Sunday, October 02, 2005
Illegal Immigration- is inaction the best course?
Last weekend I posted a bit entitled Think Globally, Act Locally regarding illegal immigration. As regular readers know I invited a few of the commenters to write expanded pieces, to tell us more about what they think or how they have experienced the effects of illegal immigration first hand. So far I have received two pieces in response, and hope to receive more. This is the second of the two, the first may be found directly below this post. This post is unedited except for formatting to fit this blog.
Begin text of guest post:
Dr Demarche asked me to write a post about why I thought the United States should do nothing about the current Illegal Immigration problem. The only problem is that I don’t think we should do nothing. I think we should have some idea about who is in our boarders, and that is why I support some sort of guest worker program with a general amnesty. However politics is the art of the possible and I do not think an amnesty program is politically possible right now. So I will try to show why I think that doing nothing is better than any of the current “I would stop Illegal Immigration by…” plans currently out there.
There seems to be 3 main complaints about about Illegal Immigrants. None of them are particularly new, and have all been used against every wave of immigrants that ever entered this continent. I can imagine the first group of Hunter-Gatherers complaining about the second group using some of the same following arguments.
1. The new immigrants will take Jobs away from those who are already here. (For our imaginary group of Hunter-gatherers they probably were talking about hunting grounds instead of Jobs, but you get the idea.)
2. The new Immigrants impose enormous financial cost on our economy. (Ok you got me here, the first hunter gatherers were probably not terribly concerned about this because they really provided a very minimal social net, and didn’t really have that much of an economy. There however are numerous other examples of Americans complaining about this after money was invented.)
3. The new Immigrants will raise the crime rate. (The previously mentioned hunter-gatherers were probably concerned with the new group attacking them, and while this was not technically illegal at the time laws having not been invented yet, you must admit that it is analogous.)
I will try to address each of these and show that the reality is the opposite of conventional wisdom, or that the best way to solve the problem is something other than get rid of the illegals. To save space and reduce my research time I will concentrate on California because from the information I have found it would appear that California has the largest illegal immigrant population. If anyone would like to talk about any other states we can cover it in the comments.
Jobs
The current unemployment rate is 4.9% according to the Bureau of Labor statistics with approximately 3.5 million people unemployed because of Job loss. There were also 384000 (.4% of the legal population) discouraged workers not included in that total because they had stopped looking because they thought no jobs existed for them. The 3.5 million were apparently still optimistic, with good reason because there were 4 million of them in February.
Now a lot of the increases in employment are coming in the Construction and Hospitality industries (also Health Care, but I don’t think most of the good jobs in that field are going to illegals).
So if any of the currently unemployed want those jobs they can get them, they are out there, and they look like they will continue to grow. So why aren’t all of the unemployed legals jumping on this growth industry? Because they think that they can do better, and they are probably right. It is unlikely that we will ever get to 0% unemployment because their will always be some churn in the market. Inefficient jobs go away and new ones are created. People move from one area of the economy to another. This is an extremely good thing. 70% of the American work force was in agriculture in 1820, now 2% are. Do you think we would be as well off as we are without that change? Most of the people currently unemployed will find jobs before their benefits run out, as is shown by the relatively small number of discouraged workers so it doesn’t seem that the illegals are having a huge negative effect on the current job market. By the way the unemployment rate in the 4 southern most counties in California is 4.6%- even less than the national average.
Financial cost to our 12 Trillion Dollar economy
The most important concept to get down for the next analysis is that economics is not a zero sum game. Lets assume that there is only $20 dollars in the whole world and I got it with my paycheck. So my income is $20. Now lets assume I spend my $20 to buy food at the grocery store to feed my family. Now lets assume that the Grocer takes the money and buys a new piece of furniture for his house. The furniture salesman takes the money and buys a new dog. The pet shop owner buys a new computer, which for argument sake is what I make for a living. Now there is only $20 in the world, but in my example at least 5 people got a $20 income. The example scales up to the real world, but it gets much more complicated.
