The few times I have heard Dobbs on this discouraged me from inquiring further. He grossly exaggerates the costs of illegals in my view.

I do not favor illegal immigration. Laws should be enforced, but they should not be stupid laws to begin with. I would start by enforcing workplace laws. I would facilitate citizenship and not permit guest worker/A1B type policies.

In the context of my post, I think the point to emphasize is that the impact of immigration on wages has been found to be negligible, and on labor rights it has probably been a plus, since the most vibrant part of the labor movement these days is immigrant-based.

Max B. Sawicky

http://maxspeak.org/mt

max@maxspeak.org

Hey Max,

Can you elaborate on box 5? Specifically, what are the unparalleled benefits of a tight labor market and how do you get a loose monetary policy (assuming that is the opposite of our current policy) and a tight labor market and avoid the stagflation of the 70s or high inflation in general?

I am in total agreement with you points, I just want some clarification for my own education.

.  .  .  when it became clear that making money was to be valued over production  .  .  .  .

Bliss was it in that dawn to be a banker,
          But to be a quant was very heaven!

Most immigrants lack skills or education, so whatever their impact is focused on a relatively narrow portion of the labor market. More immigrants increase demand for goods and services, which increases demand for labor, which counteracts the wage-dampening increased supply of labor. To some extent, immigrants take jobs many residents decline to accept and would not otherwise exist (i.e., lack of immigrants in these cases would not prompt employers to offer better pay).

Look at it this way. Over time, population and labor force grow. Employment grows along with them (to be sure, not in lockstep, creating disruption in individual families). In the 50s, some people wrote about machines replacing human labor. Didn't happen. Machines replaced some jobs and other jobs were created.

There was a study that said that illegal immigration had caused an 8% drop in wages for unskilled workers. Are you disagreeing with the study (and if so on what grounds), or do you think that drop is insignificant?

I find the standard line that illegal immigration has had little effect to not pass the smell test, mainly because I have always lived in areas with large African American communities (though I am white). And it is clear that the employment rate for AfAm men has dropped a great deal, and Latino men are doing those jobs. Labor jobs, construction jobs, etc.

I think if you live in affluent suburbia, this effect may not be noticeable.

The main way to avoid stagflation is improved productivity and productive capacity and moderation in discretionary spending when the economy approaches full employment. Full employment is when the budget should balance, not when unemployment is at the roughly 8% level that we see today.

Ideally, barring special reason to reduce the stock of debt or a high priority need for public investment, the average annual budget deficit across the business cycle would be at about the average rate of growth, barring special circumstances.

By contrast, fighting inflation with interest rate policy discourages productivity improving investments, by increasing the financial burden of investment in real assets and by reducing demand for the goods and services to be produced with that capacity. It therefore leaves the nation with a productive capacity that cannot employ all most people willing and able to work without creating inflationary conditions.

This is an excessively "fish market" analysis that ignores the impact in the markets for jobs requiring unspecialized skills on labor union formation. Illegal immigrants are far more effective in this regard than legal immigrants ... and indeed it legal immigration may be able to aid labor union formation. That seems to be recent experience in the UK.

"The jobs that Americans refuse to do" typically means, "The jobs that Americans refuse to do without the offer of more pay". And for those jobs where it is possible (but obviously not preferred) for the offer of more pay to be forthcoming, that is part of the process of maintaining a broad middle class.

I'm a bit puzzled by the inclusion of health care as a non-factor in the economic problems.  Unless the press has been feeding us a line of bull, many industries are struggling with the problem of paying for health insurance for their workers, both the working ones and the retired ones.  In my case, my former employer has had to virtually drop paying for my health insurance, and my monthly cost for that insurance is rising around 20-25% a year.  That surely qualifies as a problem.

You are correct that a big part of the cost of health care problem is the ever increasing number of new treatments and drugs that are available.  But, that can only be controlled if we accept that health care should not be a means for stockholders to make money.  It should be a guaranteed right of all citizens.  We also need to eliminate the tiers of middlemen who take massive cuts of what we pay for health care and health care insurance.  For example, a very large portion of what we pay for health care insurance goes to insurance salesmen as a commission, not to paying for our health care.

