Border Policy and the Laws of Supply and Demand

Borderpatrol

James’ post on President Obama’s move to send National Guard troops to the US-Mexican border is pretty much spot-on in regards to its criticisms of the policy move.  He specifically notes:

We’re not dealing here with terrorists.   Nor, despite heated rhetoric to the contrary, are we suffering an “invasion.”  The problems we’re dealing with are migrant workers desperate for work and drug cartels fighting for turf.

Further, it should noted that the two problems are different.  Yes, there are some smugglers who traffic both in people and drugs, and yes, they are crossing the same border, but ultimately the situations are different ones that have to be dealt with as distinct policy realms, even if they have overlap.  In simple terms, the solutions for the drug trafficking problem are not the same as the solutions for illegal immigrant problem and we need to understand that fact.  Simplistic cries of “seal of the border” do not amount to actual policy solutions.

There is one way in which both drugs and migrant labor are linked:  both are driven by supply and demand.

Writing on the topic of illegal immigration, Patrick Corcoran rightly observes:

Illegal immigrants respond to the labor market, not an independently existing desire to leave their homeland and, in many cases, their family. When either the labor demand in the US or the labor supply in Mexico dries up, so will Mexican immigration.

It is both that simple and that complex.

He further notes:

One point that gets lost in a lot of the anger about immigration is that, generally speaking, immigration is a mutually beneficial relationship: both the immigrant and the country that receives him win.

I am sure some readers will greatly dispute this fact, but it is nonetheless true.  As problematic as the entire process is, it is clear that the maids, gardeners, fast food workers, fruit pickers, construction workers and the like are serving a purpose in our economy.  Further, despite popular perception in some quarters, they do pay taxes:  sales taxes, property taxes via rent, excise taxes, and frequently payroll taxes.  In regards to said payroll taxes, the irony is that any social security taxes paid by undocumented workers goes to subsidize social security (because the workers in question are using SS numbers not their own and they cannot collect on the system).  As the NYT reported back in 2005:  Illegal Immigrants Are Bolstering Social Security With Billions:

As the debate over Social Security heats up, the estimated seven million or so illegal immigrant workers in the United States are now providing the system with a subsidy of as much as $7 billion a year.

None of this is to argue that there is no cost to illegal immigrants or that they represent an unvarnished good.  However, the situation is far, far more complex than many who get really upset about the situation make it out to be (where it is often painted all all cost and no benefit).  Certainly it should be clear that illegal immigrations is far from only a problem.  Again, the labor demand is there and I have long maintained (for example) the forces of supply and demand are quite powerful and more difficult to contain than many proponents of border control wish to acknowledge.  Indeed, the clear existence of this labor market is a solid argument for comprehensive immigration reform that would include making it far easier for this market to work.

Back to Corocan:

The Arizona ranchers who don’t want their land tramped through every night have a legitimate grievance, but that’s more of an argument for the government establishing a nationwide quota for manual labor roughly in line with what the market demands. Today, however, the quantity of low-skilled immigrant visas stands at about 1 percent of the total undocumented population.

The Arizona law can’t overcome the laws of supply and demand. It may drive immigrants into ranches in New Mexico and Texas, but the national panorama won’t be very different. And any law draconian enough to actually put a dent into illegal immigration will necessarily offend our sensibilities and harm our economy.

It would be nice if we could get a more realistic discussion on this topic.

Also, it should be noted that roughly 40% of illegal immigrants in the US are not border crossers, but rather visa over-stayers.  As such, even if we could totally seal the border between the US and Mexico with a force shield of Trekian proportions, we still wouldn’t have solved the problem.

One of the political observations I would make is that the segment of US politics that is most vehement on the question of border control is also the segment that is most interested (at least rhetorically) in both promoting capitalism and smaller government.  However, on this topic that appear to wish to repeal the laws of supply and demand and to increase the power of the government.

Photo source: click.

FILED UNDER: *FEATURED, Borders and Immigration, US Politics,
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is Professor of Political Science and Dean of the College of Arts and Sciences at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. john personna says:

    It would be nice if we could get a more realistic discussion on this topic.

