Open Letter to Nowhere

Open Letter to Nowhere
By Jeffrey Harder (06/26/2006)

Economics is probably the only profession alive that allows ideological half-truths and distorted calculations to go unchallenged by most establishment elites. When almost any economist speaks, we must all bow to the almighty gentlemen's club of free trade and offshoring because it has become the prevailing prudence of many of Washington's decision makers. Anything else just isn't hip enough. These are the people who, after all, appear "apolitical," with all the facts, figures, and econometric models to dazzle even the most inattentively ill-informed senator who voted for S2611.

So when 500-plus signatories of an "Open Letter on Immigration to President Bush and Congress" posted their stance on the issue at the Oakland-based Independent Institute think tank's website, the globalists in Washington must have broken out the champagne to celebrate the arrival of the corporate philosopher-king cavalry. Here is now the stamp of approval from some of the brightest economic minds in the world.

However, the letter itself is a weak piece of corporate-supremacist diatribe aimed at those of us fighting for some semblance of what used to be America. Alexander Tabarrok, the research director at the Independent Institute and primary impulse behind the letter, has four basic points: massive immigration is good for America; immigrants do not threaten American workers or their jobs; there has been little effect on low-skilled wage earners; and education, alas, is the answer to all our woes.

Taking the first point, Taborrok may be referring to those on Wall Street, but not necessarily to those on Main Street. As scholars such as Peter Brimelow have shown, massive migration on the scale of today has no real net benefit to most working-class and middle-class Americans. We have to look beyond the lettuce and broccoli argument. There are simply other arguments to consider besides the prices of a few consumer goods, which is also another debate in itself. Economists do not take the social pressures on Americans into account, such as public schools designed for 1400 students but packed to the gills with 4000. This is not unusual in California, which has now become one of the worst performing states in the Union with respect to middle and high-school education - and due almost exclusively to mass migration. Hundreds of hospitals along the border with Mexico have closed because of the onslaught of illegals with no insurance. An illegal alien crime wave with gangs from all over Central America has now invaded many areas of the country. Third World diseases, which a few generations ago were wiped out in America, are making a comeback. Cultural tensions with such a massive migration of people have resulted in a breakdown of the assimilationist mechanism in many regions. And the presence of so many illegals has caused a diversion of social funding away from native born Americans and legal residents to those with no right to be here, which is a direct surcharge to middle-class families. While economists may measure prosperity in terms of cheap prices (without mentioning the immense social costs, of course), others measure prosperity in the quality of daily life. And the quality of life in America has not improved with such a massive migration of unskilled, poor, low-education labor into the country. On the contrary, the meager economic benefits simply do not outweigh the enormous costs.

Tabarrok writes on that "immigrants do not take American jobs." Perhaps "take" is too simplistic a verb. "Displace" may be more accurate. For example, just a generation ago, the meatpacking industry paid on average around $20 an hour. These were not jobs Americans didn't want to do, but good paying work that people stood in line to get. Over the years American labor was displaced with foreign labor, much of it illegal, and now the average wage is $8 per hour. In the 1980's Los Angeles janitors, most of them black, made as much as $13 an hour. Then contractors broke their union and displaced many with non-union Latino immigrants. The wages and quality of life for black janitors plummeted. We see the same trends in other industries now heavily populated with illegals. Wages either go nowhere, or actually decline.

And in those industries with a high population of illegal or cheap foreign labor, the unemployment statistics for native born workers are higher. The Center for Immigration Studies notes that "in occupational categories that received the most new immigrants, native unemployment averages 10 percent." That's twice the national average at the moment. So while legal immigrants and illegal aliens may not "take" jobs, they have created a problem for those natives who are competing for work at the same level. There is really no such thing as a job "an American won't do." George Borjas, an economist at Harvard University who doesn't follow the conventional wisdom, notes that the "idea that somehow you have a need for people to do jobs that Americans won't do is just insane.'' Americans working in jobs that pay declining wages usually tend to look for something better and move on. It has nothing to do with the work ethic. Higher pay, however, gives low-wage earners greater stability and more livelihood, as well as an incentive to stay with the job.

The letter further claims that "immigration of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to have been small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent." But here, astonishingly, economists tend to differ in opinion. The National Research Council of the National Academy of Sciences noted that immigration caused about a 44% decline in relative wages for high school dropouts between 1980 and 1994. Some have different estimates, putting the decline for low wage earners anywhere from 20% on up from the 1970s to the present. Even if we were to take the 8% from the Independent Institute, that's a hefty amount for someone earning around $10,000 per year. That would be a loss of about $800. Now multiply that times millions of workers and the figures become staggering - hardly "small." In addition, foreign low-skilled managers, such as Mexican contractors in the construction business, aren't going to hire Americans skilled in the field. Black and white natives tend to get pushed aside for cheaper, more disposable Spanish-speaking labor. So even though American contractors seem to have no problem hiring foreign workers to do a task, foreign managers hire their own. This pushes out high wage earners and provides a disincentive for natives to work in the industry. Again, it has nothing to do with the work ethic.

One of the more striking statements from Tabarrok is that "concerns about the impact of immigration on the poorest Americans should not be addressed by penalizing even poorer immigrants. Instead, we should promote policies, such as improving our education system, that enable Americans to be more productive with high-wage skills." But almost every economist is unanimous in the belief that high wages are to be avoided, sort of like the bubonic plague. Corporate supremacists have no problem with Company X making huge profits from sales, but the minute Joe Sixpack gets an extra $1 per hour, well, the sky is falling. It's time to outsource the job, offshore the business, or find someone who can do it cheaper. Expensive labor - bad, high profits - good. Free trade extremist and oursourcing cheerleader Gregory Mankiw, a former economic advisor to President Bush and signator of the letter, made it clear that outsourcing was the way to go for just about any business with a wage problem. (This was the same guy who wanted to count hamburgers as a "manufactured product" in the face of millions of lost manufacturing jobs due to disastrous free trade polices.) So let's say everyone becomes a computer programmer or engineer. They would have to consider moving to Pakistan, China or Inida, because American companies are creating lots of jobs for these people - but not for natives. Paul Craig Roberts has talked about this often in his editorials dealing with jobs creation. The economy is producing primarily low-wage, low-skill jobs, and for the first time in history there are more unemployed college graduates than high-school dropouts looking for work.

The letter from the Independent Institute to the President and Congress is simply all wrong. Massive immigration is not good for America, or any country for that matter. Immigrants do indeed create tension and problems for American workers and their jobs. And here has been a definite effect on low-skilled wage earners.

The biggest problem is that the people from the Independent Institute are the kind our "leaders" tend to listen to most, instead of their constituents.

Jeffrey Harder