This argument posits that immigration is necessary for our country economically. Never mind the oft heard rationale from the left such as: “we’re a country of immigrants”, “it enriches our culture”… blah blah blah, forget about the humanitarian aspect, forget all that.
Instead let’s take a pragmatic look at the economics of the issue. Undocumented immigrants cost us money, which is true. And, yes, undocumented immigrants pay a tax (sales taxes, property taxes, etc.) that is also true. However, there is also an undocumented cost control aspect and a revenue and profit stream from undocumented immigration that rarely is heard.
First, undocumented workers are not the reason for massive job losses in this country. The greatest job losses occurred in the manufacturing sector over the last 20 years. That isn’t because of undocumented workers. The manufacturing sector was lost in this country largely thanks to Wal-Mart. They coerced their suppliers to move manufacturing to China to lower their costs, increase their market share through the lower prices, and increase their profits. Everything from mattresses to televisions to clothing went to China to provide Wal-Mart lower cost of goods. Those companies that refused were replaced by companies that would, which meant the companies that refused soon changed their minds.
Undocumented workers do not take jobs from Americans as a generality. Sometimes they do, but most often they do not. The only sector where undocumented workers compete with Americans is the lowest, no-skill sector which most of us would not consider and even most no-skilled Americans wouldn’t take. Americans will not work in the fields. Farmers in California and Texas can put want ads for food pickers and not one American will apply. The work is grueling, outside, in the middle of nowhere, with long hours, little pay and no benefits. Construction may be a little different, but at the same time, most of the jobs they take are the low-skill one-day jobs and it is Americans that hire them to save a few bucks. Few American workers get a job because of the deportation of an illegal immigrant.
Now what that does this have to do with the economy? A lot. Through low pay our prices have been kept in check for food and other goods. How much do you think a head of lettuce would cost if farmers had to pay American wages, with benefits, and overtime? Americans shop at Wal-Mart in droves because prices are low. How much would your flat screen television cost if manufactured in the US? Inflation has been kept in check for 20 years because of outside low labor costs.
Even though Republicans are beating the drum about illegal immigration (it gets votes), the reason the Republican and Democratic Congresses and Republican and Democratic presidents have not reigned in illegal immigration is because it is good for business, especially big business like Agribusiness and anyone that supplies Wal-Mart.
Incidentally, Wal-Mart is the largest employer in Arizona. If the estimated 500,000 illegal immigrants (8% of Arizona’s population) left Arizona how might that affect sales at Wal-Mart (remember Wal-Mart is Arizona’s largest employer). Since the % of illegal immigrants shopping at Wal-Mart is probably higher than the average population, the impact on Wal-Mart’s sales would be much higher. This would result in a contraction of Wal-Mart’s workforce (Arizona’s largest employer) and would probably significantly increase unemployment in the state, now extrapolate that to all other states. Thus illegal immigrants do provide American jobs and profits for American companies.
OK so that said, what long term benefits could immigrants and why should we allow more of them into the country? Again, let’s look at the economics.
Secondly, Americans are growing older faster than new (legal) workers are coming into the workforce. What does that mean? It means that if we don’t find other ways to increase the working population (besides natural birthrates) there won’t be enough workers paying into our social programs like Social Security, Medicare, and other taxes to pay for these older people. These programs make up almost half of our national budget and most of the future deficits. However you feel about these social programs is irrelevant because anyone who tries to tamper with them will quickly be voted out of office; it would be political suicide so we are stuck with them.
Legalizing immigrant workers and making it easier for them to come is the only way to increase the tax paying workforce to offset the huge costs of the graying population. Does it really matter if they don’t speak English, wear different clothes and look different as long as they’re paying into the system?
The other option is to cut government programs. With over 2MM people employed by the federal government and millions more jobs dependent on government expenditures (defense contractors, construction, suppliers, etc.) a draconian cut in government (necessary to pay for the older generation without new workers) would be catastrophic for US jobs.
So how would making immigration into this country easier, more convenient and legal to work here be good for this country’s security? This is another major argument against more open borders.