In his original post the drain on the economy caused by illegal workers concerned Dr Demarche. He quoted a $10 Billion dollar a year net drain on the Federal budget caused by the approximately 7 million illegal aliens. I read the post he linked to and it admitted that the majority of those costs were incurred by the children of the illegal immigrants born in this country. Now I would like to make a quick point here before going back to my analysis and that is that these children are not illegal aliens, but US Citizens just like you or me. For purposes of argument though I will include the $10 Billion in the total. Now there is also approximately $28 Billion in remittances to the illegal immigrants families back in the home countries also according to Dr Demarche. I found a web site claiming that California had an additional $10 Billion in state and local cost associated with illegal immigrants. We will throw in another $10 Billion for the rest of the states because they generally have less generous social services, and California has most of the illegal immigrant population according the sites I have surfed. That leads to an alleged $58 Billion Dollar drain on the economy. This is a big number, but not in relation to the economy as a whole. It represents 0.48% of our $12 TRILLION economy, or roughly ½ a cent for every dollar that is spent.
Now lets look at what the economy gets for its $58 Billion. Presumably the money comes from some sort of economic activity, and they are not all finding this money lying on the street. So they are earning this money mostly from working. Now presumably they are not sending every dollar they make home and are keeping some here to pay for products and services they need. For the purpose of our analysis we will assume they save and send back 25% of what they make. This is a really high rate of savings. The Japanese who are known for saving only save 12%. The US average saving rate is currently negative. We spend on average more than we make.
So if they send home $28 Billion, at a savings rate of 25% that means they are making 4 times that amount or $112 Billion. Now I am going to make an assumption here that they have not all found some socialist workers paradise here where every dollar the company makes goes right out to worker salaries. Therefore the companies are making more off of the illegal aliens labor than they are paying out. My company likes to make 10 times what they pay a worker, but lets assume that the small firms most of the illegals work for run a leaner operation and we will give them a multiplier of 3. So for every dollar they receive they produce three dollars in income for the company. So that would bring the total amount of economic benefit the immigrants bring to the US economy to almost $350 Billion. Most of that benefit goes to the employer of the illegals, and not the illegals themselves. Most of these firms are small businessmen or women who paradoxically are law abiding. That is because it is not illegal to hire an illegal immigrant. It is illegal to hire a worker without documentation. Documentation that is easy to forge or steal.
If you get rid of this labor, most of this economic activity goes away. We live in a really tight labor market and there are simply not enough workers to replace this unskilled labor that would not be better utilized in other higher skilled jobs. Produce either rots in the fields, or becomes so expensive that it is cheaper to import it. Construction costs go up so people make do with smaller houses, or continue renting. The Hotel industry looks very different than it does now with higher cost and lower services. We Americans will probably continue spending more than we make, but we will be getting less for our money than we do now.
Crime
This is the hardest to deal with because it quickly gets emotional. Every criminal act in the end represents some sort of personal tragedy. That being said I will try to address the most worrisome of the criminal activity that of the gangs.
The same thing that fueled the Mob in Chicago, Prohibition, fuels most of the criminal gang activity in California. The Prohibition in this case is of Drugs and not Alcohol. When I heard one of the posters on this site first complain about the illegal alien gangs I was wondering how she could tell they were illegal’s. California has approximately 2 legal Hispanic residents for every illegal, and a big history of gangs made up entirely from American citizens. But for the purpose of this analysis we will assume that if you could get rid of all the illegals there would be no more gangs, even though this is a ridiculous proposition.
If you came up with a perfect system by which legitimate employers would not hire any illegals then the only illegals that would still have jobs would be those involved in criminal activities. Many of your law abiding hard working immigrants would self deport, but others would take up the only kind of jobs they can get in this country, Drugs. So paradoxically you would end up losing the legitimate economic activity, and increasing the criminal activity. The underlying demand for the illegal product would still be there, and someone would fill it.
