Our Dear Illegals and the Economy: Part the Third

Graph missing yet again =/


The debate surrounding illegal immigration is one of those tangled webs that we, humanity, are so fond of weaving. Analyses of the problem are flowing in abundance, as are the fallacies and narrow ideas. Everyone has an answer, and that answer seems to only to respond to a very small section of the question. Why – because we are leaving things out. As humans, we cannot possibly see the entire scope of the problem, but we shall valiantly try.

This is about the time that someone would greet you with that infamous phrase from that equally infamous musical set in the 1930s in Salzburg, Austria which has as its protagonist a novice named Maria; however, I will spare you. Illegal immigrants are foreign nationals who either enter the country without following proper protocol as established by the United States Immigration services, and those who have entered the country legally, but have overstayed the limits specified by the Federal Government. While the most publicized subgroup are Mexicans who come across the southern border of the U.S., less than fifty percent fit into this category. Illegal immigrants in this country come from all over the earth: other Latin American countries, Asia, Africa, and in very few cases, Europe. This is significant because it demonstrates how most border-oriented enforcement measures will not solve the problem, and even if draconian measures are enacted, it would still be very possible to cross the border. Walls, excessive force, etc. are not the solution to the problem. While some illegal immigrants are even rich refugees, this analysis will concern mainly those whom society always thinks about, namely the Latin Americans (not just the Mexicans).

Now we must ask the question: what effect do illegal immigrants have on the economy? Are they a positive or a negative influence? Could our economy function without them? Many say that they are a negative force in the economy because they steal tax dollars and send them abroad. This is true to an extent: illegal immigrants do not pay as much in taxes as do legal inhabitants. However, they do pay sales taxes and sometimes they are able to become “quasi”-legal through fraud and pay income taxes as well. This said, illegal immigrants do tend to utilize many social services, and almost certainly do constitute a net drain on taxpayer dollars. Given that, tax money is not the best and certainly not the only measure for their economic effect, so we must keep looking. Illegal immigrants do indeed lower prices for things such as agricultural products and housing repairs. So the United States citizen does pay less for goods, but more for taxes, essentially, their effect is more or less neutral. While we can almost certainly never be exactly sure of how much money they cost us in taxes and then how much money they save us in the market, it seems most likely that their effect cannot be said to be either positive or negative only from their price. Here, economics is not as important as socioeconomics. The truth of the matter is that if many places within the United States with to fix the problem of illegal immigration, they will have to settle for a great restructuring of the socioeconomic system. Ceteris paribus, prices in southern California will shoot up and similarly across the board prices will be higher (with very high price indexes). However, this should (Government willing) decrease taxes. While in most places the effect should be balancing, Southern Florida in particular will have to incent an entirely new system to deal with construction, as the price of living there (already high) will shoot up again. This could decrease economic growth in the region, but yet it might run out the migratory citizens there, creating a more stable and less touristy economy. Essentially, illegal immigrants are essential to the economy as we know it know, and to sudden remove all illegal immigrants (by whatever means, amnesty, deportation, etc) will involve the structure of the economy changing. Are “us Americans” ready?

The real danger with illegal immigrants present is the shadow economy. Obviously, being sure of what the shadow economy is going to do can be rather difficult. This can create unknown effects on the economy and creates a quandary for political culture. However, the biggest threat is the potential for terrorist activity. Not knowing who is here, or even how many people are here, is a significant threat. If some sort of amnesty program were adopted, this would cause an example of the prisoner’s dilemma, the U.S. would be able to look for potential terrorists among the unknown population and the formerly-illegal immigrants could earn higher wages and participate in society, which leads us to our next point on inquiry.

Do illegal immigrants work for lower wages and benefits than legal workers? Using a marginal cost-benefit analysis, the answer is clearly yes. There are fines and other penalties involved with hiring illegal workers, creating a marginal cost for using their labor. Since legal laborers have no such legal cost, if illegal workers were paid the same, it would be ludicrous to hire them, since they have the risk with no reward. Their labor must be cheaper because somehow the cost of legal problems must be outweighed by the marginal benefit of paying them lower wages. Everyone, I am sure, will admit that illegal immigrants are frequently hired, so positive economics informs us that they do work for substandard wages. Furthermore, illegal immigrants cannot unionize and have no legal power to protect them from oppression (another element adding to the marginal benefit of hiring them). While I have faith in the United States public that they are not all oppressed, I am sure that it does happen in some cases.

In a previous hasty essay, I pointed out the entire lack of a statistical correlation between illegal immigration and the unemployment rate. Some may think that because there is no proof that they do not cause unemployment, they must. While it does seem probable that illegal immigrants might find areas where unemployment is low, by doing so they assist the economy in approaching the production possibilities frontier. In addition to this, more people in the end means more jobs, so saying that they cause increased unemployment is ceteris paribus and does not take into account the economic growth that illegal immigrants by definition create. By demanding more services, more jobs are created for higher paying jobs, so if the American citizens can rise to the proper educational level, they are actually benefited. In addition, they give economists another issue to be paid to study, so clearly they must be simply wonderful.

In an essay denouncing my economic theory in regards to the subject to the intellectual Madame La Guillotine, Ms. Pride (for whose intellect I have warm respect) pointed out that it would be best if illegal immigrants were to come here legally, and that if they were to do so, we could fling open our doors without reserve. I most heartily agree with Ms. Pride, but there is a slight problem. They cannot come here legally. Lawmakers back during the anti-Japanese bigotry period during WWII lovingly fostered a nice little cancer tumor in the nation by enacting quotas of immigration for certain regions. Instead of having a free-market immigration policy, we must let certain numbers of Europeans in before we can admit Asians, Africans, or Latin Americans. In case no one has noticed, there is not a huge demand for Germans to immigrate here, so we have abnormally low levels of immigration. This essentially creates a price ceiling for immigration, making a disequilibrium price level. The Government in its omniscient wisdom has decided that only certain levels of immigration are good for us and have attempted to tear supply and demand down from their authoritative thrones, and so this folly lead to the status quo. The effects are visualized here: This has caused a shortage in immigration. What happens when there is a shortage? Illegal activities attempt to fill the gap. As I am sure we will all heartily agree it is conveniently possible to immigrate illegal to the United States. Need I say more?

The solution to our problem is not some myopic, draconian, legalistic punishment of illegal aliens, nor is it the completely free amnesty which ignores the terrorist threat. The solution lies in recognizing those pesky twins known as supply and demand which lawyers (whose infinite wisdom got us into this mess) know to manipulate so very well. Break down the malicious damn of immigration quotas and its bureaucracy! And now Ms. Pride and I will leave to debate an even more fascinating and foreign subject which has never ceased to befuddle the rest of the world – the foreign and independent Republic of Texas.