WSJ: Jobs Americans Won't Do

I normally wouldn't post a full length WSJ article here, but this one is an excellent primer on immigration and the economy. This is one of the big reasons why I subscribe to the Journal, and it's a reason that I would recommend everybody does.

Jobs Americans Won't Do
April 7, 2006; Page A12
President Bush is taking knocks from all sides in the immigration debate over his argument that the U.S. needs foreign workers to fill "jobs Americans don't want." Economists on both the left and right say Mr. Bush is ignoring the role of "prices" -- and that more Americans would happily mow lawns and bus tables if those jobs paid more than they currently do.
Well, we're always happy to see leftish economists paying attention to prices. Would that they also did so when promoting minimum-wage laws and health-care mandates. Less helpful is to see allegedly free-market sorts embrace the idea that something called "the economy" can be closed off at the national border. These fair-weather free-marketeers need a little re-education on global labor markets.
Certainly if we could somehow seal the border -- and good luck with that -- the market would adjust to the shrinking supply of labor; wages and prices would adapt. The country could survive without foreign labor in the same way we cope with shortages of steel, or sugar for that matter. But economics is about trade-offs. So the real question isn't whether living in a closed economy is possible. It's whether the U.S. is better off moving in that direction.
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Our answer is that a closed economy ultimately would make America a less competitive and hence poorer country -- because we'd have less human capital, and because we'd be using the human resources we did have less efficiently. Among higher-skilled and -educated workers, pulling away the U.S. welcome mat means all of that talent would go to work creating wealth and jobs in other countries.
But keeping out foreign laborers for the alleged benefit of low-skilled U.S. workers is equally short-sighted. Yes, immigrants compete for these entry-level jobs most directly with Americans who lack a high-school diploma. But the percentage of Americans between 18 and 64 without a high-school degree has been dropping relentlessly for decades, which is a good thing. Even without immigration, poorly educated Americans would still have to compete in a global economy that increasingly places a premium on skills.
In any case, most economic studies have found only a very small negative immigration impact on the wages of even the lowest-skilled American workers. Restrictionists advertise the study by Harvard's George Borjas, who found the widest impact across all income levels. But Diana Furchtgott-Roth of the Hudson Institute points out that his study assumes that immigrants and native-born workers are perfect substitutes. In the real labor world, immigrants often fill niche markets and bring varied skills.
Immigrants also increase the demand for labor, not just the supply. That is, they are also consumers who create jobs by buying goods and housing here. Former Federal Reserve Chairman Alan Greenspan often pointed out how immigration has been driving housing demand. And if immigrants really were "stealing" American jobs, we wouldn't have had the remarkable job growth of recent years.
Perhaps the biggest fallacy is that the same jobs that foreign workers now fill would exist in their absence. That's not likely to be the case. Seal the border, and what you'd see is not the same number of jobs at higher wages but, rather, fewer of these types of jobs overall in the U.S. This is certainly the case in parts of Europe, where some services (such as dry cleaning) are rare and cost a fortune.
"The biggest disruption probably would come in light manufacturing," says Dan Griswold, who follows immigration at the Cato Institute. "Our textile industry has managed to hang on to the extent that it has because North Carolina textile mills have be able to hire immigrants. The domestic carpet industry based in Georgia has managed to survive and thrive due to immigrant labor. The same holds true for meat-packing plants in the Midwest."
Eliminate the immigrant labor force and these jobs don't -- presto! -- start paying more to attract Americans. In a global economy, they're much more likely to disappear or move overseas as domestic employers find themselves less able to compete with foreign producers. And many of the same politicians who complained about "cheap" immigrant labor would then want to block the import of products that were once made here.
Businesses can't raise wages or prices willy-nilly without respect to the ability and willingness of consumers to pay for a good or service. The agriculture industry certainly would attract more Americans if it paid $50,000 a year to pick lettuce in the noonday sun, but not without raising the cost of food and other things. It would be more expensive to eat out, for example, and fewer people would do so as a result, affecting the restaurant industry, among others.
Unlike some of his critics, Mr. Bush appreciates the absurdity of closing off our markets to foreign labor but not to, say, foreign capital and foreign technology and foreign goods. If a company needs financing for a second plant, we don't limit its options to American sources of capital.
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Mr. Bush also understands that immigrants play a key role in growing the U.S. economy, which doesn't exist in a vacuum and shouldn't have an immigration policy that pretends otherwise. The problem is not that 11 million foreigners are here working. The problem is that they're here illegally. Efforts to close off future flows, or deport illegal aliens already here en masse, would do economic harm to all Americans, both low- and high-income. Let's hope the Congress figures that out as well.