Importing poverty
William Hawkins
June 20, 2007

The argument that illegal aliens have been needed to fill a labor shortage in the U.S. economy is not supported by the facts.

According to the Census Bureau, 14.3 percent of illegals work in manufacturing. Yet, manufacturing has lost more than 2 million jobs since 2000, with more jobs lost every month.

Hordes of American citizens would love to regain factory employment, as they have not been able to find comparably rewarding jobs elsewhere; but illegals have been hired in their place. Most illegals are in the low-end of the labor pool, where unemployment is higher than average and wages are declining, the opposite of what would happen in a market with a shortage. Even in the economy as a whole, real wages for 93 million nonsupervisory, private sector workers fell again in April.

Those in the business community who support immigration "reform" do so to further swell the number of available workers to generate a labor surplus that will keep wages in check. But such a course is not in the long-term best interests of most business owners any more than it is for Americans in general.

Firms that hire "cheap" illegal workers do so to gain a competitive advantage against firms that obey the law. Honest business owners are placed in the difficult position of having to choose between emulating the unlawful behavior of rivals or risking the loss of contracts to them. A system that creates this kind of ethical dilemma should not be "regularized" into law.

There is, however, no such thing as "cheap" labor in an advanced society like ours. The higher costs for health, education and welfare, not to mention crime control, from a large increase in the number of people living in poverty is substantial. This financial pressure is already undermining state and local governments, school systems and hospitals.

Robert Rector of the Heritage Foundation concluded that the Senate amnesty bill "would be the largest expansion of the welfare state in 35 years." His research shows "the U.S. has imported poverty through immigration policies that permitted and encouraged the entry and residence of millions of low-skill immigrants." He puts the annual cost to taxpayers at $89 billion, which will increase sharply if more illegal aliens become eligible for aid under an amnesty.

Taxpayers end up subsidizing employers who hire low wage workers. While it is sometimes useful to subsidize programs such as scientific research, defense capabilities or public works, it is hard to see how restaurants, janitorial services or landscapers qualify as strategic industries. If people want extra services for their private enjoyment, from blueberries to theme parks, they should be willing to pay the full cost and not dump part of the burden on others.

The country does not advance by substituting "cheap labor" for technological progress. A study at the Federal Reserve Bank of Philadelphia by economist Ethan Lewis found "plants in areas experiencing faster less-skilled relative labor supply growth adopted automation technology more slowly, both overall and relative to expectations, and even de-adoption was not uncommon."

De-adoption of technology? There is no way to put a positive spin on that. Yet, Mr. Evans argues "Producers may anticipate future flows of less skilled immigrants by adopting less technology." New advances are called "labor-saving devices" for a reason.

Shortsighted decisions can undermine the long-term advancement of economic prosperity and national capabilities. Japan, with a very restrictive immigration policy and a static population, has plentiful capital and leads the world in robotics. In contrast, the most destitute places on the planet are awash in cheap labor. It is not the number of workers, but their productivity that determines living standards. The great achievement of America is to have elevated the working class to the middle class through innovation and investment.

The Senate proposal includes a guest workers program that is supposed to give preferences to those with more skills and work experience, but will it improve immigration or just continue the same dangerous pattern?

In a May 30 editorial, the Wall Street Journal protested the Senate vote "to halve the size of a guest-worker program for low-skilled workers." On June 6, the Senate voted to sunset the program in five years. If future guest workers are no more literate or productive than what has come in illegally, the program should not even last that long.

Importing poverty is also risky politically for broader business interests. The Service Employee International Union, which has expanded rapidly by recruiting low-wage immigrants, hailed last November's election results, claiming "By voting to change the leadership of Congress, and electing eight new pro-worker [i.e. Democratic] governors. ... more progressive voices were heard." Higher income taxes to finance social programs on a redistributive basis are at the top of SEIU's agenda.

Business stands to lose more in the long run from slower real economic growth and higher taxes, than from the deceptive, short-term gains from lower labor costs.

William Hawkins is senior fellow at the U.S. Business and Industry Council in Washington, D.C.