I haven't seen anything that suggests that this rising cost problem is going away on its own, and at the rate that it is rising if it isn't a big problem now it surely will be in 10 years. 

Hoppy in Sacramento

I didn't properly connect the dots, so will try to do better. I have not heard Lou Dobbs oppose immigration, but it is clear that he is on a crusade against illegal immigration.

If opposition to illegal immigration is "anti-immigrant lunacy" I want to know why. That is my question. Perhaps I jumped too quickly to ask for a principled defense of illegal immigration, but in any case, I'd like to know why those who want to reduce it are lunatics. That discussion, in turn, would have to include an explication of objective reasons why illegal immigration is good, or, at least, better than the alternatives.

Legal immigration is not a problem right now. Illegal immigration is what fuels the debate. So, whatever our emotional reactions to commentators like Lou Dobbs may be, let's discuss the problem in its own terms and without calling people lunatics just because they take the other side. The desire to reduce the flow of illegal immigration is not anti-immigrant, nor is it lunacy.

Tight labor markets put upward pressure on wages, facilitate unionization, and get people ordinarily written off into the labor market, all without the government having to intervene. The inflation bugaboo was put to rest in the late 90s. We had very tight labor markets, wage growth, and no serious inflation. Why is a longer story.

Max B. Sawicky

It is fish market. Sometimes that's all you need. I agree with you about unionization. On your last point I don't, sometimes yes, other times no.

Max B. Sawicky

Health insurance is growing less affordable and health care is maldistributed. Per your comments, I would take health insurance out of the firm and finance it with public funds. Then we have to figure out how much we want to spend on it, and how. Not easy, but better than the direction we are heading in now.

Max B. Sawicky

http://www.childtrendsdatabank.org/indicators/1HighSchoolDropout.cfm
Among youth ages 16 to 24, Hispanics accounted for 40 percent of all high school dropouts in 2004. However, they only made up 17 percent of the total youth population. (

"Even so, high school drop-outs work and pay taxes too."
You are kidding, do you ? How much a family of two working
high school drop-outs + 2 chldren pay in ALL taxes and how much
they get in ALL services.
Let's don't argue obvious points.

They do have a impact and a negative one at that. Here's a few examples.

Take for example the meat-packing trade, it used to be a high paid profession $25+ a hr. Now thanks to illegal immigrants doing the work wages have regressed to less to $8.00 hr in shops that use illegals.

Housing construction - again another high paid trade or used to be until contractors found out that illegals will work for dirt wages. Wages have now regressed to 1960's level.

Light manufacturing and technical work- jobs that used to pay $10-$12.00 or even $15.00 are now being done by illegals for $6.00 or$7.00 a hour.

Max and his ilk wouldn't know about these examples because he's too far removed from the working class.

This isn't the worst part. A lot of employers keep the illegals off the books so the state gets no taxes for them. And even when they do pay above board.A lot of illegals use stolen ID's and SSI numbers which screws some law abiding citizen over.

Then add in the fact that the law abiding tax payers have to pay for the care of these illegals. The illegals get free health care and education for their kids, they get injured they go on disability for life.

The reason all of this is glossed over by people like Max is because they see the illegals as new recruits to the Democratic party. Which hopefully translates into a base of new, mindless lever pullers down the road.

Illegal immigration is not a hot topic here because most understand it is easily stopped, with enforcement at the right place. We have something like 25,000 border agents and a couple hundred tasked with workplace enforcement. A no-brainer; simply hire an effective number of workplace inspectors.

Ok, I'm not sure what you mean by the first principle I cite... are you referring to the idea that employment (I suppose I should have said the unemployment rate) being inversely proportional to inflation? If that's the case, then I agree it's a little simplistic, and of course not exactly proportional. However, when unemployment goes past "full employment", inflation does rise within a closed economic loop.

What would be your definition of the difference between "full employment" and a "tight labor market"?

In my opinion, full employment is very well defined as to what it constitutes. Long-term or short-term employment has no bearing on the full employment numbers... What isn't well defined is at what level it should be.

