With a $10 an hour minimum wage, immigrant workers would have to compete with American workers for those jobs, but if American workers truly didn’t want to take them, then the immigrants would, along with the higher incomes. Why don’t we make these policy changes? In part because there are powerful interests who like the fact that there is a large and growing group of people in the US who are so desperate that they are willing to work for much lower wages than is customary and necessary for a decent standard of living. This is a trend we should definitely fight against, but not by the punitive “build a fence, keep ‘em out, catch ‘em and deport ‘em” approach which has already proven impossible to enforce. My alternative approach which recognizes the dignity of all workers, immigrant and native is far superior.
[1] In the face of President Bush’s recommendation that Congress adopt an “guest worker” program, there have been conflicting bills in the two houses of Congress. The House of Representatives has actually passed one with an emphasis on punitive efforts to stop illegal immigration and make life more difficult for those that are here. The compromise Senate proposal that appears to be in trouble seems aimed at creating a path to permanent residence and citizenship for many people currently here and working illegally. These two alternative approaches represent the fact that we as a nation appear terribly conflicted about the issue of immigration. We know that our country is a nation of immigrants that has been enriched, and become rich because of the great waves of immigration that have come to the Western hemisphere – both the voluntary and the involuntary immigration (better known as the slave trade). At the same time, there is a sneaking suspicion among many that the current rate of immigration of people not following the rules set out by our immigration laws is a danger to our long run economic and even societal health
[2] We call these lesser developed countries, underdeveloped countries or sometimes just POOR countries – though it’s important to note that even in the poorest of countries there are some very rich people.
[3] The Immigration and Naturalization Service estimated from the 2000 census data that there were approximately 7 million immigrants in this country illegally, but most commentators today are using a figure closer to 12 million for their estimates. See “Estimates of Unauthorized Immigrant Population Residing in the US: 1990-2000. You can find an executive summary of this document as well as a link to that document at http://uscis.gov/graphics/shared/statistics/illegals.htm.
[4] This won’t just affect minimum wage workers. One of the things that occurs when the minimum wage is raised, is that individuals who previously made just a bit more than the minimum wage would also get raises. Thus, people who were making $10 an hour would probably find themselves making, say, $12 an hour. I am indebted to my colleague John Anzalotti, Professor of History at Western New England College for making this suggestion and inspiring me to explore it and its possibilities.
[5] For a table of the real and nominal values of the Federal Minimum Wage, check www.epinet.org and go to the menu on the left identifying their minimum wage research and click on Table 5, The Real Value of the Minimum Wage, 1947-2005.
[6] See Economic Report of the President, 2006: 340. The index of output per hour of labor for the nonfarm business sector went from 66.9 in 1968 to 136.8 in the third quarter of 2005.
[7] This is a little complicated but in the end rather easy to understand. An employer is interested in earning profit on the items produced. Leaving out all sorts of fixed costs, the labor cost of producing a unit depends both on the wage per hour AND on the number of units produced during that hour (the labor productivity). If in 1968, a worker earning $7.44 an hour produced 10 units of some item in an hour, then the unit labor cost of the item would be 74.4 cents. If that minimum wage worker were to improve her/his productivity at the same rate as the national average, then today that worker would produce 20 units in an hour for a unit labor cost of 37.2 cents. A raise to $10 an hour would represent a 50% raise over $7.44 which would raise the unit labor costs to somewhere around 54.2 cents – not even as high as it was back in 1968.
[8] For corporate profits as a percentage of GDP see Economic Report of the President, 2006: 312, 313. For comparison’s sake, in 2004, a quite good year for corporate profits, they represented 10.33% of GDP. For the Business Failure Rate, see Economic Report of the President, 2004: 395. After peaking at 64 per 100,000 enterprises in 1961 at the height of the previous recession it had fallen to 39 in 1968 and continued to fall in 1969 despite the rise in the minimum wage in 1968. The business failure rate is a good measure of how difficult it is for small businesses to stay in operation. Most business failures are in the small business sector.
[9] And, in general, American workers were doing quite well in terms of increases in their incomes and their general standard of living. A much higher proportion of the work force was covered by union contracts, had defined benefit pension plans and significant job security.
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