Let’s be pragmatic once again. Most illegal immigrants would rather not wander through the Mexican desert for 40 days to get here. It’s dangerous and deadly. Almost every immigrant would prefer to cross the border in an orderly and safe fashion, check in with the authorities and get their work papers (just like they did at Ellis Island). This would be great for us too. We could easily know who is in the country and do the appropriate security checks. The only people who would then prefer to still cross the desert on foot and illegally would be criminals and potential terrorists. The numbers crossing illegally would drop dramatically and make the Border Patrol’s job much easier because only the true undesirables would be crossing through the desert and rivers and they would be unable to hide amongst the masses.
The drug wars in Mexico are frequently tied into illegal immigration. These are two different issues but there is a crossing point. Narco-traffickers use the illegal migrant trade to hide amongst and as mules (willingly and, most often, unwillingly) to traffic goods. With legal crossing and work options, this tool would be deprived of them and would make it harder for them to traffic drugs and easier to observe.
And finally, the cost of illegal immigration has been reported at approximately $113B a year ($2.5B in Arizona). That doesn't take into account the jobs created servicing them (estimated 13MM illegal imigrants), or the profits created selling goods and services to them, let alone the taxes taken in from those goods and services (about $13B). They buy homes and pay property taxes. They only thing they don't do is pay government payroll taxes and into government programs and into the health insurance system. If they did, those costs would very likely even out.
At $25,000 per immigrant to process and deport (in some cases over and over again), it would be much more economical to operate “Ellis Island” type immigration ports that promise clean, safe and easy immigration with legal work documents that produce income for the US than to spend the money rounding up and deporting immigrants and their associated income.
Remember the axiom of supply and demand. This is an overarching law of economics as strong as any law of physics. As long as there is a demand for low-skilled low-wage workers there will be a supply. Legal or illegal, there will be a supply. We learned that during prohibition. You can’t legislate and wall off supply where there is a strong demand. We should make it work to our advantage. We need them. Our country is going to implode under the costs of keeping the status quo for our citizens without an immediate infusion of a large workforce to contribute to our coffers.
Look at the big economic picture. Protectionism has always been an economic failure. A free labor market is in accordance with true capitalism. More immigrants equal more government revenue in the form of taxes to service our debt and maintain government programs for our rapidly aging population, lower wage workers drives costs down and is anti-inflationary. Will jobs shift? Absolutely, but that is inevitable due to the larger global economic paradigm. Americans will reign in spending for years and years to come. More consumers will help fill in the gap and maintain demand for goods and the jobs to create and service them. An easy and controllable border crossing process will allow the Border Patrol to use their resources more strategically to keep those who are truly dangerous out of the country.
Monday, August 30, 2010
Thursday, November 12, 2009
Corporatism vs. America
America used to be the land where the people ruled and where governement represented the people. At least that was the idea behind its founding.
The truth now is that through less regulation and more political "buyoffs", America is now the land where corporate interests rule and government represents corporate interests. The battle of Republican and Democrat is largely for show, it's TV fodder. Corporations own both parties.
The proof is in the pudding. The stimulus package, that propped up corporations "too big to fail" under the premise that failure to do so would plunge the nation into chaos as disruptive as the Great Depression, came with almost no restrictions or accountability to prevent a similar emergency again. In other words, it was a carte blance payoff to corporations at the expense of the taxpayers. In fact, this recession (plus the stimulus) is the best thing big corporate America could have asked for. They are able to shed jobs, put downward pressure on wages, raise productivity, erase dirty assets and raise profits and corporate suite pay. What's not to like?
While the chaos of a complete financial collapse would indeed have been chaotic and created an upheaval across almost all sectors. It would have been the necessary "correction" that would have accomplished what no stimulus package could.
Corporate America's stranglehood on our government would have been broken because many of these companies would have failed and gone extinct. This would have allowed government to once again represent the people. Without corporate payoffs, representatives would be dependent on their constituents for funds and thus accountable to them.