And, according to textbook macro-economics, wouldn't a tight labor market (i.e., greater than full employment) cause inflation to be higher than during a time with a larger labor market? If not, then I'm going to have some serious talks with my previous economics professors. In which case, it would make sense to me that instituting anti-inflationary policy would be a proper foundation for allowing the labor market to tighten. Just because the Feds don't do something first, doesn't automatically mean it's off the table.... Just like, because you shower first in the morning doesn't mean you won't brush your teeth later.

As far as avoiding inflation by loosening monetary policy, I admit I can't cite that. It was something I recall reading with regards to some economists feeling we can push the unemployment rate down to 1-2% and safely avoid inflation. Or, it might have been to avoid the effects of inflation.

~~~~~~~~~~~
Quidquid latine dictum sit, altum videtur.

Come visit PROJECT: Lucidity.

It's not a fish market. Whatever tastes and fashions, good fresh fish will always provide nutrition, because we are the same biological organisms that we were 40,000 years ago ... and spoiled fish will always represent a substantial loss in value, because of those cussed microorganisms that have been around for far longer.

The labor market is for employment in production, and subject to technological change ... changing technique, changing equipment, changing skills, changing organization. Sure you can use neoclassical fishmarket metaphors, but doing so you beg the question regarding the most important source of rising real incomes.

Corporations will not only push to develop on the technological path that best serves their ends within present institutional constraints, but will also push to change the rules in ways that they expect will permit even more favorable technological development paths.

If we permit the government to pursue a high unemployment policy, as at present, and a policy of high tolerance for the employment of illegal entrants, we ought to expect an abundance of unskilled labor for tasks that can be organized to use it, and therefore no need to develop ways to accomplish those tasks based on jobs that Americans will be ready, willing, and able to take. It is, in short, like the Singapore Development model, with the sign reversed to make it an Anti-Development model.

And on Trade ... that's the actual deficit.

5 year sequential averages, current account deficit as share of GDP:
* 61-65 0.76%
* 66-70 0.20%
* 71-75 0.29%
* 76-80 (-0.20%)
* 81-85 (-1.39%)
* 86-90 (-2.37%)
* 91-95 (-1.10%)
* 96-00 (-2.72%)
* 01-05 (-5.11%)

Even at an income multiplier of 1.5, the loss of 7.5% of potential GDP in the face of labor-unemployed rates of 8% or more is not a 'minor' matter.

What I meant to show was that there was not an actual fence for the length of the Iron Curtain. There was of course intense scrutiny of the easier paths, and the special case of Berlin does not counter the main point. West Berlin was more like an embassy's front door than a frontier crossing. The equivalent would a crossing directly into New York from Mexico.

To support the point consider Alaska and Siberia. Inuit crossed the Bering Strait continually duing Soviet days, to visit family and hunt. They were known but tolerated sometimes, and sometimes not. Our Mexican border is most like the Soviet southern border. There was no fence in Afghanistan or Iran.

As to the rest of the post, that is public knowledge. The Customs and Immigration department of Homeland Security has the numbers in question. The conclusion is common sense.

I'll put it this way: People find ways to enter if it's worth it. Make it less worthwhile. Spending lots of money on border enforcement is both inefficient and ineffective. Unlike a possible terrorist, who will go to ground, an immigrant seeking work will do exactly that. If there is also a substantial minimum wage requirement on employers, why would a business chose to hire undocumented workers with a limited command of English? For the same cost they can get English-speaking legal workers. Only if a blind eye is turned toward the businesses that enjoy cheap hostage labor is there a problem.

Corvid

What about the $45 billion a year sent to Mexico by illegal immigrants that otherwise would have remained mostly within the U.S. economy? And as for the effect of illegal immigration on wages and unionization, look at the history of the meatpacking industry over the past 30 years, or much of the construction industry, to name just two.
.
I simply do not understand why it is the responsibility of the United States to provide jobs within our borders for 1 out of 7 Mexican laborers, not to mention the many Central Americans. Mexico, at least, is a hugely prosperous country. It has more millionaires than Germany. It's richly endowed with natural resources and is not overpopulated. It's a terrific tourist destination.
.
The solution is to let them deal with their problems and let us deal with ours. We could start by repealing NAFTA.