    Agreed.

    Also, it should be noted that roughly 40% of illegal immigrants in the US are not border crossers, but rather visa over-stayers. As such, even if we could totally seal the border between the US and Mexico with a force shield of Trekian proportions, we still wouldn’t have solved the problem.

    If we had work visas then we could raid workplaces (and the curb outside Home Depot), to deport those without them. Then we could set a number for the gastarbeiter.

    But we aren’t willing to do those wholesale raids now, and we aren’t willing to grant work visas, and so we have a status quo.

    (Those 1200 National Guard are just a play within the status quo.)

  2. Dave Schuler says:

    When either the labor demand in the US or the labor supply in Mexico dries up, so will Mexican immigration.

    Both of which are either happening right now or will happen in the foreseeable future. Which is why I’m not overly exercised about immigration, legal or illegal from Mexico (acknowledging fully that we have the right to our own laws and having them enforced).

    I do have a question, though. Has anybody ever done a study that found that unskilled immigrant labor had a benefit on net to the United States? I’m asking because I want to know the answer.

    The reason it’s an important question is that the costs of unskilled labor are likely to grow while I doubt that the benefits will.

  3. Dave Schuler says:

    BTW, there’s a third condition that should slow immigration from Mexico. Studies have shown that when the comparative incomes of two neighboring countries reach a certain threshold that economic migration between the countries slows dramatically. Said another way the richer Mexico gets (or the poorer we get) the less immigration there will be between the two countries. It’s not perfectly elastic. IIRC we’re getting pretty close to the threshold now.

  4. john personna says:

    I believe that many of the illegal aliens serving me papusas are central American.

    That and, I’d think Mexicans recognize what a dangerous basket case their country has become.

  5. Without a doubt a large number of migrant workers are Central American, yes.

    Anecdotally, for example, when I worked as a night manager at a McDonald’s in SoCal back in the late 1980s, our entire night time cleaning crew was from Guatemala and El Salvador.

  6. steve says:

    “I do have a question, though. Has anybody ever done a study that found that unskilled immigrant labor had a benefit on net to the United States?”

    Tango likes the National Research Council studies. They are not bad studies, but they do have at least two problems IMHO. First, they look pretty much just a t taxes. (Correct me if I am wrong.) They do not look at general economic gains to the economy from having cheap labor and increased productivity by those who are relieved from grunt labor or child care. Second, I believe that Medicaid now requires proof of citizenship. The NRC studies were done before that change. As with all of these studies, these are largely estimates.

  7. Wayne says:

    Re “immigration is a mutually beneficial relationship”

    Only to a certain point and that point is usually pretty low. Otherwise you wouldn’t have so many countries with strict immigration laws. Look at Mexico. They are much poorer country than the U.S. but they have strict immigration laws and problem with illegal immigration from even poorer countries.

    I pay sales tax to. Does that mean I should not pay income tax? What if no one pays income tax? By your logic we can’t be prosecuted for not paying income or property taxes because we do pay sales tax therefore we do pay taxes. Your argument doesn’t fly.

    If we need more immigrants to fulfill our work needs we can increase legal immigration totals. Once again it is the use of the old Red Herring. It is illegal immigration and unsecured borders that people have a problem with not immigrants.

    Many of the liberals say we need cheap labor. Yet the reason illegal immigrant labor is so desirable is because you can pay them less then minimum wage and skirt many other labor laws that the left passed. So in the end it is the left who want to pass these labor laws to make themselves feel good but then don’t want to follow them. Typical liberal philosophy, laws apply to other people.

  8. I pay sales tax to. Does that mean I should not pay income tax? What if no one pays income tax? By your logic we can’t be prosecuted for not paying income or property taxes because we do pay sales tax therefore we do pay taxes. Your argument doesn’t fly.

    First, I should have included income taxes in my list, as many illegals do pay income taxes as well. Second, I made no argument along the line that you are stating. The only argument I made was that many claim that illegals do not pay taxes, and that is manifestly not true.

    BTW, if you want to work in the under-the-table black market economy, you have the same opportunities as migrants workers to do so. The point is, which also gets to the rest of your comment, is that most citizens don’t choose that route.

