Thread: S.C.: The underground economy

Posted on Mon, Mar. 24, 2008
The underground economy

Effects of cheaper labor draw varied responses
By Aliana Ramos and Robert Morris

Just after sunrise, 20 job-seeking men crowd Labor Ready's counter and chairs in Myrtle Beach.

After three days of trying, one man finally scores a $6-per-hour freight job. Another leaves with nothing.

Myrtle Beach resident Charles Harmon has been collecting unemployment for a month since being laid off from his road-construction job. The check pays his rent, but he's worried his utilities will soon be turned off.

Miles across town, having bypassed any employment office, Jose Juan and Tomas Barona are already rolling paint across the side of a building, employees of fellow immigrant Roberto Veracruz at more than $10 per hour.

Although some people might consider this evidence of illegal immigrants taking jobs, leading economists say the issue is more complicated than that.

"Some employers exploit immigrant laborers because they can pay them less," said Jim Johnson, a University of North Carolina economist who studied immigration's effects in the state.

"But that's only part of the story."

No bottom line

According to the nonpartisan Pew Hispanic Center, illegal immigrants represent about 4.9 percent of the nation's labor force and work in construction and grounds maintenance and as painters, maids and dishwashers.

Researchers rarely study illegal immigrants as a group because of the difficulties in proving who is and isn't in the country legally. Instead, economists focus on broader groups, such as all Hispanics or all immigrants, to reach conclusions about those here illegally.

Given their wide difference in opinion, however, the studies could hardly be called conclusive. Some examples:

One leading researcher, George Borjas of Harvard University, wrote in 2004 that overall immigration, legal or otherwise, depressed wages for workers in every economic sector by about 4 percent. By 2006, however, Borjas and two other researchers concluded that immigration had slightly increased wages for all U.S. workers except those with the least education, who saw a 5 percent drop.

A 2005 study that concentrated on major cities such as Miami and Los Angeles that have absorbed large waves of immigrants found no measurable job loss or wage depression, leading the University of California-Berkeley researcher to conclude that states such as South Carolina with much lower levels of immigration should not be affected either.

Other studies have found immigration's economic effect varies state by state, benefiting Texas and Georgia, for example, while hurting Arizona, North Carolina and, to a lesser degree, South Carolina.

"Even the basic facts are not settled," University of South Carolina economists wrote in a 2007 report. "Overall, it is not possible to draw sweeping generalizations about the labor market and economic effects during this period of stepped-up immigration."

Cruel competition

If there is any consensus among the studies, it is that in those specific industries where low-wage, low-skilled American workers compete most directly with a large influx of unskilled immigrants, the cheaper labor prevails.

When new laborers arrive willing to work for less, Americans "have less bargaining power," said economist Doug Woodward of USC's Moore School of Business.

The labor pool functions as a market unto itself, and the workers are a commodity.

"If the demand is constant and you add supply," meaning more low-skilled workers, Woodward said, "you drive prices down." In South Carolina's case, the demand for workers was increasing during the construction boom, but the influx of low-wage labor outstripped it, he said.

Competition with Hispanic immigrants often affects black South Carolinians more directly than whites, the economists say, likely because of educational attainment. More than 40 percent of Hispanic immigrants in the state have not graduated from high school, and graduation rates are lower for black workers than for whites.

Citizens' salaries may not fall as immigrants are added to the work force, the economists note.

Instead, they do not receive raises, and their salaries become worth less year to year as inflation drives up prices.

Hispanic workers' wages suffer far more than those of whites or blacks in every field that uses immigrant labor, because new immigrants compete most directly with those already here. Further, economists speculate that immigrants cannot fully replace native workers, but instead complement them.

Veracruz, who came to this country illegally 12 years ago and now owns a tax-paying painting service, said he faces stiff competition for painting jobs. He said the market has become oversaturated and many illegal workers are competing for the same subcontracts.

Crowded out

Even that small slice of economic change can be tough to swallow for those who are a part of it.

Harmon, the unemployed road builder, said the incursion of immigrants into his job field takes opportunities away from young Americans, some of whom would work construction instead of going to college or to help pay for it.

"So our people now aren't getting opportunities and chances they used to," Harmon said.

"There's nothing down at the bottom."

Harmon describes construction as "good, manly work" that he loves and has been doing for more than a decade.

Years ago, he was also a volunteer firefighter at the Forestbrook station but stopped after he was diagnosed with seminoma cancer. Chemotherapy rid him of the cancer but left him saddled with thousands of dollars in medical bills.

With his $12.75 hourly wages and weekly overtime, he managed to stay ahead.

Then, on Feb. 17, just before the end of his shift, Harmon said he and several others were told they didn't need to return to work.

In the weeks before he was laid off, Harmon said immigrant laborers - some who admitted in conversations to being in the country illegally - were being taught to use the heavy equipment he operated. He has since applied with several other area construction firms, but the industry is slow. No one is hiring.

