Friday, December 16, 2016

What Really Occurs When Immigrants Enter the Workforce

Here’s a Don Boudreaux  letter to the Wall Street Journal:
Matthew Burwell writes that “As long as the law of supply and demand remains in effect, importing massive numbers of foreign workers will necessarily depress wages” (Letters, Dec. 16).  I stand second to none in admiring the explanatory power of supply-and-demand analysis.  Yet for that analysis to work it must be used correctly. Mr. Burwell uses it incorrectly.
An increase in the supply of labor lowers wages only if nothing else changes.  But when immigrants enter the workforce two very important other things change.  First, immigrant workers spend or invest their earnings, both of which activities increase the demand for labor – thus putting upward pressure on wages.  By focusing only on immigrants’ effect on the supply of labor, Mr. Burwell overlooks immigrants’ effect on the demand for labor.
A second change is one that was emphasized by Adam Smith: larger supplies of workers, as well as more consumers of the economy’s output, lead to greater specialization. Jobs change.  As Smith explained, this greater specialization makes workers more productive.  This increased productivity, in turn, causes wages to rise.
If Mr. Burwell needs empirical evidence against his mistaken assertion that supply-and-demand analysis implies that more workers “necessarily depress wages,” he should consider that, in large part because of immigration, the population today of the 13 original U.S. states is more than 34 times larger than it was in 1776.  And yet wages in these states today, far from being lower (as Mr. Burwell’s analysis would have it), are vastly higher than they were then.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek. 

8 comments:

  1. ─ Matthew Burwell writes that “As long as the law of supply and demand remains in effect, importing massive numbers of foreign workers will necessarily depress wages” ─

    Yes, and importing midgets will depress people's height. Supply and demand!

    Indeed, professor, we finally know who the economically incompetent are, because thanks to El Presidente Bananero Trumpo they are coming out of the woodworks.

    By the way, the newest Fox News wunderkind Tucker Carlson repeats the exact same claptrap as "proven by economic theory" and then goes on accusing those who argue using economic theory of living in academic ivory towers.

    ─ This increased productivity, in turn, causes wages to rise. ─

    Professor, understand one thing - these Trumpistas are closeted Marxists. They will never think of immigrant workers as consumers except when it is expedient to do so and then will only accept that immigrants consume welfare. You and I will argue the same points until the cows come home except it will be an exercise in futility, as talking to these Trumpistas is like talking to a wall.

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  2. That which is seen and that which is not seen and that which Libertarians refuse to see because it conflicts with their suicidal immigration policy.

    Hey keep at it though.
    Legions of 3rd world minimum wage immigrants produce rising wages, that's the ticket !

    Very disingenuous of the the professor to compare immigration pre 1965 to the 3rd world horde we are being flooded with today.

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    1. @FormerThinkingPerson,

      No surprise that you avoid addressing rhe points made by profressor Bourdeaux and instead accuse him of being "disingenuous" for not focusing on something completely irrelevant, and calling immigration "suicidal" only because you have a hangup about certain people.

      Delete
  3. No surprise you read what you want and ignore the rest.
    If it was irrelevant why is it mentioned ?

    Real wages have been basically flat since the 70s.
    Prosperity! Liberty !

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    1. @FormerThinkingPerson,

      --- If it was irrelevant why is it mentioned ? ---

      The only person to bring it up was you, which doesn't make it relevant.

      --- Real wages have been basically flat since the 70s. ---

      And I am sure you're a pipe fitter like you father before you, and your father's father, and as your son will be an so on...

      It's easy to point out to these irrelevant statistics (even if true) totally bereft of context.

      --- Prosperity! Liberty ! ---

      Up is down! At least he will keep the trains running on time!

      Delete
  4. I'm so sick of these broad economic "laws" being misapplied. First, Smith clearly says "workers," not welfare state opportunists. The majority of illegals coming over are not here to work, unless it's for illegal purposes.

    Secondly, workers must assimilate. There is not unlimited capacity for poorly educated, culturally or communicationally illiterate concentrated in few geographical areas.

    Take away the welfare supports and you could make some of these arguments - but the burden on the tax payer to support an illegal who takes full advantage of the system, outstrips the economic creation these "economists" continue to falsely ascribe.

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    1. I'm so sick of the alt-right using "the welfare state" as an excuse for their big government eugenecist agenda.

      Delete
    2. @PolitiJim Rants,

      --- The majority of illegals coming over are not here to work ---

      Liar.

      --- unless it's for illegal purposes ---

      Working is illegal?

      You heard it here first.

      --- There is not unlimited capacity for poorly educated, culturally or communicationally illiterate concentrated in few geographical areas. ---

      That may well be but that is up to the market to decide, not you.

      --- I'm so sick of these broad economic "laws" being misapplied. ---

      Most of the time they are misapplied by economically-illiterate nincompoops who believe in magical thinking, mostly on the left but also on the right.

      Delete