The sources of America’s immigration problems–and a possible solution

By Ron Unz | September 21, 2011

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Escaping the Low-Wage Society

So we are faced with several apparently insoluble and reinforcing dilemmas. Passing legislation to curtail immigration seems a political non-starter with both parties, and enforcing such legislation even if passed is equally unlikely. Yet as an almost inevitable consequence of the current system, the bulk of the American population—including the vast majority of immigrants and their children—falls deeper and deeper into economic misery, while government finances steadily deteriorate, leading our country to a looming calamity whose outcome appears both dire and quite difficult to predict. Over the last century, the political consequences of a largely impoverished middle class and a bankrupt government—whether in Latin America or in Central Europe—have often been very unfortunate.

By contrast, the sharp constriction in the labor supply resulting from steep reductions in additional immigration would dramatically boost worker wages, especially at the low end, with current immigrants themselves being among the greatest beneficiaries. An increase of a couple of dollars per hour or more could make huge improvements in the difficult existence of the working poor, perhaps allowing them to exit the debt treadmill and stand a better chance of eventually rising into a revitalized middle class. Admittedly, corporate profits might suffer a little and some businesses at the lowest end might disappear; but corporate profits are already doing quite nicely these days, and it makes no sense for developed countries to desperately compete with the impoverished Third World for jobs that are only viable under Third World salaries. Immigration restrictions that raised working-class wages by a couple of dollars an hour would also do wonders for the fiscal health of the Social Security system and government finances in general.

But perhaps the obvious escape from this seemingly inescapable political trap is as simple as merely reversing the direction of cause and effect. Consider the consequences of a very substantial rise in the national minimum wage, perhaps to $10 or more likely $12 per hour.

•   •   •

The automatic rejoinder to proposals for hiking the minimum wage is that “jobs will be lost.” But in today’s America a huge fraction of jobs at or near the minimum wage are held by immigrants, often illegal ones. Eliminating those jobs is a central goal of the plan, a feature not a bug.

Let us explore the likely implications of this simple proposal. The analysis that follows should be regarded as impressionistic and plausible rather than based on any sort of rigorous and detailed research. It is intended to raise possibilities rather than provide answers. Also, let us assume for the moment that these higher wage requirements would be very strictly enforced.

First, the vast majority of workers in America’s surviving manufacturing sector—whether in unionized Seattle or non-union South Carolina—already earn far more than the existing minimum wage, so their employers would hardly be affected, resulting in almost no impact on our international competitiveness. The same would be true for government employees, resulting in negligible cost to the taxpayer.

By contrast, the bulk of the low-wage jobs affected fall into the category of domestic non-tradeable service-sector jobs, which cannot be replaced by overseas workers. Many of these jobs would disappear, but a substantial fraction would remain viable at the higher wage level, with employers either raising prices or trimming profits or more likely a mixture of both. Perhaps consumers would pay 3 percent more for Wal-Mart goods or an extra dime for a McDonald’s hamburger, but most of these jobs would still exist and the price changes would be small compared to ongoing fluctuations due to commodity prices, international exchange rates, or Chinese production costs.

Meanwhile, many millions of low-wage workers would see an immediate 20 percent or 30 percent boost in their take-home pay, producing a large increase in general economic activity, not to mention personal well-being. We must bear in mind that an increase in the hourly minimum wage from the current federal level of $7.25 to (say) $12.00 would also have secondary, smaller ripple effects, boosting wages already above that level as well, perhaps even reaching workers earning as much as $15 per hour.

The likely impact upon immigrant workers, whether legal or illegal, would be quite varied. Those most recently arrived, especially illegal ones with weak language or job skills, would probably lose their jobs, especially since many of these individuals are already forced to work (illegally) for sub-minimum wages. However, workers who have been here for some years and acquired reasonably good language and job skills and who had demonstrated their reliability over time would probably be kept on, even if their employer needed to boost their pay by a dollar or two an hour.

Thus, the force of the policy would fall overwhelmingly on those immigrants who possessed the weakest ties to American society and still retained the strongest links to their country of origin. By contrast, those immigrants—legal or otherwise—who had lived here for some years and therefore had gradually become part of the community would mostly emerge unscathed, probably receiving a very welcome boost to their family income. Some anti-immigration activists might find this prospect extremely distasteful, but half- or two-thirds of a loaf is better than none.

Moreover, although this wage structure would tend to “grandfather” a considerable fraction of existing illegal immigrants, it would constitute a very formidable barrier to future ones. Paying $12 per hour might be reasonable for a reliable employee who had worked with you for several years, but would be much harder to justify for an impoverished new arrival speaking minimal English and with no track record. To a large extent, the undocumented job window in America would have permanently slammed shut.

In effect, a much higher minimum wage serves to remove the lowest rungs in the employment ladder, thus preventing newly arrived immigrants from gaining their initial foothold in the economy. As a natural consequence, these rungs would also disappear for the bottom-most American workers, such as youths seeking their first jobs or the least skilled in our society. But over the last few decades, these groups have already been largely displaced in the private-sector job market by immigrants, especially illegal ones. Whereas 40 years ago, teenagers and blacks tended to mow lawns and work as janitors, in most parts of the country these days, such jobs are now held by recent arrivals from south of the border. So the net loss of opportunity to Americans would not be large.