"You're such an outcast in your own country right now. ... You just keep getting pushed farther and farther away," he said.

Harmon hopes to find a minimum wage job working in a restaurant but said he'll probably have to find two jobs to pay all his bills.

A better life

Just after his high school graduation a year ago, Ismael Elias, 19, packed a sweater and a pair of pants and crossed the Mexican border to the U.S. He had wanted to be a doctor, but because his parents lacked the money for college, he faced a future of Mexico's $5-per-day minimum wage.

Now, Elias shares a mobile home with four other men - a temporary type of housing used by those with short-term plans. He wakes up each morning at 6:30 a.m., more than 1,000 miles from his Veracruz, Mexico, home, hoping there will be enough work when the truck comes by.

When it picks him up, Elias makes about $8.50 an hour doing yard work. But there are days when he finds no work.

Elias understands his illegal status in the United States, his lack of basic rights. Like many workers, however, he has no plans to stay.

"I want to save money and not come here anymore," Elias said. "It's difficult to be here without my family."

If he follows the trend of many other immigrants, however, Elias may be in the U.S. longer than he expects. A 2005 survey of Mexican workers by Woodward and other USC researchers found that 60 percent plan to return home, but 72 percent of the workers had not visited home in five years.

While in South Carolina, they will likely find work. Myrtle Beach attorney David Canty, who represents many Hispanics who have been cheated out of wages, describes the use of illegal immigrants as a "business model" for many area employers. Some write one check to a legal worker and tell him to divide it among his co-workers, Canty said. Others never claim employees, despite paying $750,000 in wages.

The macro view

While some very specific sectors have seen job losses to illegal immigrants, to look only at those job losses and wage reductions within certain industries - what Woodward called a "very micro view" - is to ignore the immigrants' effects on the entire rest of the economy, which are often positive.

"You can't just say that just because it causes problems somewhere, it's overall bad for economy," Woodward said.

N.C. researchers determined that without Hispanic labor, that state's total wage bill would be $2 billion higher.

Withdrawing those laborers would have meant $10 billion in construction would not have been done and up to 27,000 houses would not have been built. "In many ways, labor-cost savings are passed on to local consumers," the UNC economists wrote.

Because immigration has suppressed labor costs in the poultry industry, for example, the cost of chicken in the supermarket has likely been held down, Woodward said. In construction, the low cost and ready supply of immigrant labor has meant more buildings have gone up in the Grand Strand, he said, increasing its appeal to tourists, who then spend across the local economy.

Hispanics inject more than $3 billion into the S.C. economy through their spending, Woodward found, even after subtracting 20 percent of their paychecks that surveys have found the workers are sending, on average, back to their home countries.

Finally, economists say, many industries such as manufacturing in search of cheap labor outsource it to other countries. Those that attract immigrant labor are the ones that can't outsource. Construction, for example, must take place at a local job site; housekeeping must be done in the resort guest's room.

On the Grand Strand, the need for labor is undeniable. Workers are bused in from Williamsburg County to help meet the demands during the peak summer months.

The biggest demand right now in the hospitality industry is housekeeping, said Elizabeth Sherron, manager of Labor Ready.

"Right now, I have 80 orders at one hotel for housekeepers."

http://www.myrtlebeachonline.com/news/l ... 92643.html

"A 2005 study that concentrated on major cities such as Miami and Los Angeles that have absorbed large waves of immigrants found no measurable job loss or wage depression, leading the University of California-Berkeley researcher to conclude that states such as South Carolina with much lower levels of immigration should not be affected either."

OK--no measurable job loss--what means are used to measure??? Over what period??
Here in Atlanta, the day worker centers were populated by residents, of course. The majority were black citizens. As the illegal aliens moved in, there were no more blacks at the centers. The pay scale dropped and they did not want to work for the minimum wage or less. Show me where those numbers are measured! Certainly not at the unemployment office--they were not eligible, obviously, to collect. So these great brains get these numbers, see the same numbers of jobs no reported loss of jobs and suggest that illegal workers are good for the economy. Why in the world don't we bring in people from Mexican universities to do the studies. Then these in-house unthreatened educators maight see what is really happening.
What happened to those who just gave up???? What happened to the guys who tried to stick it out and got bypassed because the others, (Oh, oh, the employers practiced racial profiling.), got tired of showing up and not getting work. How many turned to booze, drugs, criminal activities??? A recent comment from a young man north of Atlanta really bothered me. He said that the temporary staffing agencies now had Latinos placing the workers and he felt that Latinos were getting first choice. He said there was a lot of dialogue going on on Spanish!

PS What happened to all those displaced in the poultry, meat and carpet industry??? I guess they all moved to Mexico to take jobs Meexicans don't want....

When new laborers arrive willing to work for less, Americans "have less bargaining power," said economist Doug Woodward of USC's Moore School of Business.

Exactly, and not just the low skilled workers. Anyone working for a company that services non-English speakers. They have to compete with bi-linguals.

Dixie