Immigration & Wage Suppression

[unlawflcombatnt]

The biggest problem created by uncontrolled illegal immigration is wage suppression. According to economics professor George Borjas, immigration reduces the average annual earnings of U.S.-born men by an estimated $1,700, or roughly 4%. (See Yahoo News story: Illegal Workers Have Mixed Impact.) If that reduction is applied to the roughly 135 million employed Americans, that reduces aggregate annual worker income by $230 billion, or $0.23 trillion. That's roughly 2% of our $12 trillion GDP. That's a loss in consumer spending of $230 billion (less taxes). Given that our entire GDP growth in 2005 was $384 billion, this is a significant amount. Considering that consumer spending is approximately 70% of GDP, that makes the "growth" in consumer spending around $269 billion.

Again, the loss of that $230 billion is no small amount. And it is also $230 billion less money that could have been taxed, costing the Federal government anywhere between $36-55 billion per year. (Increasing the taxable income of a single taxpayer making $35,000/year by $1700 increases Federal income tax by $413. Increasing taxable income of a married taxpayer filing making $35,000/year by $1700 increases Federal income tax by $267. Multiplying these numbers by 135 million amounts to $55.7 billion and $36 billion, respectively.)

Right-wingers will argue that this wage suppression is offset by business profits, and that these profits fuel investment. But investment capital is OVER-abundant at present. Increasing this excess even further will not result in more capital investment. It will result in higher CEO salaries, further overinvestment in the stock market, and further investment in foreign production facilities, the latter of which puts even further downward pressure on American wages.

Furthermore, business profits don't fuel consumer spending. And consumer spending is the engine that drives our economy, not investment. Without consumer spending, there are no returns on investment. And if no returns are anticipated on investment, no investment takes place.

The immigration-fueled reduction in wages does NOT help our economy. It hurts it. It reduces aggregate consumer income and the consumer spending it finances. The reduction in consumer spending reduces consumer production demand, further reducing demand for the labor to provide that production. The reduction in labor demand drives down employment and wages. The resultant labor demand reduction further reduces aggregate consumer income and further reduces consumer purchasing power.

As consumer buying power declines, so do investment opportunities, since those opportunities are created by consumer demand for production. Thus the increased profits resulting from reduction in labor costs create even more excess capital, while reducing investment opportunities still further.

Does anyone really think that wage suppression is "good" for the economy? Doesn't someone have to purchase the goods produced for business to profit? Won't reducing consumer income also reduce consumer goods purchasing? Won't a decline in consumer goods purchasing reduce business revenues and reduce potential profits? Once again, is immigration-fueled reduction in worker/consumer income really "good" for the economy?

unlawflcombatnt

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[Undertoad]

...immigration reduces the average annual earnings of U.S.-born men by an estimated $1,700, or roughly 4%. If that reduction is applied to the roughly 135 million employed Americans, that reduces aggregate annual worker income by $230 billion, or $0.23 trillion.

You applied the statistic about U.S.-born men to all 135 million employed Americans, most of whom are not U.S.-born men.

[Griff]

Let's not pretend that your wage earner/consumer lives in a magic bubble where wage increases don't increase the cost of goods which impacts folks on a fixed incomes disproportionately.

[xoxoxoBruce]

More on US produced goods than imported goods as the shipping is a smaller piece of the total. Therefore it's having a smaller impact every year.

[unlawflcombatnt]

Originally Posted by Undertoad

You applied the statistic about U.S.-born men to all 135 million employed Americans, most of whom are not U.S.-born men.

Most are U.S. born, however, even if not men. Though there may be some slight difference in the effect on U.S.-born women, and non-U.S. born men, the general idea is the same. It suppresses wages.

The general decline in wages can be seen from the copy below of hourly and weekly real wages from the U.S. Bureau of Labor Statistics. Hourly wages declined 0.24 % in March. Weekly wages declined 0.27%.



Below are the links to the both weekly and hourly real wages.

BLS-WeeklyWages

BLS-HourlyWages

unlawflcombatnt

[xoxoxoBruce]

Assuming the preliminary numbers are accurate, it went up a little from Jan to Feb and down a little from Feb to Mar. But it went down a little from Feb to Mar for the last 5 years.
As gloomy as I am about of long range economic future, I'm not ready to call a vibration an earthquake just yet.

[Undertoad]

Originally Posted by unlawflcombatnt

Most are U.S. born, however, even if not men. Though there may be some slight difference in the effect on U.S.-born women, and non-U.S. born men, the general idea is the same.