Furthermore, recently arrived illegal workers must very quickly find employment if they hope to cover their living expenses and remain here rather than being forced to return home instead. But first-time American job-seekers are already living with their families and anyway have no other home to draw them away, and consequently could spend months seeking an available job. Thus, a higher minimum wage would tend to disproportionately impact new immigrants rather than their American-born competitors.

•   •   •

The enforcement of these wage provisions would be quite easy compared with the complex web of current government requirements and restrictions. It is possible for business owners to claim they were “fooled” by obviously fraudulent legal documents or that they somehow neglected to run the confusing electronic background checks on their new temporary dishwasher. But it is very difficult for anyone to claim he “forgot” to pay his workers the legally mandated minimum wage. Furthermore, the former situation constitutes something of a “victimless crime” and usually arouses considerable sympathy among immigrant-rights advocates and within ethnic communities; but the latter would universally be seen as the case of a greedy boss who refused to pay his workers the money they were legally due and would attract no sympathy from the media, the police, juries, or anyone else.

Very stiff penalties, including mandatory prison terms, could assure near absolute compliance. Virtually no employer would be foolish enough to attempt to save a few hundred dollars a month in wages paid at the risk of a five-year prison sentence, especially since the workers he was cheating would immediately acquire enormous bargaining leverage over him by threatening to report his behavior to the police.

The proposed change would simply be in the rate of the minimum wage, rather than in the structure of the law, so certain relatively small modification and exceptions, such as including estimated tips for some restaurant employees, might be maintained, so long as these did not expand as a means of circumventing the statute.

Depending upon the state, the current American minimum wage ranges between $7.25 and $8.67 per hour. But is a much higher national minimum wage such as $12 per hour really unreasonable by historical or international standards? In 2011 dollars, the American hourly minimum wage was over $10 in 1968, during our peak of postwar prosperity and full employment, and perhaps that relationship was partly causal. Although exchange-rate fluctuations render exact comparisons difficult, the minimum wage in Ontario along our northern border is currently well over $10 per hour, while in France it now stands at nearly $13. Even more remarkably, Australia recently raised its minimum wage to over $16 per hour, and nonetheless has an unemployment rate of just 5 percent. With the collapse of America’s unsustainable housing-bubble economy of the 2000s, our unemployment rates seem no better and in many cases considerably worse than those of affluent Western countries that have refused to pursue our race-to-the-bottom low-wage economic strategy of recent decades.

•   •   •

But suppose this boost in the minimum wage succeeded at one of its primary goals and eliminated the jobs of many millions of America’s large undocumented population. Would these current workers and their families remain here anyway, perhaps turning to crime as they became financially desperate? After all, huge numbers of immigrants were employed in housing construction, and following the collapse of that industry their unemployment rates have soared, but most of them have stayed here anyway rather than going home again.

The central point to recognize is that most illegal immigrants, and a substantial fraction of legal ones, enter America with the original goal of short-term economic gain, intending to work for a few years, save as much money as possible, then go back home to their family and friends with a nice nest-egg. Frequently, these plans are unrealistic—saving money proves more difficult than expected—and local ties develop. But except for financial factors, even those individuals who have lived here a decade or longer often still dream of returning to their native countries, sometimes even after they have married, had American-born children, and put down considerable roots.

Among other factors, the cost-structure of American society is extremely high compared with that in most of the developing world, where dollars go much farther. This is the primary reason that substantial numbers of non-Hispanic American retirees have chosen to relocate to Mexico with their pensions, despite considerable barriers of language and culture.

Furthermore, as discussed earlier, the fiscal costs to the American government of low-wage immigrant families can be enormous. A couple working jobs at or near the present minimum wage pays negligible taxes, while if they have two school-age children, the grossly inflated expense structure of American public education may easily result in an annual taxpayer burden of $20,000 or more, even excluding the substantial costs associated with all other public services. And if one or both of these parents lose their jobs due to a soaring minimum wage, the fiscal burden grows still more severe.

The obvious solution, both humane and highly cost-effective, would be for the government to offer immigrants extremely generous financial relocation packages if they return home to their own countries. A tax-free cash payment perhaps as high as $5,000 or even $10,000 per adult plus a much smaller sum per minor child, together with free travel arrangements, would constitute an enormously attractive offer, probably being much more than they had managed to accumulate during many years of difficult low-wage labor. If the legal changes proposed herein had already caused their jobs to disappear, such a relocation offer would become irresistible. (Naturally, the full financial package would require hard evidence that they had already been living in America for a year or more, thereby preventing foreigners from crossing our borders simply to game the system.) Given the massive fiscal burdens inherent in the current situation, even such generous financial terms would probably pay for themselves almost immediately.

An important aspect of all these proposals is that they are largely self-enforcing. Workers would be perfectly aware of the simple minimum wage laws, and harsh penalties would deter employers from taking the risk of violating them. The disappearance of low-wage jobs would remove the primary lure for new illegal immigrants, and generous cash relocation packages would lead many existing ones to eagerly turn themselves in and seek deportation. Although the Border Patrol would continue to exist and immigration laws would remain on the books, after a short transition period these would become much less necessary, and a vast existing system of government bureaucracy, business red tape, and taxpayer expense could safely be reduced.

Even principled libertarians, fervently opposed to the very concept of a minimum wage, might find this system preferable to the status quo, which contains an enormously complex web of regulations and employment restrictions; the civil libertarian nightmares of identity cards, national databases, and workplace raids; and an existing minimum wage on top of all these other things.

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