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November 12, 2004
Immigration and Economics
I had a debate with a friend of mine on the issue of immigration and the global economy. He sent me a copy of the Phyllis Shlafly Report titled "What the Global Economy Costs Americans"
I responded to him with a critique of her column. Sections are reprinted below.
by Phyllis Shlafly
The big argument for the tax cut just signed by President Bush is that it will create much-needed jobs. But one big question remains: will those jobs be created for
Americans, or will corporations simply hire more job-seekers from India and China?
First, do we really want these jobs to stay here? Consider the consequences of forcing
corporations to keep these jobs here. To do these jobs, Americans will want to be paid
more than Indians or Chinese. The increased cost will be passed along to the consumer.
So your bills will eventually (maybe not immediately) go up. You'll pay more for many
services in the long run. Because either prices will have to go up, or corporate revinues
will have to go down. Lagging revinues means recession. Is this really good for the
American consumer?
Second, any discussion of outsourcing must also include insourcing. You don't hear so much
about it, but jobs are coming to the United States. And we are creating new jobs all the time.
In the short term both outsourcing and insourcing cause social dislocations causing politicians
to get involved. Thomas Sowell has an excellent editorial on this which you can find here.
It's time for Congress to call a halt to the scandal of the way big corporations hire foreigners at the same time they are laying off their American employees. The hiring of hundreds of thousands of foreigners is why this year's college graduates face the worst job market in recent memory.
When U.S. corporations built hundreds of plants in Third World countries, we were
told not to worry about losing blue-collar manufacturing jobs because we were
keeping the service jobs. Now the high-paying white-collar service jobs are going
overseas, too, particularly jobs for engineers and computer specialists.Follow the money. The big corporations hire aliens from India and China at half or
a third the wages, work them long hours without overtime pay, and treat them like
indentured servants unable to quit for a better job. What makes this racket possible
is the partnership between corporations and government.
The wording in this article is a bit too conspiratorial for me, but I'll answer the substance
anyway.
Yes "corporations" hire illegals because they can pay them less. And politicians are reluctant
to crack down because of the economics of the matter. What economics am I talking about?
Consider the consequequences of tossing all illegals out of the country. The jobs previously
done by the illegals would now be open. But Americans would refuse to take these jobs at the
same wage rates as the illegals were paid. Thus to fill these jobs corporations would have
to raise wages. The consequences of this would be higher prices paid by the consumer. Either
that, or lower corporate profits. And the consequences of lower profits are twofold; lower
investment in new plant and R&D, and lower stock prices. Do you want your 401k to tank?
Now, I am NOT saying that we should ignore illegal immigration. In fact, I'm in favor of a
cracking down. What I AM saying is that we need to understand the economic consequences
of doing so. Unfortunately the Eagle Forum newsletter you sent me makes no attempt to do so.
The corporations make political contributions to assure the passage of legislation that legalizes the importation of foreign cheap labor by the devices called H1B visas L-1 visas, and outsourcing....
I admit that I don't know enough about these issues to really comment on the details.
But the basic economics are clear enough; if you put a halt to these visas you will end up paying
higher prices as a consumer. This may or may not be what the public wants, but before we take
any decisions we need to understand the economic consequences. This article seems to think
that you can cut off visa's and we'll all live happily ever after.
Corporations hire people for less money because they're trying to stay competitive. They want
to offer a good service at a low price. There's nothing really conspiratorial about it.
Ok readers, tell me if I've got it right or not.
Posted by Tom at November 12, 2004 2:42 PM
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