The point about trying to "fix" it by punishing the illegal entrants is that it is used as a diversion to avoid employer sanctions. And the "choose only one" alternative is clear.

• Choose only to punish illegal entrants, and as long as jobs are available new entrants will be smuggled in illegally to take their place. The main impact will an increase in the share of their income taken by people smugglers ... illegal entry won't be reduced substantially.
  
• Choose only to punish illegal employers, and then the flow of illegal entrants will drop back down from millions to thousands, because of the lack of job opportunity.
  

Pushing for both will only result in the one that harms the illegal entrants without solving the problem. So I push for effective prevention of illegal employment, and then once that is in place we can have a debate on who should be offered work rights under what terms.

Dissing Dobbs like that puts you on the same side as illegal immigration supporters who say similar things. So, if you want to critique Dobbs while also not supporting illegal immigration, you're going to have to either get more detailed and provide your opposition to specific things Dobbs says, or you're going to have to say you don't support others (like, for instance, Reason Mag) who say similar things.

And, the "costs of illegals" aren't just economic.

For instance, the U.S. Federal Reserve is trying to profit from illegal immigration. That will probably be good for the economy, bringing in income for not just the Fed but the other banks involved. However, the U.S. government being allowed to profit from indirect illegal activity - including things like human trafficking and identity theft - represents massive government corruption. While that program will bring in cash, a major cost is that now the government is profiting from - and will perhaps encourage - illegal activity.

And, another "cost" is increased political power inside the U.S. for the Mexican government.

Justice for Janitors.

No national identity card is really necessary. At least two of the recent big (show) raids involved SSNs not matching the given names and other details.

Note that we already spend more publically on health insurance than most Western countries with universal coverage, and with nearly as much private money thrown on top still fail to cover 10m's of people.

We could start a universal basic and catastrophic coverage system with a not-too-big increment ... I reckon that a 1% payroll tax below the SS cutoff and 5% above yields around $70b, and then a health care commission could determine the highest priority things that can be covered on a universal basis with that money. That then take pressure off the unorganized collection of government programs.

And if qualifying for the universal coverage includes as one of the criteria health benefit per dollar spent, then that introduces the indirect bargaining power of a universal plan that Big Pharma opposes so strongly ... witness its effort to do as much damage as possible to the Australian Pharmaceuticals Benefits Scheme during the Australian/US FTAgr'nt negotiations.

The SSN database is not trustworthy. Certainly you cannot use it as a foolproof source of citizenship verification. Almost 10% of its records contain errors. If you're going to institute a rule that anyone who does not match SSN's database can't be hired for a job, you're going to end up rendering 10% of the workforce (American citizens!) unemployable because of some fool bureaucrat's flub. That's not going to fly.

I know I'm late to the debate, but...

Dobbs is more than just anti-illegal immigration. He takes it to an extreme that I think is completely unwarranted.

My preferred solution is not a continuation of illegal immigration -- our current situation is bad for everyone, including the immigrants. I'd greatly expand legal immigration, and support a giant plea-penalty for those already in the country, including a fine on the order of $1-2 thousand, a short, manditory course in rudimentary English, and three year resident alien status. If at the end of three years you have a clean criminal record and have shown an ability to be employed consistently, welcome, citizen.

"The implications of tolerating deficits of two percent of GDP -- over $200 billion in today's terms -- rather than a deficit of zero are huge."

The implications sure are huge. Such deficits reduce the national saving rate. (National saving = private saving + government surpluses).

This has two harmful effects.

1.It increases interest rates. As a result physical investment is lower and therefore the productive capacity of the economy grows more slowly, leading to a lower rate of growth in the standard of living. (There is one major exception to this. If the deficit is the result of government investment in human capital, like education, and infrastructure, and if these have a higher rate of return than physical investment, that will not lead to a lower rate of growth in productive capacity.)

2.It causes an increase in the flow of capital funds from abroad. This drives up the value of the dollar on foreign exchange markets. That in turn makes U.S. products less competitive with foreign products both at home and abroad.