Mr. Moderate

If you have read through the previous essays in this series on economics, it should come as no surprise when I assert that wages are subject to the Law of Supply & Demand. The concepts of “services” in the consumer sector translates directly to “labor” in the producer sector, and in both cases the cost of labor is subject to the usual forces that impact the market.

It should also come as no surprise at all when I assert that immigration tends to increase the supply of labor and therefore has a tendency to reduce the price for labor. How great that tendency is will depend to some degree on to what use the income of the immigrants is put. If a large percentage (typically half) of the income is exported back to family members in the “home country” of the immigrants, then the impact on the price of labor will be much greater than if no such export of income occurs. The reason for this is that income which is spent (or even saved and allowed to be spent by others through the usual banking process) adds to the overall demand for goods and services, which in turn adds to the demand for producer labor.

In general, if we have “real immigrants” who intend to be loyal to the United States, their earnings will have much less of an impact on the overall price for producer labor than if we have “wage exporting immigrants” who will send a good portion of their wages out of the country. The latter type of immigrant not only exerts a large downward pressure on the price of producer wages, but they also exacerbate the huge trade deficit of the United States. So, those types of immigrants represent a “double-whammy” against the economy of the United States.

In general, the people of the United States have been greatly annoyed that their government has done nothing to control illegal immigration across the border with Mexico. This has been even more true since the September 11 attacks as everybody recognizes that an effectively open border with Mexico is also an open invitation for terrorists to invade the USA.

But it takes a great deal of money to run for political office in the United States, and that money necessarily comes from the wealthier people who have business interests. And one of the biggest interests of any business is the cost of labor. Any business owner wants labor costs to be lower than they are so they will make a larger profit. It does not matter whether the particular candidate is a Republican or a Democrat, they need those large campaign contributions to run successfully for office, and the office of Representative in Congress takes such a large quantity of money to obtain, nobody can get elected unless they in some way “sell out” to business interests.

Accordingly, no matter which party has been in control of Congress for many decades now, there has always been a majority of Representatives in Congress who would not allow the border with Mexico to be totally closed off. This has contributed to the decades-long downward trend of wages against prices. Extreme economic discomfort over the past several decades has only been avoided by changing from the usual pattern of one wage earner per household to a new usual pattern of two wage earners per household. However, housing prices are once again near the breaking point, and there is no obvious alternative this time around as there was in the 1980s.

As long as we continue to allow millions of Mexican citizens to cross our southern border, live and work in this country, and send a goodly portion of their earnings back to Mexico, then those immigrants will continue to depress the cost of labor in the United States by a very significant amount. Unfortunately, that is exactly what the business owners in the United States want: lower labor costs. So, I suspect this will not change any time soon as both political parties are deeply held in the hip pockets of the business owners of the United States.