So there we have it, why I think that doing nothing is better than any of the options that have a chance of being acted on (Berlin Wall, National Identity card, or vigorous enforcement of existing law). Flame away.
Eddie
(End of guest post.)10/02/2005 08:40:00 PM posted by Dr. Demarche
Begin text of guest post:
Dr Demarche asked me to write a post about why I thought the United States should do nothing about the current Illegal Immigration problem. The only problem is that I don’t think we should do nothing. I think we should have some idea about who is in our boarders, and that is why I support some sort of guest worker program with a general amnesty. However politics is the art of the possible and I do not think an amnesty program is politically possible right now. So I will try to show why I think that doing nothing is better than any of the current “I would stop Illegal Immigration by…” plans currently out there.
There seems to be 3 main complaints about about Illegal Immigrants. None of them are particularly new, and have all been used against every wave of immigrants that ever entered this continent. I can imagine the first group of Hunter-Gatherers complaining about the second group using some of the same following arguments.
1. The new immigrants will take Jobs away from those who are already here. (For our imaginary group of Hunter-gatherers they probably were talking about hunting grounds instead of Jobs, but you get the idea.)
2. The new Immigrants impose enormous financial cost on our economy. (Ok you got me here, the first hunter gatherers were probably not terribly concerned about this because they really provided a very minimal social net, and didn’t really have that much of an economy. There however are numerous other examples of Americans complaining about this after money was invented.)
3. The new Immigrants will raise the crime rate. (The previously mentioned hunter-gatherers were probably concerned with the new group attacking them, and while this was not technically illegal at the time laws having not been invented yet, you must admit that it is analogous.)
I will try to address each of these and show that the reality is the opposite of conventional wisdom, or that the best way to solve the problem is something other than get rid of the illegals. To save space and reduce my research time I will concentrate on California because from the information I have found it would appear that California has the largest illegal immigrant population. If anyone would like to talk about any other states we can cover it in the comments.
Jobs
The current unemployment rate is 4.9% according to the Bureau of Labor statistics with approximately 3.5 million people unemployed because of Job loss. There were also 384000 (.4% of the legal population) discouraged workers not included in that total because they had stopped looking because they thought no jobs existed for them. The 3.5 million were apparently still optimistic, with good reason because there were 4 million of them in February.
Now a lot of the increases in employment are coming in the Construction and Hospitality industries (also Health Care, but I don’t think most of the good jobs in that field are going to illegals).
So if any of the currently unemployed want those jobs they can get them, they are out there, and they look like they will continue to grow. So why aren’t all of the unemployed legals jumping on this growth industry? Because they think that they can do better, and they are probably right. It is unlikely that we will ever get to 0% unemployment because their will always be some churn in the market. Inefficient jobs go away and new ones are created. People move from one area of the economy to another. This is an extremely good thing. 70% of the American work force was in agriculture in 1820, now 2% are. Do you think we would be as well off as we are without that change? Most of the people currently unemployed will find jobs before their benefits run out, as is shown by the relatively small number of discouraged workers so it doesn’t seem that the illegals are having a huge negative effect on the current job market. By the way the unemployment rate in the 4 southern most counties in California is 4.6%- even less than the national average.
Financial cost to our 12 Trillion Dollar economy
The most important concept to get down for the next analysis is that economics is not a zero sum game. Lets assume that there is only $20 dollars in the whole world and I got it with my paycheck. So my income is $20. Now lets assume I spend my $20 to buy food at the grocery store to feed my family. Now lets assume that the Grocer takes the money and buys a new piece of furniture for his house. The furniture salesman takes the money and buys a new dog. The pet shop owner buys a new computer, which for argument sake is what I make for a living. Now there is only $20 in the world, but in my example at least 5 people got a $20 income. The example scales up to the real world, but it gets much more complicated.