It would also have opened opportunities for new businesses to replace these big behemoths with more responsive, nimble and sound practices. This is where the stimulus money could have been spent to foster the growth of these replacement businesses. It would also have fostered immediate "new" industries such as green energy to relieve our oil dependence quicker, new infrastructure businesses, new communication businesses, a new nimble auto industry that can truly compete globally, a new built from the ground up insurance industry, and a new financial sector making money the old fashioned way (loans and savings to finance the new businesses) instead of esoteric and risky financial "tools" and mortgages would have been restructured for long term stability and income for the new banks.
The upheaval would have been tremendous. Unemployment would have soared. Money would have dried up for a while (again, this is where the stimulus would've performed better), and the nation would have certainly suffered. But...
The much needed correction would have leveled the playing field for business and allowed innovation to take hold (small companies are inherently more innovative than large corporations) to build up the future of American business. The stimulus money would have gone to the restructuring of American business rather than maintaining the status quo. The road would be long and hard but it would be faster given that the govt would intervene immediately (unlike during the Great Depression) and it would not have been compounded by ecological disaster (as in the Great Depression). In other words, the Depression that could've been would not have been as bad as the Great Depression.
A clean slate is easier to build upon than the current wretched slate and we would have been alot better off in the long run. Instead the playing field for business has not been leveled, none of these "new" businesses has made any inroads, money is not loosening up, credit costs are soaring, housing mortgages are still the knife at our throats, corporate protections are still in place, and accountability is still elusive. As it is, our lumbering corporations maintain their stranglehold on our government and foreign corporations (with their own state support) are better positioned to take advantage of the new global environment than American business is (think BRIC) and American consumers have no leverage.
Yes, corporatism won again despite being the ones who took us to the brink and they're making a lot of money, the rest of us aren't.
The truth now is that through less regulation and more political "buyoffs", America is now the land where corporate interests rule and government represents corporate interests. The battle of Republican and Democrat is largely for show, it's TV fodder. Corporations own both parties.
The proof is in the pudding. The stimulus package, that propped up corporations "too big to fail" under the premise that failure to do so would plunge the nation into chaos as disruptive as the Great Depression, came with almost no restrictions or accountability to prevent a similar emergency again. In other words, it was a carte blance payoff to corporations at the expense of the taxpayers. In fact, this recession (plus the stimulus) is the best thing big corporate America could have asked for. They are able to shed jobs, put downward pressure on wages, raise productivity, erase dirty assets and raise profits and corporate suite pay. What's not to like?
While the chaos of a complete financial collapse would indeed have been chaotic and created an upheaval across almost all sectors. It would have been the necessary "correction" that would have accomplished what no stimulus package could.
Corporate America's stranglehood on our government would have been broken because many of these companies would have failed and gone extinct. This would have allowed government to once again represent the people. Without corporate payoffs, representatives would be dependent on their constituents for funds and thus accountable to them.
It would also have opened opportunities for new businesses to replace these big behemoths with more responsive, nimble and sound practices. This is where the stimulus money could have been spent to foster the growth of these replacement businesses. It would also have fostered immediate "new" industries such as green energy to relieve our oil dependence quicker, new infrastructure businesses, new communication businesses, a new nimble auto industry that can truly compete globally, a new built from the ground up insurance industry, and a new financial sector making money the old fashioned way (loans and savings to finance the new businesses) instead of esoteric and risky financial "tools" and mortgages would have been restructured for long term stability and income for the new banks.
The upheaval would have been tremendous. Unemployment would have soared. Money would have dried up for a while (again, this is where the stimulus would've performed better), and the nation would have certainly suffered. But...
The much needed correction would have leveled the playing field for business and allowed innovation to take hold (small companies are inherently more innovative than large corporations) to build up the future of American business. The stimulus money would have gone to the restructuring of American business rather than maintaining the status quo. The road would be long and hard but it would be faster given that the govt would intervene immediately (unlike during the Great Depression) and it would not have been compounded by ecological disaster (as in the Great Depression). In other words, the Depression that could've been would not have been as bad as the Great Depression.
