In the campaign season now drawing to a close, immigration and globalization have often been described as economic threats. The truth, however, is more complex.
Over all, it turns out that the continuing arrival of immigrants to American shores is encouraging business activity here, thereby producing more jobs, according to a new study. Its authors argue that the easier it is to find cheap immigrant labor at home, the less likely that production will relocate offshore.
The study notes that when companies move production offshore, they pull away not only low-wage jobs but also many related jobs, which can include high-skilled managers, tech repairmen and others. But hiring immigrants even for low-wage jobs helps keep many kinds of jobs in the United States, the authors say. In fact, when immigration is rising as a share of employment in an economic sector, offshoring tends to be falling, and vice versa, the study found.
In other words, immigrants may be competing more with offshored workers than with other laborers in America...
As other papers by Professor Peri have shown, low-skilled immigrants usually fill gaps in American labor markets and generally enhance domestic business prospects rather than destroy jobs; this occurs because of an important phenomenon, the presence of what are known as “complementary” workers, namely those who add value to the work of others. An immigrant will often take a job as a construction worker, a drywall installer or a taxi driver, for example, while a native-born worker may end up being promoted to supervisor. And as immigrants succeed here, they help the United States develop strong business and social networks with the rest of the world, making it easier for us to do business with India, Brazil and most other countries, again creating more jobs.
For all the talk of the dangers of offshoring, there is a related trend that we might call in-shoring. Dell or Apple computers may be assembled overseas, for example, but those products aid many American businesses at home and allow them to expand here. A cheap call center in India can encourage a company to open up more branches to sell its products in the United States.Cowen makes some important points, aiming toward a bigger-picture view of what encourages a business to hire an American worker. The reality is that few Americans are willing to take jobs as low-skilled workers, especially once they have a college degree (which more and more Americans now have). This is a phenomenon that was brought to light (humorously, but no less correctly) by Stephen Colbert in his congressional testimony.
Therefore, if we as Americans aren't willing to fill low-paying jobs (or, at least not willing to fill them at a reasonable wage that won't produce rampant inflation), we are faced with a choice between immigrant labor and overseas labor--immigration versus offshoring. In the case of immigration, we might still be able to work as the low-skilled laborers' supervisors; in the case of offshoring, all jobs go overseas.
This is an important point to understand. When wage levels at home are too high, or labor supply is too low, companies are forced to find other sources of labor. We can't simply shut off immigration and foreign trade and expect that all will be well in our domestic employment picture. It isn't the case.
Difficult economic times often require us to decide among several unpalatable outcomes. In this scenario, there are four basic choices:
1) Lower our wage expectations, begin accepting the low-skilled jobs that are currently going to immigrants and overseas
- This outcome is both unlikely to pass and somewhat undesirable; the wage paid by these jobs is insufficient to keep pace with the increase in living costs that has come as a result of government policy (both fiscal and monetary). This leads to...
2) Close off all avenues of immigration and offshoring; require companies to hire American workers at whatever rate they demand
- This option might seem to many as the most "fair", from an American worker perspective. Corporations are evil, they underpay their employees to pad their wallets, and they should just pay a fair wage to a good strong American worker.
This approach is also politically popular, and has gotten a lot of play since the recession began. Protectionist policies like these are easy to parrot when unemployment is high, and they therefore almost always show up. But there is a big problem in the analysis. The fact is, companies farm cheap labor because it helps them keep the price of their final product (charged to the consumer) down. If they are forced by policies to pay more for labor, the only certainty is that consumer prices will rise.
Inflation is ugly, and it hurts the poor the most, as I've mentioned here before (most notably in the text of my letter to my senators). Therefore, ironically, this option would provide incredibly fleeting gains to the newly employed. The end result would be little different from the end result of Option #1--poor Americans would be unable to pay their bills.
3) Allow our jobs to be sent overseas
- As the study above mentions, this is likely a WORSE option than option #4...
4) Allow immigration, accept that immigrants will take the low-skilled jobs
- This is simply the best among several somewhat unpalatable options. We can't have it all our way--there's no such thing as a free lunch. It'd be great if we could all work low-skilled jobs and get paid 6-figure salaries and somehow avoid inflation and a decrease in buying power. But it's mathematically impossible.
Immigration and outsourcing are the only things preventing our economy from rampant inflation--and an even more rapidly growing gap between rich and poor. That's irrefutable, no matter what the politicians in search of cheap points try to tell you. And if I had to choose between the two, I'd choose immigration every single time--not just for the economic benefits that the above study touts, but because it's consistent with the roots of our country.
No, I don't support illegal immigration, but I also don't think that illegal immigration is anything but a symptom of an already screwy immigration policy in our country. Fixing illegal immigration requires fixing our immigration policies more broadly, and fixing both will prove a boon to our economy.
Don't forget to vote today.
[New York Times]
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