Economic Fallacies Surrounding The Issue of Immigration

by | May 6, 2016 | Immigration

There are many economic fallacies that surround the issue of freer or open immigration into the United States, and few of them can stand up to serious critical examination.

There are many economic fallacies that surround the issue of freer or open immigration into the United States, and few of them can stand up to serious critical examination.

The Fallacy that Immigrants “Steal” Jobs from Americans.

Opponents of more open immigration sometimes argue that the arrival of more immigrants means the threatened loss of jobs for those already living in the country.

The often-implicit assumption behind this argument is that there are a fixed number of jobs in the country, and if more workers enter the labor market, by definition any work gained by one of the new arrivals must mean lost employment for someone else already there.

As long as there are unsatisfied wants that more production could gratify, then there is always more work for more hands to do. An increased number of workers within a country means that there can occur what economists call both more extensive and more intensive use of labor. By more extensive use of labor is meant that things that could not be done before because there were not enough hands to do them can now be undertaken.

The available number of employable workers might have enabled the production and supplying of a certain amount of, say, shirts, pants, and shoes. But given the availability of labor, and the importance that consumers assigned to having desired goods, it may have been impossible to also produce and supply hats that people also wanted to wear.

The arrival of additional hands through immigration to do productive work would now allow this unsatisfied want for headwear to be partly fulfilled without having to withdraw hands for the production of any of those shirts, pants, or shoes.

By more intensive use of labor, economists mean the more refined development of the system of specialization. More hands to perform desired work means that employers can undertake a more developed division of labor that enables an increased productivity.

Suppose that within a factory there were enough available workers to divide possible tasks into four steps or stages of production, each of which enables the participants to more industriously and productively focus their efforts and attentions to one part of the production process.

The arrival of more workers, again possibly through immigration, to be employed within such enterprises enables the potential and possible tasks to be divided into more refined and detailed steps that, again, raises the productivity and output of all those who participate in the economy’s activities. The increased output per worker means that all in the society can have available through trade a greater supply of wanted goods and services that might not have been possible without the new hands to assist in the work to be done.

Adam Smith began his famous book, The Wealth of Nations (1776), precisely by emphasizing the benefits from division of labor. He also pointed out that the extent of the division of labor is limited by the extent of the market. It makes little sense to take greater advantage of specialization to expand output to, say, a quantity of 1,000 units of some useful good from 500 units if there are not enough people participating in the network of exchange to buy all that can be produced through that intensified division of labor.

But in a country as large as the United States with its more than 320 million people and a global economy within which America trades with billions of people, any opportunity to more intensively develop the division of labor through the use of more available hands made possible by immigration can be successfully and profitably absorbed into the national work force.

The Fallacy that Immigrants Lower the National Wage Level.

Another fear often expressed about the arrival of large numbers of immigrants is that their addition to the national labor force will tend to push wages in general down in the economy as they compete for jobs currently held by the existing workers.

It should be remembered that there is no such thing as a “national wage level.” This, like the general “price level” of goods and services, is a statistical creation by selecting, summing, and averaging a large number of individual wages, each of which reflects the supply and demand for the specific types, skills and qualities of labor in particular markets for hiring workers.

It is certainly the case that if, all other things the same and unchanged, a significant number of qualified immigrant economists, all with teaching and specialization skills similar to my own, were to enter the job market for professors’ positions, the salary for my labor services in my narrow segment of the university teaching market would likely be bid down.

But this is no different than if more college and university age students out of the domestic population were to decide to major in economics, then earn their advanced degrees in the subject, and proceed to try to land jobs with their newly acquired PhDs. The greater supply of such economists might result in my employable salary being competed down.

On the other hand, the consumers of economics teaching services might very well find themselves able to acquire their education at a lower price because the cost of hiring such qualified economics professors will have decreased.

Suppose this were to happen. With a decline in the cost of an economics education, both parents and students may now have more money left in their pockets after having paid the tuition and related expenses. With this “freed up” sum of money they would now have the financial ability to buy more of other things they previously could not afford when paying higher tuition fees.

This will result in an increased demand for other desired goods and services. The prices for these goods and services, other things held given, would tend to rise, increasing the profitability of increasing their supply. This would open up new and increased demands for other types of labor – those able and skilled to, perhaps, produce more flat-screen televisions, or more service jobs at restaurants as people can afford to eat out more frequently, or more employment in other avenues of education. This greater demand made possible by the lower cost of some labor services due to immigrant workers in certain sectors or parts of the market would raise the demand for more workers, and therefore their potential wages and incomes, in other parts of the market.

The Fallacy that Unskilled Immigrants Have No Niche to Fill.

But what about the unskilled or poorly educated immigrants at the lower end of the employment scale? Studies over the years have shown that often it is the unskilled immigrants who fill niches in the market that many in the existing labor pool in the nation are unwilling to perform.