A clean slate is easier to build upon than the current wretched slate and we would have been alot better off in the long run. Instead the playing field for business has not been leveled, none of these "new" businesses has made any inroads, money is not loosening up, credit costs are soaring, housing mortgages are still the knife at our throats, corporate protections are still in place, and accountability is still elusive. As it is, our lumbering corporations maintain their stranglehold on our government and foreign corporations (with their own state support) are better positioned to take advantage of the new global environment than American business is (think BRIC) and American consumers have no leverage.
Yes, corporatism won again despite being the ones who took us to the brink and they're making a lot of money, the rest of us aren't.
Tuesday, November 25, 2008
Back to Basics: Rising Above the Clutter and Staying There
A few weeks ago I had the honor and privilege of guest lecturing an M.B.A. marketing management class at the University of Rochester, Simon School of Business. Professor Nelson, a brilliant expert in the marketing field, kindly invited me to speak earlier this year, and presenting to his students energized me in many ways. Standing in the very room where I was once the note and exam taker fulfilled the deep need to give back. And, after thirty minutes of discussion, I raised the following topic: "What does it mean to be a corporation during a recession?"
The bright students and I discussed people's rituals and how savvy firms today will figure out ways to market products to consumers - products that will enable end-users to continue to behave in manners that are familiar to them, but in more cost-friendly options. Examples include home hair color kits, DVD movie nights and pot-luck dinners. In each option, people still get to participate in events and behaviors that matter to them most - beauty, entertainment and connection.
In recent months, manufacturers are not the only ones targeting the individuals that, ultimately, are responsible for making nervous shareholders happy. Savvy retailers, anticipating conservative shopping patterns, currently offer layaway. The rules of layaway are basic: find an item you love, take it to the service desk, pay what you can for it and once you have paid it in full, it is yours to keep - no credit cards needed. Think of it as a savings account specific for stuff. The question is, with many retailers moving to a Scan Based Trading (consignment) model, during layaway, who really owns the inventory? This must make auditors cringe more than the account receivables on expired gift cards or travel sites that enable transactions, but don't really provide independent services.
Back in the early 90's, while earning my B.A. at DePaul and working full time managing Claire's Stores in Chicago, times were tough. Not as tough and uncertain as today, but, still tough. Every morning, when opening the store and getting it ready for the customers, our district manager Andrea Pape would make the morning chain call. Andrea would call one store manager, provide a list of daily reminders on what will make a difference at the cash register, and that manager would then need to relay the information to the next store manager in the district.
Some of Andrea's reminders included:
Of course, the early 90's hadn't yet experienced the inundation of miles, points and other loyalty programs that seduce good citizens into irrational decisions.
Two years ago, due to the business needs of various job positions and other fantastic opportunities, I earned elite status with my airline. And for the next twenty-four months, I perpetuated the status by using a credit card to purchase even more tickets, justifying the trips with accrued credit card points and more miles, all in an effort to stand in a shorter security line at the airport. Earlier this year, it finally hit me: I was flying more just to fly more. And my airline, as many others, no longer has the expedited security line at all times and locations. Perhaps too cost prohibitive to have two agents checking tickets? Perhaps a trade-off to reverse the decision to stop granting a minimum 500 miles per trip (vs. actual miles traveled)? Regardless, the points and miles no longer seem all that seductive, and the recent investment in a house over-rode the need to book another overseas flight.
And speaking of transportation, currently, at this moment, as gas prices continue to fall and no one is reporting on why, six months ago, they rose to nearly triple the price they are at today, people have stopped flying, reduced driving and re-budget every fiscal decision, large and small. The typically cyclical economy patiently waits for the Next Big Thing. Perhaps the new president will encourage confidence - not a spending spike - but statistically significant economic investment - in manufacturing, in services and, most importantly, in entrepreneurial follow-through. In the holy trinity of decision rights, performance measures and rewards, millionaire CEO bailout sends a message of irreversible and irresponsible planning. When Cortez sank his ships, he made it clear that going back was not an option.
At times likes this, pure fiscal Darwinism has to tango with social responsibility. Profit-optimizing capitalists need to court the giving spirits and together generate a new rent-collecting business model, one that will reposition and reconfirm the country as the innovation champion. As my Strategy Professor Matteson once said, "You have to rise above the clutter."