    Indeed, the following claim is not accurate:

    Yet the reason illegal immigrant labor is so desirable is because you can pay them less then minimum wage and skirt many other labor laws that the left passed.

    This is true for some illegal workers, but is not the universal statement that you are making out to be.

    So in the end it is the left who want to pass these labor laws to make themselves feel good but then don’t want to follow them. Typical liberal philosophy, laws apply to other people

    This is a non sequitur.

  9. Wayne says:

    Re “The only argument I made was that many claim that illegals do not pay taxes, and that is manifestly not true.”

    When people say that they are talking about income taxes which many illegals do not pay. That is like someone saying criminal don’t follow laws and you replying “that is manifestly not true”. After all they do follow some laws. Technically that is true but it is understood that they are not talking about all laws but some. Trying to pretend different is bull.

    Re “but is not the universal statement that you are making out to be.”

    I didn’t mean it to be a universal statement. Although it is a significant portion and after reading your comments you don’t have much room for accusing others for making universal statements.

    Re “if you want to work in the under-the-table black market economy”

    If I wanted to sell drugs or hire myself out as an assassin, I could have the same opportunity as they have. However I don’t think those are the proper things to do.

    Re “non sequitur”

    How so? People passing laws they don’t intend to follow but expect others to follow does support the conclusion that they believe that laws apply to others and not to themselves.

  10. When people say that they are talking about income taxes which many illegals do not pay.

    Perhaps that what you mean. However, they does not mitigate against the fact that they pay taxes.

    That is like someone saying criminal don’t follow laws and you replying “that is manifestly not true”.

    That only make sense if you redefine what I said.

  11. LaurenceB says:

    Wayne,

    Many, many illegal immigrants pay income taxes. Their paycheck goes through the same withholding process yours does. To their employer, they are just like you.

    For those who are paid “under the table” by an employer, I think it’s a fair assumption that they typically make so little that even if they did file an annual income tax return, they would likely pay very little tax – perhaps none at all.

  12. Wayne says:

    LaurenceB
    Many, many illegal immigrants do not pay income taxes

    FICA tax which is a good chunk is not exempted tax from low income workers.

  13. LaurenceB says:

    Go back and read Dr. Taylor’s reference to payroll taxes. In particular, note the reference to Social Security.

  14. TangoMan says:

    I am sure some readers will greatly dispute this fact, but it is nonetheless true. As problematic as the entire process is, it is clear that the maids, gardeners, fast food workers, fruit pickers, construction workers and the like are serving a purpose in our economy.

    Who said they weren’t? Also, who is presuming that these job classifications are staffed primarily by illegals. Just a few days ago I linked to a report which broke out the native representation in most of those job categories in the report noted that in all job categories but two, that natives held the majority of positions.

    Further, despite popular perception in some quarters, they do pay taxes: sales taxes, property taxes via rent, excise taxes, and frequently payroll taxes. In regards to said payroll taxes, the irony is that any social security taxes paid by undocumented workers goes to subsidize social security (because the workers in question are using SS numbers not their own and they cannot collect on the system).

    You write this like you actually believe it, when the reality is different, and will be catastrophic when the Totalization treaty between the US and Mexico is signed by the President. More here:

    Illegal aliens who file with the IRS for refunds suffer no penalty for submitting W-2s with fake information, as an American would, so long as they include the authentic illegal-alien taxpayer ID number given them by the IRS. In

    These contributions to SS & Medicare are claimable in the future and are refundable when the illegal alien leaves the US. Sure, we have temporary use of the money but these contributions also represent a growing liability for the US treasury.

    Again, the labor demand is there and I have long maintained (for example) the forces of supply and demand are quite powerful and more difficult to contain than many proponents of border control wish to acknowledge.

    Supply and demand forces are distorted by the presence of a welfare state. Let me walk you through the dynamic process. Increased labor supply from illegals decreases market clearing labor rates in the unskilled market sector. With me so far? American citizens face three choices, 1.) continue to work for wages that keep decreasing, 2.) drop out of the labor force and be supported by another family member, or 3.) drop out of the labor force and collect social welfare benefits.

