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2006 July 25 Tuesday
Raise Minimum Wage To Reduce Illegal Immigration

Former Democratic Governor of Massachusetts Michael Dukakis and Daniel Mitchell, a professor of management and public policy at UCLA, argue that raising the minimum wage would effectively reduce illegal immigration.

There is a simpler alternative. If we are really serious about turning back the tide of illegal immigration, we should start by raising the minimum wage from $5.15 per hour to something closer to $8. The Massachusetts legislature recently voted to raise the state minimum to $8 and California may soon set its minimum even higher. Once the minimum wage has been significantly increased, we can begin vigorously enforcing the wage law and other basic labor standards.

Millions of illegal immigrants work for minimum and even sub-minimum wages in workplaces that donít come close to meeting health and safety standards. It is nonsense to say, as President Bush did recently, that these jobs are filled by illegal immigrants because Americans wonít do them. Before we had mass illegal immigration in this country, hotel beds were made, office floors were cleaned, restaurant dishes were washed and crops were picked ó by Americans.

Americans will work at jobs that are risky, dirty or unpleasant so long as they provide decent wages and working conditions, especially if employers also provide health insurance. Plenty of Americans now work in such jobs, from mining coal to picking up garbage. The difference is they are paid a decent wage and provided benefits for their labor.

However, Americans wonít work for peanuts, and these days the national minimum wage is less than peanuts. For full-time work, it doesnít even come close to the poverty line for an individual, let alone provide a family with a living wage. It hasnít been raised since 1997 and isnít enforced even at its currently ridiculous level.

A big rise in the mimimum wage would reduce the incentive for businesses to hire illegals because it would reduce the ability of businesses to reduce labor costs by using illegals.

The economic downside for the economy as a whole would be fairly small. People who are making $6 and $7 an hour receive such a low percentage of total income that doubling their incomes would have little impact on prices of goods and services. Fewer people would have jobs. But that would not make poor people poorer on average. They'd get more money when they did work.

Also, a reduction in the number of illegal aliens would reduce other costs for poor people such as by reducing the number of people making demands on government-funded medical services. Poor American citizens would therefore get better medical care. They'd also be less victimized by criminals.

Update: A rise in the minimum wage would also increase the quality of those who enter and stay in the United States illegally. Those who come would have to have better skills in order to justify their higher hourly wages. Otherwise they would not get hired. So with higher minimum wages less skilled immigrants would be more likely to self-deport and less likely to come in the first place.

Share |      By Randall Parker at 2006 July 25 09:21 PM  Immigration Economics


Comments
Stephen said at July 25, 2006 11:50 PM:

I think this is wrong in so many ways.

First, the minimum wage is irrelevant to this issue. Imagine if there weren't any illegal immigrants and a farmer had crops to pick. The farmer has three options, leave crops in ground to rot, invest in automation or offer a price sufficient for people to be willing to sell their labour. Assuming the farmer decides on the last option, the farmer must offer a higher wage in order to purchase the labour.

Second, a higher wage (whether set by way of a legislated minimum or by the laws of supply and demand) would increase the supply of labour - including (at the moment) illegal immigrants who come to America looking for work.

Third, minimum wage laws are easily circumvented and the circumvention is expensive to detect - so the honest employer is made uncompetitive in comparison to the dishonest employer.

Fourth, I'm sure there's a fourth, I just can't think of it right now...

My recommendation: Increase the cost to the employer of hiring illegal immigrants (at any wage), and provide a whistleblower clause - if an illegal immigrant informs the authorities that he is being employed by an American business, then upon the court finding that the business was knowingly employing illegals, the illegal immigrant gets an automatic citizenship. Only one citizenship offer per court case though.

John S Bolton said at July 26, 2006 3:01 AM:

To say that, is also to identify the weakness of such a proposal. It depends on government being actually concerned to enforce it.
Actually though, one would get a situation in which illegals were favored for employment, as they would be very much less likely to report violations of high-minimum wage standards.
Unemployment would be diverted towards citizens even more than currently, artificially increasing the demand for illegals at the low end.
Beware the Trojan Horse! It has foreign hostiles inside.

noone said at July 26, 2006 4:50 AM:

Employers alrready breaking the law by employing illegals and often paying them below minimum wage won't be impressed by this,unless it really is followed by strict enforcement,in which case a higher minimum wage is irrelevent,as simply enforcing current law would have the same effect.

This is simply a way to increase the min. wage.Virtually no level of government is interested in going after employers,anyway.
All we would get is the status quo with a higher minimum wage and more jobs for illegals as businesses shed legals to hire illegals.

In a word,just a scam.

On the bright side?Wage stagnation is moving up the food chain to the white collar proffesional class,so expect reinforcments soon.

Bob Badour said at July 26, 2006 5:17 AM:
A big rise in the mimimum wage would reduce the incentive for businesses to hire illegals because it would reduce the ability of businesses to reduce labor costs by using illegals.

