This past Friday, the 23rd of April, Arizona governor Jan Brewer signed into statue an immigration bill, making undocumented immigration a crime in the state of AZ. The bill gives the authority to police officers of that state to stop, and question, any person as to the status of their citizenship, if deemed suspicious (NY Times) Something about this does not make sense. Putting aside moral judgment, ethical opinion, or normative economic points of view, this bill is still costly, harmful, and otherwise poorly reasoned legislation, in purely positive economic terms. The reason why lies in free-market theories on the nature of labor. To utilize such theories (contextually provided here by Walter Block, to whom I will reference momentarily), one must examine 2 points of interest. Why would immigrants want to be here in the first place, and why employers would want to hire them?
Immigrants must either be here for better quality of living, better employment opportunity, or some combination of the two. More than likely, they are here for the greater opportunity of higher wages as compared to opportunity available domestically; if such opportunities existed in their home country, they would be more likely to work domestically, rather than make the extreme (and often dangerous) effort of migrating to the United States (1). However, the opportunity is here only because of US employers’ willingness to employ them. This willingness on the part of US employers stems from the value of the marginal benefit of the labor provided by the migrant workers. Walter Block, professor of economics at Loyola College in New Orleans, points out the economic behavior in this very case:
Not only do employers from southern California travel hundreds of miles to find them [Mexican workers], but they also furnish trucks or travel money to transport them northward. In fact, employers from as far away as Wisconsin travel to Mexico for ‘cheap labor’ (workers receiving less than their marginal product)
Block, pg. 227
So what happens if these workers are here illegally, and are working in a place where illegal immigration is punishable by immediate deportation? The immediate consequence is that employers lose the least expensive section o f their labor costs. The workers to whom they need only paid a wage equal to the marginal benefit of that labor (or possibly less, depending on the initial domestic wages of the immigrant workers), are now gone. When that happens, costs of production generally increase. To replace that labor lost (if the employer chooses to do so), a higher wage must be offered to attract non-migrant workers. Assuming that a non-migrant worker provides the same benefit to the employer, in terms of productive labor, as does a migrant worker (Which, in such jobs as custodial positions, may be entirely plausible), this higher wage must then be automatically greater than the marginal product of that worker.
Now wait a minute; an employer would never hire an additional worker if the wage he must pay to that worker was greater than the marginal product of his labor! Therefore, the employer will take one of two courses of action. Either the employer will simply not re-hire new workers to fill the space left by the migrant workers, or he must raise his prices to maintain profitability. Which of these options appears to be more viable to the competitive producer?
The logic having been laid out, I have some questions: What were the motivations behind the passing of this bill, and what were the expected results? I would be willing to wager a new copy of Human Action to say the list of expected results did not include “Inflationary pressure”. In fact, I would also expect that one motivation may have been the goal of allowing more employment opportunities for our own domestic workers. As demonstrated above, this result is unlikely as well. What motivations and expected results are left? Unfortunately, there are none that can be discussed under restrictions of excluding moral judgment, ethical opinion, or normative economic points of view. However, I will briefly stand upon my soapbox and claim that the words of Emma Lazarus no longer seem as beautiful to many Americans as they used to be:
Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse from your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the Golden Door (2)
Block, Walter. Defending the Undefendable. Ludwing von Mises Institute, Auburn, AL. 2008
(1) Block, pg. 227
(2) Lazarus, Emma. The New Colossus