    Option #1 is the only option that conforms to your argument about labor markets conforming to the forces of supply and demand. Option #2 produces a suboptimal outcome in that someone who is willing to work instead chooses to stay at home to care for the household or not even that, they just remain idle or turn to petty crime, with the result that there is decreased aggregate demand in the economy from the loss of this person’s productivity in the economic sector. Option #3 results in increased utilization of unemployment insurance and social security disability payments.

    Some analysis on workforce participation rates:

    Looking first at all workers shows that between March 2000 and March 2005 only 9 percent of the net increase in jobs for adults (18 to 64) went to natives. This is striking because natives accounted for 61 percent of the net increase in the overall size of the 18 to 64 year old population.

    If 61% of the increase in the size of the working age population is accounted for by citizens and they only account for 9% of the net increase in jobs, then what are the rest of these people doing with their time? Sure, a good many of them are in school and some are not-working spouses, but we’re still left with a huge disparity.

    As for the less-educated, between March of 2000 and 2005 the number of adult immigrants (legal and illegal) with only a high school degree or less in the labor force increased by 1.6 million.

    At the same time, unemployment among less-educated adult natives increased by nearly one million, and the number of natives who left the labor force altogether increased by 1.5 million. Persons not in the labor force are neither working nor looking for work.

    We see an imbalance between immigrant labor supply being introduced into the labor force and a far larger native combination of natives who are unemployed and who have left the labor force. This is a classic case of displacement rather than immigrant labor being used to address labor shortages.

    Of perhaps greatest concern, the percentage of adult natives without a high school degree who are in the labor force fell from 59 to 56 percent between March 2000 and 2005, and for adult natives with only a high school degree participation in the labor force fell from 78 to 75 percent.

    How is this a good sign? How large is the proportion of this segment which is now relying on some social welfare income in lieu of earned income?

    The decline in less-educated adult natives (18 to 64) in the labor market does not seem to be the result of more parents staying home with young children, increased college enrollment, or early retirement.

    This begs the question of whether these citizens have been willing to make the trade of living on less income in exchange for more free time or whether they have sought a source of income that comes from not working.

    Some of the occupations most impacted by immigration include maids, construction laborers, dishwashers, janitors, painters, cabbies, grounds keepers, and meat/poultry workers. The overwhelming majority of workers in these occupations are native-born.

    Clearly, there are few, if any, jobs that Americans won’t do, the sticking point is at what salary.

    Native-born teenagers (15 to 17) also saw their labor force participation fall � from 30 percent in 2000 to 24 percent in 2005.

    The alarming decrease in the teenage workforce participation rate is not just a recent trend but a trend that has shown inverse linearity with the rise of illegal workers since the 90s. Here is data from a report referencing BLS data which looks at the workforce participation rate for ALL teens, unlike the above which looked only at native-born teens:

    According to July 2002 BLS data, the labor force participation rate for teens— the proportion of the youth population aged 16 to 19 that is working or is looking for work—was 58 percent, a steady decrease from the 1994-2002 peak of 67 percent in July 1995.

    Here is a BLS report from April 2010 which breaks down unemployment rates by group:

    Among the major worker groups, the unemployment rate for whites (9.0 percent) edged up in April, while the rates for adult men (10.1 percent), adult women
    (8.2 percent), teenagers (25.4 percent), blacks (16.5 percent), and Hispanics
    (12.5 percent) showed little or no change. The jobless rate for Asians was 6.8 percent, not seasonally adjusted.

    The number of long-term unemployed (those jobless for 27 weeks and over) con-
    tinued to trend up over the month, reaching 6.7 million. In April, 45.9 percent
    of unemployed persons had been jobless for 27 weeks or more.

    Look at that unemployment rate for teenagers, 25.4% and keep in mind that these are teenagers who are actively looking for work. This sure doesn’t look like we have a labor shortage in the nation.

    Here is a report on what is happening in the Black community and how so many Black men are idle for periods of a year or more:

    Focusing more closely than ever on the life patterns of young black men, the new studies, by experts at Columbia, Princeton, Harvard and other institutions, show that the huge pool of poorly educated black men are becoming ever more disconnected from the mainstream society, and to a far greater degree than comparable white or Hispanic men.

