Monday, April 09, 2007

Is Labor Now the Mobile Factor?

David Jackson reports in USA Today that President Bush is making a visit to Arizona to tout his proposal for a guest worker program. I get as far as the fourth paragraph before getting bent out of shape:

The president said measures must be taken to protect the border from immigrants who come over with impunity; but he said there also needs to be an organized system to accommodate workers who are doing jobs Americans refuse to perform.

There are no jobs that Americans refuse to perform. There may be jobs that Americans refuse to perform at the prevailing wage rates. This simply means that the wage rates should rise and the number of jobs should fall, until the number of jobs matches the number of people authorized to work in the country who are willing to perform them. If it turns out that with these higher prevailing wage rates, the employer can no longer operate at a profit, then the employer should cease operations--or relocate to a place where labor and other costs are sufficiently cheap as to allow a profitable business. The "organized system" that accommodates this is simply a free market and enforcement of the most basic immigration laws.

When I was first learning economics, we always spoke of capital, not labor, as the mobile factor of production. Maybe something has changed. In the current environment, I would expect to see capital going south across the border with Mexico, drawn by the high returns available due to the large amount of low-wage labor. But that's not what we are seeing. We are seeing the labor cross the border--at considerable personal cost--to take the low-wage jobs and then send remittances back to Mexico. (Even in agriculture, where the land is obviously not mobile, I would be surprised if much of the agriculture in the Southwestern U.S. couldn't also be produced in Mexico. But there is nothing in the argument that requires the unskilled labor to work in agriculture or any particular industry.)

How bad must the environment for business and investment be in Mexico for the capital to stay here and the labor to cross the border?

8 comments:

cyberike said...

Obviously, many of the jobs performed by illegal immigrants cannot be performed south of the border, with construction and lawn service just a few of the many examples. But the thing that's odd to me is the attention and the passion this issue gets when we are our own cause of the problem. This is not an issue that can be solved politically, it must be solved by ordinary people changing their behavior, and clearly that is not going to happen.

The prevailing wage rate is not something set randomly by business, it is (to a large extent) determined by what people are willing to pay, and people are not willing to pay much for many of the services they receive. Too many people are basically too cheap, to be blunt.

We see this phenomenon with taxes and government: citizens refusing to pay fully for the services they receive. Illegal immigrants are fulfilling the basic business function of supply and demand. If the demand for cheap services dries up, so will the supply.

Not gonna happen, in my opinion. We are our own problem, we should stop complaining about it.

Rusty said...

There are some seasonal agricultural jobs for which temporary labor makes sense. I grew up with true migrants 45 years ago, they followed various crops around the country and then wintered in Mexico.

Other than that, Bush ahs no intention of tightening the border, the demand for cheap, regulation-free labor is too great.

loogel said...

When you get down to it, aren't immigration capped borders non-free-market? There is an employer and a set of workers on one side of a fence and another set of workers with no employer on the other side. The workers on the side of the fence artificially increase their wages by restricting how many of the workers on the other side of the fence can come over to work, even though the employer would very much like for both sets of workers to work.

loogel said...

Not that I would endorse immediate elimination of immigration restrictions.

Jake Baron said...

I suspect that what Bush means by "an organized system to accommodate workers who are doing jobs Americans refuse to perform" is actually something like "an organized system to boot out workers who aren't doing jobs Americans might or might not refuse to perform." The practical impact such a policy would have is uncertain, because really, how many unemployed illegal immigrants do we have?

Anonymous said...

...and it is going to get worse for Mexico. Output from the Cantarell oil field (the main field of Mexico) has declined 20% from January 2006 through February 2007.

This means less oil to export and ultimately that means the revenue stream that is 40% of the funding for the central government is in jeopardy. IF the rate of decline remains this severe there will be little time to adapt.

IF exports of oil from Mexico are reduced America will be looking more to Venezuela.

oh boy!

Anonymous said...

Talking about mobile labor...

Combine the effect of declining oil export revenue on funding the Mexican government with the enhanced drought caused by Global Warming and Mexicans will be looking to move.

Should they go south into Central America or should they move north?

How strong is that wall?

Fritz said...

You Wrote: There are no jobs that Americans refuse to perform. There may be jobs that Americans refuse to perform at the prevailing wage rates.

Yes, but like the Gold Standard's commodity drawbacks, do you want scarcity of unskilled labor to draw away skilled workers from higher GDP producing activity? There is a balance where additional unskilled workers can be an advantage to the economy's balance. I think the greater issue is the assimilation of the succeeding generation, where they aspire to higher skilled employment.