In his original post the drain on the economy caused by illegal workers concerned Dr Demarche. He quoted a $10 Billion dollar a year net drain on the Federal budget caused by the approximately 7 million illegal aliens. I read the post he linked to and it admitted that the majority of those costs were incurred by the children of the illegal immigrants born in this country. Now I would like to make a quick point here before going back to my analysis and that is that these children are not illegal aliens, but US Citizens just like you or me. For purposes of argument though I will include the $10 Billion in the total. Now there is also approximately $28 Billion in remittances to the illegal immigrants families back in the home countries also according to Dr Demarche. I found a web site claiming that California had an additional $10 Billion in state and local cost associated with illegal immigrants. We will throw in another $10 Billion for the rest of the states because they generally have less generous social services, and California has most of the illegal immigrant population according the sites I have surfed. That leads to an alleged $58 Billion Dollar drain on the economy. This is a big number, but not in relation to the economy as a whole. It represents 0.48% of our $12 TRILLION economy, or roughly ½ a cent for every dollar that is spent.
Now lets look at what the economy gets for its $58 Billion. Presumably the money comes from some sort of economic activity, and they are not all finding this money lying on the street. So they are earning this money mostly from working. Now presumably they are not sending every dollar they make home and are keeping some here to pay for products and services they need. For the purpose of our analysis we will assume they save and send back 25% of what they make. This is a really high rate of savings. The Japanese who are known for saving only save 12%. The US average saving rate is currently negative. We spend on average more than we make.
So if they send home $28 Billion, at a savings rate of 25% that means they are making 4 times that amount or $112 Billion. Now I am going to make an assumption here that they have not all found some socialist workers paradise here where every dollar the company makes goes right out to worker salaries. Therefore the companies are making more off of the illegal aliens labor than they are paying out. My company likes to make 10 times what they pay a worker, but lets assume that the small firms most of the illegals work for run a leaner operation and we will give them a multiplier of 3. So for every dollar they receive they produce three dollars in income for the company. So that would bring the total amount of economic benefit the immigrants bring to the US economy to almost $350 Billion. Most of that benefit goes to the employer of the illegals, and not the illegals themselves. Most of these firms are small businessmen or women who paradoxically are law abiding. That is because it is not illegal to hire an illegal immigrant. It is illegal to hire a worker without documentation. Documentation that is easy to forge or steal.
If you get rid of this labor, most of this economic activity goes away. We live in a really tight labor market and there are simply not enough workers to replace this unskilled labor that would not be better utilized in other higher skilled jobs. Produce either rots in the fields, or becomes so expensive that it is cheaper to import it. Construction costs go up so people make do with smaller houses, or continue renting. The Hotel industry looks very different than it does now with higher cost and lower services. We Americans will probably continue spending more than we make, but we will be getting less for our money than we do now.
Crime
This is the hardest to deal with because it quickly gets emotional. Every criminal act in the end represents some sort of personal tragedy. That being said I will try to address the most worrisome of the criminal activity that of the gangs.
The same thing that fueled the Mob in Chicago, Prohibition, fuels most of the criminal gang activity in California. The Prohibition in this case is of Drugs and not Alcohol. When I heard one of the posters on this site first complain about the illegal alien gangs I was wondering how she could tell they were illegal’s. California has approximately 2 legal Hispanic residents for every illegal, and a big history of gangs made up entirely from American citizens. But for the purpose of this analysis we will assume that if you could get rid of all the illegals there would be no more gangs, even though this is a ridiculous proposition.
If you came up with a perfect system by which legitimate employers would not hire any illegals then the only illegals that would still have jobs would be those involved in criminal activities. Many of your law abiding hard working immigrants would self deport, but others would take up the only kind of jobs they can get in this country, Drugs. So paradoxically you would end up losing the legitimate economic activity, and increasing the criminal activity. The underlying demand for the illegal product would still be there, and someone would fill it.
So there we have it, why I think that doing nothing is better than any of the options that have a chance of being acted on (Berlin Wall, National Identity card, or vigorous enforcement of existing law). Flame away.
Eddie
(End of guest post.)