    The share of young black men without jobs has climbed relentlessly, with only a slight pause during the economic peak of the late 1990’s. In 2000, 65 percent of black male high school dropouts in their 20’s were jobless — that is, unable to find work, not seeking it or incarcerated. By 2004, the share had grown to 72 percent, compared with 34 percent of white and 19 percent of Hispanic dropouts. Even when high school graduates were included, half of black men in their 20’s were jobless in 2004, up from 46 percent in 2000.

    With the shift from factory jobs, unskilled workers of all races have lost ground, but none more so than blacks. By 2004, 50 percent of black men in their 20’s who lacked a college education were jobless, as were 72 percent of high school dropouts, according to data compiled by Bruce Western, a sociologist at Princeton and author of the forthcoming book “Punishment and Inequality in America” (Russell Sage Press). These are more than double the rates for white and Hispanic men.

    Here is time series data from the BLS on workforce participation rates of the noninstitutionalized civilian workforce from 1973 to 2009. Compare the 1973 male employed workforce participation rate of 75.5% to the 2009 rate of 64.5%. Compare the 1973 female employed workforce participation rate of 42.0% to the 2009 rate of 54.4%. Now the female data is also capturing the social dynamic of more women entering the workforce but we also see a decrease from the 2000 high water mark of 57.5% participation rate.

    Here is data on Social Security Disability payments for the years 2000 and 2008. In 2000 disability was being paid to 6 million citizens of working age. In 2008 disability was being paid to 8.5 million citizens of working age.

    It would be nice if we could get a more realistic discussion on this topic.

    Which means what? Agreeing with your faith-based suppositions? I don’t see you making a data or analysis driven case, rather what I see you doing is appealing to the authority of opinion columnists who make rhetorical cases that appeal to your bias. You cite them because you like what they say and they you ask people to have a realistic discussion, where realism seems to be determined by how closely the participant hew to the opinion columnists position.

    Also, it should be noted that roughly 40% of illegal immigrants in the US are not border crossers, but rather visa over-stayers. As such, even if we could totally seal the border between the US and Mexico with a force shield of Trekian proportions, we still wouldn’t have solved the problem.

    So what? Really, please explain to me why solving 60% of a problem is not beneficial in it’s own right?

  15. TangoMan says:

    Please check moderation queue.

  16. TangoMan says:

    Thank you for releasing the comment from moderation. Would you please consider a modification of your comment formatting options. Notice how a blockquote which immediately follow a hypertext link is automatically bolded and the font size is reduced. If any text in that first paragraph is bolded by the commenter in order to highlight it produces a bolding of all of the text that follows (I learned this in a previous comment) and the bolding is lost anyway because the entire paragraph text is bolded.

    I just wanted to bring these issues to your attention.

  17. TangoMan says:

    Hello, anyone here? We’ve got some data that we can now use to have a more realistic discussion on this topic.

    I’m willing to argue my side, so don’t be shy. I’ve even got more data to make the discussion even more realistic, that is if we can even start it. It’s been over 6 hours already since the data dump and no one wants to have a more realistic discussion on this topic.

  18. TangoMan,

    Despite how it may seem, I am not online 24/7 🙂

    I will attempt to give this a more thorough look through, but my initial reaction is that while you have identified real issues, you are eliding the basic issue by ignoring the basic labor market issues.

  19. TangoMan says:

    you are eliding the basic issue by ignoring the basic labor market issues.

    I’m looking forward to your further clarification on the basic labor market issues that you think I’m misunderstanding and/or ignoring.

  20. floyd says:

    So… “the law of supply and demand” trumps legislative law.
    Well I guess that gives the drug trafficers a pass as well as the illegal emmigrants.
    The principle is the same and to say otherwise is disingenuous.

  21. @Floyd

    Actually, I think that the major failings if both our immigration and our drug lawsare failing specifically because they fail to adequately address the supply/demand dynamic.

    So no, you haven’t caught me in some disengenuous trap.