labor economics followup13 Apr 2006
Quick trip back to econ 101: recall the concepts “supply” and “demand.” What makes a job a “low wage” job? In econ 101 world, a job will be a “low wage” job if the supply is high relative to the demand. When there is insufficient supply, then the wage rises. My students didn’t pass the course if they couldn’t get this one right. Econ 101 tells us that there is not a shortage of workers for low wage jobs; it tells us that there are employers who want to keep the wages for these jobs from rising.
Immigration has been one of the tools that have been used to depress wages for less-skilled workers over the last quarter century. Many of the “low-wage” jobs that cannot be filled today, such as jobs in construction and meat-packing, were not “low-wage” jobs thirty years ago. Thirty years ago, these were often high-paying union jobs that plenty of native born workers would have been happy to fill. These jobs have become hard to fill because the wages in these jobs have drifted down towards a minimum wage that is 30 percent lower than its 1970s level.
In response to this logic, the “low wage” job crew claims that if the wages in these jobs rose, then businesses couldn’t afford to hire the workers. It’s time for more econ 101. Businesses that can’t make money paying the prevailing prices go out of business – that is how a market economy works. Labor goes from less productive to more productive uses. This is why we don’t still have 20 percent of our workforce in agriculture.
So the economic side of the debate over immigration is a question about employers wanting access to cheap labor. That part is pretty simple. There are other questions in this debate about human rights and basic decency. It’s outrageous to threaten people with deportation and imprisonment who have worked in this country as part of a conscious government policy. (No one enforced employer sanctions. That was a deliberate decision by the government.)