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Topic: Illegal Immigration Suppresses Wages (Read 2954 times)
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unlawflcombatnt
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Posts: 1
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The biggest problem created by uncontrolled illegal immigration is wage suppression. According to economics professor George Borjas, immigration reduces the average annual earnings of U.S.-born men by an estimated $1,700, or roughly 4%. (See San Luis Obispo News story: Illegal Workers Have Mixed Impact.) If that reduction is applied to the roughly 143 million employed Americans, that reduces aggregate annual worker income by $243 billion, or $0.243 trillion. That's roughly 2% of our $12 trillion GDP. That's a loss in consumer spending of $243 billion (less taxes). Given that our entire GDP growth in 2005 was $384 billion, this is a significant amount. Considering that consumer spending is approximately 70% of GDP, that makes the "growth" in consumer spending around $269 billion.
Again, the loss of that $243 billion is no small amount. And it is also $243 billion less money that could have been taxed, costing the Federal government anywhere between $38-59 billion per year. (Increasing the taxable income of a single taxpayer making $35,000/year by $1700 increases Federal income tax by $413. Increasing taxable income of a married taxpayer filing making $35,000/year by $1700 increases Federal income tax by $267. Multiplying these numbers by 143 million amounts to $59 billion and $38 billion, respectively. Thus the income tax revenue lost is somewhere in between.)
Right-wingers will argue that this wage suppression is offset by business profits, and that these profits fuel investment. But investment capital is OVER-abundant at present. Increasing this excess even further will not result in more capital investment. It will result in higher CEO salaries, further overinvestment in the stock market, and further investment in foreign production facilities, the latter of which puts even further downward pressure on American wages.
Furthermore, business profits don't fuel consumer spending. And consumer spending is the engine that drives our economy, not investment. Without consumer spending, there are no returns on investment. And if no returns are anticipated on investment, no investment takes place.
The immigration-fueled reduction in wages does NOT help our economy. It hurts it. It reduces aggregate consumer income and the consumer spending it finances. The reduction in consumer spending reduces consumer production demand, further reducing demand for the labor to provide that production. The reduction in labor demand drives down employment and wages. The resultant labor demand reduction further reduces aggregate consumer income and further reduces consumer purchasing power.
As consumer buying power declines, so do investment opportunities, since those opportunities are created by consumer demand for production. Thus the increased profits resulting from reduction in labor costs create even more excess capital, while reducing investment opportunities still further.
Does anyone really think that wage suppression is "good" for the economy? Doesn't someone have to purchase the goods produced for business to profit? Won't reducing consumer income also reduce consumer goods purchasing? Won't a decline in consumer goods purchasing reduce business revenues and reduce potential profits? Once again, is immigration-fueled reduction in worker/consumer income really "good" for the economy?
unlawflcombatnt
EconomicPopulistCommentary
Economic Patriot Forum
______________________
There must be balance between the "means of consumption" and the "means of production."
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« Last Edit: August 15, 2006, 01:32:00 PM by unlawflcombatnt »
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nisperos
Newbie
Posts: 45
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"unlawflcombatnt" said:
According to economics professor George Borjas, immigration reduces the average annual earnings of U.S.-born men by an estimated $1,700, or roughly 4%. (See San Luis Obispo News story: Illegal Workers Have Mixed Impact.)
However, the very article which he cites more fully says:
...Between 1980 and 2000, legal and illegal immigration reduced the average annual earnings of U.S.-born men by an estimated $1,700 or roughly 4 percent, according to research done in 2004 by George Borjas, economics professor at the John F. Kennedy School of Government at Harvard University.
The situation was worse if one considers only the 10 million U.S.-born men who lack a high school degree. For them, the increased supply of workers depressed wages by 7.4 percent, he found.
Economists at the Federal Reserve banks in Dallas and Atlanta found no evidence in 2003 that wages of higher-skilled U.S.-born workers were hurt by immigration, although lower-wage workers were affected...
AND, later in the article, it says:
"...If all the illegal workers in this country were booted out tomorrow, economists believe wages would have to rise significantly to get U.S.-born workers to take their jobs.
"It would take time for that to occur and during this period of adjustment - some things might not get done - maybe some crops won't be picked or some hotel rooms won't get cleaned," said Mark Zandi, chief economist at Moody's Economy.com. In some cases, companies might opt to invest in machines and other automation rather than hire higher-paid workers, economists said.
Under these scenarios, consumers' prices could rise. ..." (underline mine)
So, basically, I don't agree that unlawflcombatnt's analysis is the full picture, but read his comments and read the article he cites and then decide.
It's not an original comment to say that some people see the illegal immigration problem as a battle of the "have nots" and the "have nots". What is scary is that one of the impacts seems to be a widening of the gap between the very rich and the very poor, as well as a shrinkage of the middle class; all things which don't bear well for democracy.
Still, securing our borders, allowing some of the people who are here illegally (whether by illegal arrival or remaining after expired visas) to earn citizenship, and guest worker visas seem to be, all taken together, a good start at tackling the problem.
Think not? I bet some of the food grown in our country could be grown cheaper elsewhere. I bet even more manufacturing could be outsourced or nearsourced. I bet lots of people can find ways to reduce their travel lodging and eating out if prices for these items increase...
And, what about all those people with investment property who count on rental income? Wouldn't that further depress the already slowing housing market and reduce equity wealth to have empty properties? Business goes not only where the market is but where the production opportunities are there to increase profit. Business is not limited by borders! There are plenty of other places to sell goods besides this country -- and if our land and our residential and commercial properties lie vacant and become bargains, then they will look like good investments to foreigners with money! You may not like the global economy in which we find ourselves, but it is economic reality. Think again!
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