An Economic Perspective on Immigration

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.