Monday, April 24, 2006

The Immigration Issue: part 1

The immigration issue is big news, especially here in Arizona. Everybody has their ideas and opinions on what needs to be done. Some say we should build a wall while others think a guest worker policy will fix the problem. I think that we need to really understand the problem before we can fix it. This article will focus on exploring the problem. I'll attempt to offer some solutions in subsequent posts. Bear in mind that I'm not an expert but this is what my "common sense" has come up with.

Supply and Demand

The very heart of a capitalist society is the law of supply and demand. Simply put, where there is a demand, there will be a supply. In the US there is a demand for low wage labor. Whether it's on farms, in restaurants, in construction, in retail, in travel, or anywhere else, employers are looking to cut costs. This is not evil but business. If I can do business cheaper than company B down the street, more people will come to me and I'll make more money. Just look at Walmart. They cut every possible cost they can and that's given them low prices and high profits. What company doesn't want that?

The problem is the supply of workers. Americans have become very proud, especially in the more affluent parts of the country. How many people would rather be unemployed than work for McDonalds? How many people are willing to work the long hours of physically demanding labor that farm or construction work requires? It's not a popular choice when we can go to college and get real high-paying jobs in computers or accounting or medicine or some other white collar job. Not only that, but the low wages can make it extremely difficult, if not immpossible, to live on the income from these jobs. At this point it's not a matter of arrogance but survival. Can a person really live on $7 an hour? how about $10 an hour?

So what happens? When employers can't find people to fill these jobs locally, they broaden their search. Unfortunately, our neighbor to the south isn't nearly as prosperous as we are. There are thousands of people willing to work in these low wage and low prestige jobs. Many of them are doing it to support their families and give there children a shot at a better life. The wages that we turn our noses up at are more than generous for some of the impoverished areas of Mexico and other Central and South American countries. So they come here and take the jobs.

Is this bad? Well yes it is. Why? It's illegal. Maybe that seems like a little thing but lets look at something similar: prohibition. Is drinking bad? Some say yes and some say no but, during prohibition, it was illegal. What happenned? An entire criminal industry grew up around the smuggling alcohol. They usually had more people and better weapons than law enforcement and they created a level of corruption that seemed to permeate through everything. Despite the best efforts of government, this continued until prohibition was repealed. With illegal immigration we have some of the same thing. We have coyotes that are smuggling people across the border and charging a few thousand dollars each. We have drug cartels using illegal immigrants to smuggle drugs across the border (the drug trade being another supply and demand issue that I won't be going into here). There are cases of bribes going to police and border patrol in order to keep things going. There are areas of the border that are avoided by the border patrol because they know they'll get shot at if they go there. In my opinion, the illegal immigration isn't nearly as bad as the criminal organizations that have sprung up to support it.

That's not to say that illegal immigration isn't bad. Sure the illegal immigrants are just looking for a better life and I don't think they should villified individually, however, collectively there are some real issues. Let's go back to supply and demand. What happens when there's a demand but no supply? If there are jobs but nobody to fill them? One of two things happen, either the job is withdrawn (the company figures out how to function without the job being filled or the company goes out of business) or the salary is increased. What happens when salaries go up? The poor get richer and the rich run the risk of getting poorer (or at least not getting richer as quickly).

So what is the economic impact? If the poor are getting richer, they will improve their standard of living. They wouldn't be so desparate for the necessities of life. We would probably (remember, this is just my opinion) have reduced crime, reduced animosity between the lower, middle, and upper classes, more people satified with their lives, etc. There's a lot of good that can come from it. Would there be any bad? Yes, I think there is a downside as well.

If Walmart, which pays under $10 per hour on average, couldn't find anybody to work for those wages, what would they do? They'd raise their salaries. They would also probably raise their prices to cover for the loss. For smaller businesses it may be more extreme. If landscaping companies had to increase their wages and hence their prices, how many customers would they lose? How many would go out of business? Food prices would probably go up, luxury prices (restaurants, hotels, etc) would probably go up, housing prices would probably go up, etc. A lot of small companies would probably go out of business and a lot of large companies would have much smaller profits (and some could go out of business as well).

Businesses are very powerful in government (like it or not) and will fight anything that they see as detrimental to their bottom line. In a lot of ways, illegal immigration is good for business. Cheap labor means bigger profits and illegal immigrants don't complain about poor treatment, lousy wages, lack of healthcare, etc. After all, if they did, they might get deported. Unfortunately, the crime and suffering caused by our current immigration policies have gotten to the point that the people are upset and demanding the problem be fixed. So now, business lobby or no business lobby, something has to be done.

Which brings us to the real question. What do we do?

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