The Inefficiency of Illegal Immigration
Jan 1, 2011

The Inefficiency of Illegal Immigration

The debate over illegal immigration in the US is one of the most contentious issues we face due to a large number of different - and indeed opposing - values, emotions, legal rules and more than a little racism. Many of the facets that go into this debate get conflated with each other; however, there is one aspect on which we can all agree: the status quo is pretty bad. I attempt to delineate but one aspect here which is that, aside from any moral questions, the current status quo of illegal immigration is economically inefficient.

To consider illegal immigration from a purely economic angle makes good sense. As this excellent Economist article details, 80% of farm workers in the US are Hispanic with estimates to perhaps 90% being illegals. This represents a seizable component of the economy that has several implications were it to radically change, not the least of which would be a large rise in the cost of consumer food products. Cheap labour results in cheap prices, keeps American businesses competitive relative to other countries and, as the Economist article indicates, does not seem to crowd out the labour markets as few people desire the jobs the illegals do (at the wages/benefits they do it at). The 11 million illegals in the US and the scale of remittances from the US to Mexico (18bn) and South America demonstrate the scope of this economic effect. Illegal immigration, rightly or wrongly, contributes to the size and prosperity of our economy.

More than illegal immigration being an economy in its own right, the motivations for the status quo are largely economic in nature. On the illegal immigrants' side the economic motivations are clear: the situation in Mexico is often very dire and the ability to acquire a better job and conditions in the US drives so many to cross the boarder each year despite the hardship on doing this. However, it is also economic motivations that prevent reform on the American side. The businesses that hire enormous amounts of illegal immigrants each year (such as agricultural and construction) continually are among the largest factions that encourage the status quo which provides cheap labour the businesses desire without the need for the kinds of benefits and social support given to normal citizens. These factions and their influence prevent reform in either direction: they prevent a conservative hardline stance that makes it substantially more difficult to access this labour force and they prevent a progressive stance that increases the welfare of illegal immigrants (perhaps by offering paths to citizenship with all its associated, but costly, benefits).

The issue I wish to address in this post - having emphasized the importance of the economic consideration - is how inefficient the system actually is. An efficient economic system is going to be one that well matches labour supply and demand. As it is, there are enormous barriers between the supply arriving at the demand. One first has to deal with the often months long and repetitious attempts to actually cross the boarder. One then tries to travel to an area looking for work which is very often based on vague tips and connection and even this is difficult based on the essentially zero capital of immigrants. After possibly traveling back across the border (perhaps a million cross annually, according to the crop seasons), returning the next season to the same or similar job to apply or increase learned skills is difficult.

Compare this to a system where, say, low skilled temporary work visa's for season work were relatively easy to get (amazingly, the US only grants 5000 low skilled visa's every year). Companies could easily advertize and recruit labour and then supply buses that took workers right from the border to their farms. They could easily rehire the same workers each year allowing for building of skills and less retraining inefficiencies. Reducing the months that illegal immigrants spend attempting to cross the border and the costs that are associated with their attempts to hide and travel are not only better for the immigrants, but actually better for companies as it lowers the effective cost of being an illegal immigrants allowing for even cheaper labour. Through legalizing components of migrant labour, the inefficient gap between labour supply and demand that currently exists can be minimized.

The result has few losers. Companies benefit from greater access and efficiencies in hiring migrant labour. Consumer's benefit from lower prices on migrant labour intensive products like food and construction. And of course the migrants benefit from not having to go through the expensive, dangerous, timely and humilitating effects of being an illegal immigrant. However to get at such a place requires genuine and meaningful reform and reform is difficult. Worries about getting a worse deal - from companies worrying about labour costs/benefits being forced to increase or voters worried about higher unemployment - as well as institutional rigidity in democracies coupled with considerible anti-Hispanic xenophobia and nationalism prevent these kind of meaningful changes. We need to strive hard to get over this potential barrier and arrive at the economically more efficient side - not to mention any of the moral considerations of having 11 million people living in a quasi-legal status and poor conditions.

The recent failure to pass the DREAM act (which provided a path to citizenship for children of illegal immigrants who had integrated into society to the point of doing 2 years of college or military service ) is a profound disappointment for those interested in ethical reform of the current status quo. These are the people to whom it is easiest to empathize with (as they are here through no fault of their own) and to whom seem to be productive citizens and yet even to them reform has been stalled. If we can't pass this bill, which is the first and easiest step to undertake in more comprehensive immigration reform, the chances for future progressive reform are increasingly slim.

Thoughts on this post? Comment below!

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4 comments:

Cncerned said...

So you don't care about citizens being out of work? Just give all of the jobs to illegals huh? You're a scum and could care less about citizens. What a disgrace!

Anonymous said...

"To consider illegal immigration from a purely economic angle makes good sense. As this excellent Economist article details, 80% of farm workers in the US are Hispanic with estimates to perhaps 90% being illegals. This represents a seizable component of the economy that has several implications were it to radically change, not the least of which would be a large rise in the cost of consumer food products. Cheap labour results in cheap prices, keeps American businesses competitive relative to other countries and, as the Economist article indicates, does not seem to crowd out the labour markets as few people desire the jobs the illegals do (at the wages/benefits they do it at). The 11 million illegals in the US and the scale of remittances from the US to Mexico (18bn) and South America demonstrate the scope of this economic effect. Illegal immigration, rightly or wrongly, contributes to the size and prosperity of our economy."

I guess everything I learned in economics is untrue when it comes to illegal aliens. Farmers don't sell their produce for all the market will bare, and supper markets likewise don't sell their food stuffs for all the market will bare. We all know this is BS! It doesn't matter where the BS is produced, it is still BS. Cheap illegal alien labor increases profits, it doesn't result is lower prices, and when the public pays the huge social costs of illegal aliens, its a really bad deal for everyone except the corporations and businesses that employ illegal aliens.

bazie said...

As indicated in my post, I certainly care very much about citizens being out of work. However it doesn't immediately follow that increasing the legality of illegal immigrants is going to result in less citizens working.

As the economist article discusses, the jobs many illegal immigrants take (such as crop workers) are ones the average citizen has little desire to do which has been reinforced by numerous studies. Conversely, when one increasing the efficiency of the economy this net growth is actually benefitial for most people. Consumer prices are lower, more money can be spent on investment and non-staple consumption which increases demand and hence jobs and the like. Economies are not zero sum, and when we increase the efficiency in one aspect of it this isn't going to result in an immediate loss in, say, employment for citizens.

Your ad hominems don't need commenting on.

bazie said...

Oops, Anonymous's comments were previously flagged a spam, hence why it appears I just ignored them.

In response, this is just basic supply and demand economics. Lowering the cost of labor is going to, through competition, lower the cost of the product. Sure this is done unevenly and takes some time in imperfectly competitive markets, but if we don't accept this most fundamental tenet of economics we are pretty lost with regards to discussing anything in economic terms.

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