When you wrote the above, were you being sarcastic or facetious?

I don't see the logic. Right now: An employer can save money by breaking the law ie. by hiring an illegal immigrant at the low minimum wage. After increasing the minimum wage: An employer can save money by breaking the law ie. by hiring an illegal immigrant for less than the minimum wage. What's the difference?

Even though the employer will break multiple laws, he is likely breaking multiple laws now. For instance, if he is picking up day workers in a truck and paying cash, he is knowingly contributing to tax evasion. Ditto the person who pays cash for an illegal immigrant nanny or housecleaner.

Guy said at July 26, 2006 9:57 AM:

One of the reasons the minimum wage is not raised is that the government believes it's own nonsense in its unemployment numbers. The argument goes that unemployment is so low that Americans wouldn't even do the jobs illegals aliens are willing to do, at $8 per hour. The real unemployment rate is higher than 10%. A good reference to learn the truth about government reporting:

http://www.shadowstats.com/cgi-bin/sgs/article/id=341

You cannot project unemployment numbers using new unemployment claims when benefits run out after 18 month. Unemployment will always be significantly higher than in that report, but even if the report is read truthfully, we know unemployment is greater than 10%.

If the truth were known about unemployment, the Republicans would have less an argument against raising the minimum wage.

Bob Badour said at July 26, 2006 2:16 PM:

Guy,

A higher minimum wage would tend to increase unemployment even higher. I am not sure I understand what you are saying.

The Superfluous Man said at July 26, 2006 2:22 PM:

In addition to the concerns above, why would an employer prefer an American over an illegal? The illegals will still end up getting jobs, and will still come here. Simply, why would the illegals suddenly leave? It might be harder for them to get a job, as it would for poor Americans, but it's still far better than Mexico.

Raising the minimum wage does work in the case of a guest-worker policy, in that for an employer to bring over an immigrant, he must pay, say, $20 an hour. Of course, no employer would do that, nixing the cost effictiveness of the immigrant. Which is the point.

Randall Parker said at July 26, 2006 4:10 PM:

Bob,

Right now the employer of the illegal can pretend he's not employing an illegal. The legal requirements he has to meet are low. He has to demand documents that demonstrate the prospective employee has the legal right to work here. He is not in a position to verify the documents. America's government does not provide easily accessible authentication services for whether a Social Security number or other stuff is valid.

Whereas if the employer pays below minimum wage he can not plead ignorance. So employers rarely pay below minimum wage whereas they hire illegals in great numbers.

Stephen,

A higher minimum wage would increase the supply of labor by making work more attractive to those who now do not see it worth their time. Teenagers and college students living off their parents would get a bigger financial benefit per hour worked. So they'd be more inclined to work. Also, some of the legions of young black males who have left the legal labor market would return. Black male labor market participation has been declining since the late 1970s. A higher minimum wage might pull some of them back into legal non-criminal work.

The farmer who has to pay more per hour will use more capital equipment. The demand for capital equipment will increase R&D on automation.

The farmer who offers more per hour will also attract more natives to do the work.

Guy,

Your link is very interesting:

The popularly followed unemployment rate was 5.5% in July 2004, seasonally adjusted. That is known as U-3, one of six unemployment rates published by the BLS. The broadest U-6 measure was 9.5%, including discouraged and marginally attached workers.

Up until the Clinton administration, a discouraged worker was one who was willing, able and ready to work but had given up looking because there were no jobs to be had. The Clinton administration dismissed to the non-reporting netherworld about five million discouraged workers who had been so categorized for more than a year. As of July 2004, the less-than-a-year discouraged workers total 504,000. Adding in the netherworld takes the unemployment rate up to about 12.5%.

What I want to know: What are all the black men doing who are not in jail and not in legal jobs?

Gary Glaucon said at July 27, 2006 5:19 PM:

What's up with the posting requirement? It appears that Randal is writing to himself.

Randall Parker said at July 27, 2006 9:27 PM:

Gary,

The posting requirement? I have some anti-spam measures in place that occasionally improperly block legitimate comments. Sorry if that is happening to you. If you tell me about the problem I might be able to fix it.

The alternative to the anti-spam measures is to get about 4000 to 5000 spam posts a day.

Omer K said at October 8, 2006 10:29 AM:

This post was silly on too many levels. The problem isnt the laws...its the enforcement of the laws. Adding another minimum wage law simply penalizes low skill legal workers by giving businesses more incentive to automate.

The whole idea of minimum wage itself is folly. We already have social security, what was the point of adding a 'working' safety net aka minimum wage? Employers will NEVER pay an employee more than he is worth, at least not for long. If you try to force more employers to do so, well, for a while bureacrats and low skill people will be beaming with happiness. But 10 years down the road the employers will all be moving their industries to China.


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