In the middle decades of the nineteenth century it was not unusual to find that many of the domestic servants in not just wealthy but middle class households were young Irish girls who had come over to escape from the potato famine in their native country as well as the British rule that they disliked. Uneducated with only simple “country manners,” this became their entry into the American labor market. Over a generation or two, the wave of Irish immigrants and their children improved their education and employment skills and left behind such domestic work as their talents fetched higher wages in other corners of the market.

In the early decades of the twentieth century, hired gardeners were often of Japanese background in places like California, for instance. As the descendants of these Japanese immigrants entered the mainstream of American life, especially after the Second World War, the image of the hired gardener was no longer that of Japanese.

Over the last few decades those of Hispanic background have filled the niche of hired gardeners, certainly not exclusively but often, as has the role of domestic servant in various parts of the country. If immigrant integration into American society follows the same paths as in the past, two or three decades from now, the stereo-types of Hispanics will have changed as they integrated into the general labor market, moving on to other economic niches and roles, as it did f other immigrant groups in earlier times.

We have seen this with many ethnic groups that have settled and integrated themselves into the general and greater social and economic environment within the country. It is no longer a caricature or cliché to refer to the “Chinese” laundry, because those of Chinese ancestry in America are simply, now, “Americans” distributed and dispersed among many professions and occupations and callings fully integrated into American society in almost all instances.

As new waves of immigrants have entered the American economy, they have filled roles that earlier waves have transitioned out of, just as they are most likely to do in the future. Think of it as the “new guys” who start their careers with the “entry level” jobs. They often are paid less than other workers at first, and are assigned tasks and jobs that others in the firm or enterprise no longer do and do not want to do. But it is the starting point for learning skills, gaining experience, and demonstrating higher worth and value for themselves over time to earn the promotion and better salary in the future, either from their initial employer or some other who sees and values their acquired abilities and potentials.

Filling these roles and entry level positions for the unskilled or low skilled enables part of the immigrant population to have an avenue for starting on the path of improved opportunity in America compared to the old country they have left behind.

To statistically cover over all these real and distinct changes and improvements in employments, incomes, and availabilities of goods by reducing them to price and wage averages and aggregates hides from view not only the real nature of adaptation to change in general, but more specifically many of the positive affects and impacts of immigrants to the United States.

Reducing Government Regulations and Welfare Temptations

We should keep in mind that the problems that some immigrants face are the same problems that government has imposed as stumbling blocks to improvement on all in the society: minimum wage laws, business taxes that hinder investment and capital formation, and regulations that prevent growth and innovation through anti-competitive policies.

These are the roots of many of our social and economic difficulties that harm both native-born and immigrant looking for work and trying to materially advance, including, for some, finding ways to escape from poverty and poor living conditions.

But what about the attempts of political panderers and plunderers to try to buy the votes of new immigrants who obtain or may obtain in the future the right to vote by offering them access to the “benefits” of the welfare state?

Let us remember that those who use such means for gaining political power have had their success with the American-born and American citizen population. It is their votes that have established, maintained, and expanded the interventionist-welfare state that so dangerously burdens the country. It cannot be blamed on “foreigners” – whether legal or illegal. As the cartoon character, “Pogo,” once said, “We’ve met the enemy, and he is us.”

Rather than punish those who, like our ancestors, want to come to America for their “second chance” for a better life for themselves and their children by closing the door of immigration, the task should be to eliminate the controls and regulations that hinder improvement for all of us.

Ending Access to the Welfare State for Any Immigrants

But given that fact that this is not likely to happen in any immediate future, what might be a “second best”? Let me suggest that one answer is to say that anyone may come to America to work, investment, live, and enjoy a freer life.

But for a period of, say, the first fifteen years during which they reside in the United States they are ineligible for access to any welfare-redistributive programs for themselves and their family members.

If this seems harsh, it is worth recalling that before the modern welfare state that is how every generation of immigrants came to America and made their way – either through they own hard work or the voluntary assistance of private charity.

I wonder how many critics of open or freer immigration into the United States would be as negative as they are if the new arrivals were expected to make their own way rather than receive any tax-based handouts from the government?

Part of America’s greatness has precisely been as a haven, a port of last call, for those denied religious freedom, or suffering under brutal and corrupt governments, or locked out of economic opportunities due to political systems of favor and privilege in their own lands.

It has not always been an easy or straight path for the new comer to America’s shores. But the fact that for over two centuries millions have come shows that it has not just been a dream but a reality of a land of opportunity and prosperity.

It has also been the country’s life-blood of new and innovative risk-taking, entrepreneurially spirited enterprisers, and youthful hopefuls who want to breath freer than where they were born. It is a good part of what had made America a dynamic and vibrant country unlike so many others around the world.

To turn our backs on this American tradition and legacy is to betray the essence of what America has been since its beginnings.

Dr. Richard M. Ebeling is the recently appointed BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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