So now the question is, which retailers and manufacturers have the common sense to keep the entire value chain happy? The answer lies in three additional questions:
The bright students and I discussed people's rituals and how savvy firms today will figure out ways to market products to consumers - products that will enable end-users to continue to behave in manners that are familiar to them, but in more cost-friendly options. Examples include home hair color kits, DVD movie nights and pot-luck dinners. In each option, people still get to participate in events and behaviors that matter to them most - beauty, entertainment and connection.
In recent months, manufacturers are not the only ones targeting the individuals that, ultimately, are responsible for making nervous shareholders happy. Savvy retailers, anticipating conservative shopping patterns, currently offer layaway. The rules of layaway are basic: find an item you love, take it to the service desk, pay what you can for it and once you have paid it in full, it is yours to keep - no credit cards needed. Think of it as a savings account specific for stuff. The question is, with many retailers moving to a Scan Based Trading (consignment) model, during layaway, who really owns the inventory? This must make auditors cringe more than the account receivables on expired gift cards or travel sites that enable transactions, but don't really provide independent services.
Back in the early 90's, while earning my B.A. at DePaul and working full time managing Claire's Stores in Chicago, times were tough. Not as tough and uncertain as today, but, still tough. Every morning, when opening the store and getting it ready for the customers, our district manager Andrea Pape would make the morning chain call. Andrea would call one store manager, provide a list of daily reminders on what will make a difference at the cash register, and that manager would then need to relay the information to the next store manager in the district.
Some of Andrea's reminders included:
- Is the store immaculate? Are the lights working?
- Is the store staged for sales? Are all the fixtures, shelves and pegs filled with product, with nothing in the stock room?
- Is the staff wearing its best smile, greeting and helping every customer that walks through the door?
- No one is allowed behind the register counter unless ringing up sales. All sales require a thank you.
- Are toys refreshed with new batteries and demonstrated to children and adults?
- Is the cash wrap filled with impulse items to drive a bigger transaction?
- Store gate does not go down until the very last customer has left the premises.
Of course, the early 90's hadn't yet experienced the inundation of miles, points and other loyalty programs that seduce good citizens into irrational decisions.
Two years ago, due to the business needs of various job positions and other fantastic opportunities, I earned elite status with my airline. And for the next twenty-four months, I perpetuated the status by using a credit card to purchase even more tickets, justifying the trips with accrued credit card points and more miles, all in an effort to stand in a shorter security line at the airport. Earlier this year, it finally hit me: I was flying more just to fly more. And my airline, as many others, no longer has the expedited security line at all times and locations. Perhaps too cost prohibitive to have two agents checking tickets? Perhaps a trade-off to reverse the decision to stop granting a minimum 500 miles per trip (vs. actual miles traveled)? Regardless, the points and miles no longer seem all that seductive, and the recent investment in a house over-rode the need to book another overseas flight.
And speaking of transportation, currently, at this moment, as gas prices continue to fall and no one is reporting on why, six months ago, they rose to nearly triple the price they are at today, people have stopped flying, reduced driving and re-budget every fiscal decision, large and small. The typically cyclical economy patiently waits for the Next Big Thing. Perhaps the new president will encourage confidence - not a spending spike - but statistically significant economic investment - in manufacturing, in services and, most importantly, in entrepreneurial follow-through. In the holy trinity of decision rights, performance measures and rewards, millionaire CEO bailout sends a message of irreversible and irresponsible planning. When Cortez sank his ships, he made it clear that going back was not an option.
At times likes this, pure fiscal Darwinism has to tango with social responsibility. Profit-optimizing capitalists need to court the giving spirits and together generate a new rent-collecting business model, one that will reposition and reconfirm the country as the innovation champion. As my Strategy Professor Matteson once said, "You have to rise above the clutter."
So now the question is, which retailers and manufacturers have the common sense to keep the entire value chain happy? The answer lies in three additional questions:
- Which rituals remain holy?
- What behaviors no longer matter?
- What new needs are about to surface? (Think Wayne Gretzky's skating to where the puck is heading vs. where it already was.)
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