Dude, you simply can't do that if you're going to use that as your jumping-off point for all sorts of other conclusions. It's like a physics student who says "now, assume there's no gravity..." and then determines all sorts of things before remembering to add gravity back into the mix.

In economics you can prove *anything* by ignoring the other side of the equation. In this case Griff gave it to you, and he's a smart guy, ignore him at your own peril! What is the effect of illegal immigration on prices my friend?

[9th Engineer]

I think it's also important to look at what demographics are most effected by the wage suppression. It may seem obvious, but immigrant workers themselves most likely are hardest hit. This means that we have a rapidly growing population of people who do not identify themselves primarily as American, who are stuck in a low wage labor sector with very little chance for social mobility. I know it's not the exact same problem France has, but we may see a similar result eventually.

[tw]

Originally Posted by 9th Engineer

This means that we have a rapidly growing population of people who do not identify themselves primarily as American, who are stuck in a low wage labor sector with very little chance for social mobility. I know it's not the exact same problem France has, but we may see a similar result eventually.

And it was called 1910America. Who are the source of a nation's most productive people? Those immigrants "stuck in a low wage labor sector with very little chance for social mobility". 1910 conditions caused what? Immigrants in any country are typically a greatest source of that country's success.

Thank you very much for posting this excellent source/thread.

[xoxoxoBruce]

Originally Posted by tw

And it was called 1910America. Who are the source of a nation's most productive people? Those immigrants "stuck in a low wage labor sector with very little chance for social mobility". 1910 conditions caused what? Immigrants in any country are typically a greatest source of that country's success.

That was an entirely different world where we made products, people could improve their skills and invent new ways. Now it's technical and business pencil pushing or service jobs. No apprenticeships or job experience, they want you educated and ready to go at entry level.

[tw]

Originally Posted by xoxoxoBruce

That was an entirely different world where we made products, people could improve their skills and invent new ways. Now it's technical and business pencil pushing or service jobs. No apprenticeships or job experience, they want you educated and ready to go at entry level.

What made American so productive? Not the first generation immigrants. But we send all those kids to school. We did then what Aericans are now complaining about today as increased costs. Those increased costs back in 1910 created the most productive Americans - second and third generation immigrants.

It was back on 1910 as it is today. Bean counter types complain about how immigrants tax schools and other infrastructure. They see costs where they should be seeing a national investment.

Same as in 1910. First generation immigrants did labor - as we are doing today with so many immigrants who even have college degrees. Those first generation immigrants create the most productive part of a country's future - back then and today.

Meanwhile ask your waiter what his education was. Too often it was advanced education - accounting, computers, one was even a doctor. Anoter speaks five languages. Americans cringe when I do equations or work out an algorithm while sipping coffee. Foreigners get curious and ask questions. We so need their labor that each was working as a waiter. No different from 1910. They are the investment in America's future.

[Rock Steady]

Let's talk about the high-end job market too.

In my last job, I was the only american-born software engineer of 6 working in the USA. They recently opened an Indian office with 6 more SEs there. After I accepted a counter-offer to stay (deadly mistake always), in two months they replaced me with a younger Indian guy.

Now I am a contractor trying to get a permanent position. At this company there are 4 american-born and 7 foreign-born SEs. In 8 weeks they will decide whether or not to hire me perm.

I have BS, MS, PhD 1984 in CS and an excellent resume featuring 8 startup companies. The availablity of legal immigrants impacts my opportunities to work and the wage I can get.

[xoxoxoBruce]

Those early 20th century immigrants made their kids go to school and insisted they learn English. Today the schools are becoming babysitters and in their native language to boot. Fewer and fewer kids are getting a real education now.

TW, you do realize you're not normal, right? Not that there's anything wrong with that.....just asking.

[Rock Steady]

Originally Posted by xoxoxoBruce

Those early 20th century immigrants made their kids go to school and insisted they learn English.

True. My grandparents were born in Italy; grandfather pushed a vegatable cart in New York. My father worked up from truck driver to salesman w/o college. I was the first person in my extended family to get a college degree.

Originally Posted by xoxoxoBruce

Today the schools are becoming babysitters and in their native language to boot. Fewer and fewer kids are getting a real education now.

It varies a lot. In Saratoga, CA High School the suicide rate is high because of unhealthy levels of academic pressure from asian-born parents.