Bryan Caplan  

Immigration and the Minimum Wage

Markets for Everything, Includ... Terrible Turnaround...
David Henderson's got two quibbles with my talk on immigration:
First, [Bryan] says that if we didn't get rid of the minimum wage, legal immigrants would just get black-market jobs. That's true, but incomplete. Precisely because they would now be legal, they could comfortably go to a wage board in their state and complain after the fact and get back pay. An employer, looking forward to that outcome, would not hire them. I pointed out here that ironically, the way the minimum wage law is enforced is what gives illegal immigrants (who would no longer be illegal under Bryan's preferred policy) an advantage in the competition for jobs. Illegal immigrants can credibly commit not to turning in a minimum wage violating employer. Legal immigrants can't credibly commit.
True to some extent.  But I stand by my basic point: When you price workers out of the labor market, a black market will emerge to hire them - especially if they have no other means of support.  And the black labor market, like other black markets, will develop extralegal commitment devices to enforce contracts and stymie legal punishment - reputation, ostracism, and - of course - violence.
Bryan's other error is to suggest that enforcing a minimum for native-born people but not for immigrants would help the native-born. No way. Would United Airlines want a pricing restriction that doesn't let it cut fares but lets Southwest do so?
If I said this, I misspoke.  But it's more complex than David lets on.  If (a) labor is homogeneous, (b) natives are subject to a minimum wage, and (c) immigrants aren't, then employers will only hire immigrants, and natives clearly lose.  But in the real world, as I emphasized in my talk, native and immigrant labor are heterogeneous, so the welfare effects of selective minimum wages for workers are not clear-cut.  Price floors that apply to wheat farmers but not corn farmers can make wheat farmers better off.  Still, on balance I think David's right.

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COMMENTS (3 to date)
superdestroyer writes:

I guess it makes sense that someone living in Fairfax County where there are few if any blue collar whites would see native and immigrant labor as heterogenous. However, most of the U.S. still has blue collar whites and poor blacks. Those groups compete heads up with illegal immigrants. To increase the supply of poor, illiterate immigrants will crush what is left of blue collar whites.

Also, whites and blacks do not have the same coping mechanisms as poor Hispanics. For example, Blue collar whites resist packing their extend families into a single house to lower housing costs.

Why do elite white academics want to lower the standard of living of blue collar whites to third world levels just so their tacos and papusas will be cheaper and so they can have someone mow their lawn.

Ted Craig writes:

I've only viewed the slides, but I'm not impressed with what I saw. Caplan cherry-picks data and makes sweeping, derogatory statements ("cultural wastelands"). The greatest flaw seems to be using immigration and illegal immigration interchangeably, a common libertarian method for beating on strawmen. The appeal of immigrants for employers is their skill sets, such as Indian computer programmers. The appeal of illegal immigrants is their illegality. Not having to pay minimum wage, worker's comp and payroll taxes is a huge plus. Using the two as if they were the same is like talking about property and stolen property as if they were the same. There's a reason you can buy items cheaper when they fall off a truck.

Wyatt Sieber writes:

I believe minimum wage should only be allowed for the legal citizens. The illegal citizens are basically being paid under the table. They are not being held accountable when it comes to payroll taxes and being able to keep that extra money even though it may not be minimum wage is definitely a nice appeal to them. Personally, if they are not a legal citizen I think they should not be hired. Even though the labor is probably going to be cheaper and the work may get done just as well but quicker, it is not fair to the legal citizens to be cheated out of their opportunities.

It just does not make sense to hire an illegal just because the labor may be cheaper. It would not surprise me if big companies start hiring illegals over legals for that main reason of cheaper labor. I'm sure in other countries this has been happening for a long time as well as probably here in the United States. I understand land of the free and land of opportunity but the people who are here legally should always have rights over any illegal immigrant.

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