A Note on the Economics of Immigration

This morning on the radio the talk show host made the following claim (as best I can recall), “And the free marketers will tell you that the illegal immigrant workers make for cheaper products. But look at Las Vegas, there was a time when the rooms there cost $14, now they cost $300. You’re getting ripped off!” The implication here is that the free marketers are lying to line their own pockets. There are a number of problems with the above nonsense the one of which is that most people who are in favor of the free market don’t own hotels in Las Vegas.

The biggest problem is that the price of a good is not determined by supply alone–i.e. costs. The price of any good is determined by supply and demand. Let me repeat this since it seems to be lost on many people. The price of any good is determined by supply and demand. Thus, while labor costs might go down somewhat, it is also entirely possible that demand has increased or other factors of production have gone up so that in the end the price is higher. Take for example Las Vegas. What was there to do in Las Vegas say 25 years ago? Go watch one of the Rat Pack, maybe do a little gambling and that was about it. Now what is there? Theme parks, ginormous malls, a manmade lagoon where pirates battle it out, and erupting volcano, IMAX theaters…in short a great big amusement park with gambling and shows by various performers. Gee…could demand be higher in terms of non-gambling related activities meaning that the resorts and hotels have to raise the price of a hotel room?

It is this kind of brain-dead idiotic nonsense that tends to turn me off to the anti-immigrant movement. When one puts forward dumb arguments that with just a little bit of thought are seen to be rather dubious at best; it is hard not to think that perhaps a big part of the reason for opposition immigration is xenophobia and/or racism. So a word of advice to those of you who are opposed to immigration, sit down and think through your economic arguments. In fact, take a page from the Evil Overlord List, run them past a five year old child any flaws in the argument should be immediately excised. In fact, I’d recommend sticking just to the national security issue, it doesn’t require these kinds of dopey arguments.

FILED UNDER: Economics and Business, Race and Politics, US Politics,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. McGehee says:

    It is this kind of brain-dead idiotic nonsense that tends to turn me off to the anti-immigrant movement.

    There’s plenty of brain-dead nonsense on both sides, Steve.

  2. RiverRat says:

    Supply and demand for labor should be the issue.

    A question for the economists around here. Are the illegal immigrants a factor in calculating the unemployment rate? I think not. What percentage of illegals are unemployed? Is the rate higher or lower DOL statistics?

    If they were all deported would wages increase as labor demand increases? Would an increase in wages attract more citizens to the jobs they’re filling? Would this result in prices rising to the point that demand for the services offered decreases?

    This is a shadow economy which tends to keep prices potentially lower for the consumer. Right? Does the cost of goverment benefits exceed the price reductions available to the consumer?

    Doesn’t this constitute shadow indentured servitude? Slavery?

    Just asking.

  3. floyd says:

    a nation without borders is no nation

  4. RJN says:

    Steve

    You are saying that your ideas about illegal immigration have, as their source, reactions to dumb remarks by other people. Nice.

    There are costs, that tax payers bear, to provide medical care, education, and incarceration for illegals. These costs should also be involved in any proper economics analysis.

    People like yourself who have, say, an academic job with a very generous salary, and benefits to die for, can get glib – and shouldn’t – about the work prospects of others.

    It is likely, also, that the people about whom one can get glib are the people who bear the greatest burden of supplying our fighting forces. These people have also assumed there would be, and they have worked for, a future for their children.

  5. LJD says:

    There are costs, that tax payers bear, to provide medical care, education, and incarceration for illegals. These costs should also be involved in any proper economics analysis.

    You took the words right out of my mouth. What are the ‘economics’ of providing services for free (i.e. the recipients pay no taxes or premiums into the system, yet in many areas account for a majority of the costs).

  6. DC Loser says:

    Many illegals use fake social security cards and account numbers to give their employers “deniability” about employing illegals. They have federal income tax and FICA deducted from their pay even though they have no intention of ever filing a tax return or applying for social security. This in fact leads to a large boon for the US treasury. What the size of this is, I don’t know. Maybe somebody knows out there.

  7. Scott_T says:

    Steve, you should get bonus points for that post just for working in the classic Evil Overlord list.

    Not many people can start with Illegal Immigration and slip in the old Evil Overlord list.

  8. Jack Ehrlich says:

    DC Loser. They say, and I do not know who they are, that it costs about 120K dollars to educate a child to graduate high school. Seems to me, that number is a little high. Never the less, which of the minimum wage earning illegal immigrants do you think contribute enough to pay the costs of educating their children? What part of illegal is it that escapes you?

  9. Steve Verdon says:

    RJN,

    You are saying that your ideas about illegal immigration have, as their source, reactions to dumb remarks by other people. Nice.

    Do you ever not put words in other people’s mouths? My problem with the anti-immigrant crowd is that they use specious economic arguments when for the most part the national security issue would suffice. It makes me suspect there is more to the anti crowd than simply what they are saying.

    There are costs, that tax payers bear, to provide medical care, education, and incarceration for illegals. These costs should also be involved in any proper economics analysis.

    Sure, I haven’t denied that. However, it is irrelevant to the point I’m making in this post. Further, the problem you are highlighting is also in large part due to rotten government policy not simply immigration.

    People like yourself who have, say, an academic job with a very generous salary, and benefits to die for, can get glib Рand shouldn̢??t Рabout the work prospects of others.

    A word of advice, don’t make assumptions about people that you cannot back up as it makes you look like a fool. I don’t have an academic job and a generous salary and benefits to die for.

    This in fact leads to a large boon for the US treasury. What the size of this is, I donâ??t know. Maybe somebody knows out there.

    IIRC it is one of the factors that has been helping the Social Security issue to some degree.

    DC Loser. They say, and I do not know who they are, that it costs about 120K dollars to educate a child to graduate high school. Seems to me, that number is a little high. Never the less, which of the minimum wage earning illegal immigrants do you think contribute enough to pay the costs of educating their children? What part of illegal is it that escapes you?

    But are all illegals earning the minimum wage? The labor market could be clearing at a wage that is above the minimum wage even with illegal immigrants in it.

    Like I said, run those arguments by that 5 year old. He probably would have caught this last flub.

  10. DC Loser says:

    I know the illegals working around here doing construction jobs are probably earing about $10-20 an hour.

  11. Roger Ridenour says:

    I agree with LJD, generally. Don’t illegals pay payroll taxes, FICA, etc., in many instances, though? I’ve heard the argument they help shore up SS since they don”t draw from it, but don’t know if this in fact the case.

  12. floyd says:

    is this the same 5 year old child from whom you get your advice and opinions? the national security issue is one of your favorites, “a straw man argument” on the issue of immigration. the issue is national sovereignty which is rapidly becoming an archaic concept to the “brain dead idiots” who think nationalism is a crime.