Bryan Caplan  

How Diabolical is Unz's Proposal?

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Ron Unz wants to raise the minimum wage to discourage illegal immigration.  The mechanism: The minimum wage raises unemployment for low-skilled workers, and illegal immigrants are very low-skilled.  His words:
In effect, a much higher minimum wage serves to remove the lowest rungs in the employment ladder, thus preventing newly arrived immigrants from gaining their initial foothold in the economy.
When I told Unz that I considered his plan "diabolical," he chuckled that he took my assessment as a compliment. 

To be "diabolical" is to be cleverly evil.  But Unz's critics often deny that he's even clever.  If employers are willing to break immigration laws, why does Unz think they won't break minimum wage laws as well?  The truth, though, is that Unz anticipated this objection:

The enforcement of these wage provisions would be quite easy compared with the complex web of current government requirements and restrictions. It is possible for business owners to claim they were "fooled" by obviously fraudulent legal documents or that they somehow neglected to run the confusing electronic background checks on their new temporary dishwasher. But it is very difficult for anyone to claim he "forgot" to pay his workers the legally mandated minimum wage. Furthermore, the former situation constitutes something of a "victimless crime" and usually arouses considerable sympathy among immigrant-rights advocates and within ethnic communities; but the latter would universally be seen as the case of a greedy boss who refused to pay his workers the money they were legally due and would attract no sympathy from the media, the police, juries, or anyone else.

Very stiff penalties, including mandatory prison terms, could assure near absolute compliance. Virtually no employer would be foolish enough to attempt to save a few hundred dollars a month in wages paid at the risk of a five-year prison sentence, especially since the workers he was cheating would immediately acquire enormous bargaining leverage over him by threatening to report his behavior to the police.

Yes, Unz overstates.  People who employ a solitary illegal nanny, housekeeper, or gardener won't fret about the minimum wage.  Unless enforcement norms drastically change, your neighbors will effectively remain above the law.  But Unz's proposal would effectively shut illegal workers out the legal labor market - and that's where most of the jobs are.

Still, there is a way to make Unz's proposal even more diabolical.  I hesitate to reveal it, but I seriously doubt the nativists will listen.  The heart of darkness: Give a green card to any illegal immigrant who testifies against his employer for labor law violations.  You solve for the tragic equilibrium.

COMMENTS (10 to date)
HH writes:

I made a similar proposal a while back - not to endorse it but to say it would work. It's available at the link but the basics are:
-declare amnesty until the end of the year, perhaps with fines or whatever
-after that date, any illegal immigrant who can prove they have a job is entitled to a share of a massive fine against his employer.

That's it. Self-enforcement ensues, and employers get real incentive not to hire illegal immigrants.

Again, not endorsing, just saying.

ilya writes:

I'm not sure the infringement will be actually provable:

> "Gabriel said he needs 4 hours to pick that tomato field; how could I know he'll actually work from dawn to dusk?"

(the sectors where illegal immigrants work tend to have much in common with contracting anyway)

And would't in the court of public opinion the situation be internalized as
> "Those Mexicans weren't happy with just being on our land; now they ask to be paid more!!"

Admittedly, the latter part is what makes it even more diabolical.

Mico writes:

Immigration seems to be an important issue for the left, perhaps more so than the minimum wage. Furthermore most left-wing supporters of the minimum wage justify their support by denying it creates unemployment.

So isn't Unz's proposal just as likely to backfire - to demonstrate publicly than the minimum wage causes employment and that the workers are the ones being hurt by it (as, indeed, he explicitly states it is they who are intended to be hurt)?

Adoption of Unz's proposal may simply result in the rolling back of both immigration restrictions and the minimum wage more generally.

An igyt writes:

Unz needs to read the classic Harris-Todaro paper on rural-urban migration, and stuff from sources I forget on the minimum wage and teens.

He misunderstands how the wage causes unemployment. It is not just movement up a demand curve. On the supply side, a high wage draws in immigrants from (for example) Mexico until the rise in unemployment leaves the expected wage equal to what those workers could earn staying home.

He's also just dead wrong on the ease of evading the minimum. Something like half of minimum wage workers give the boss a little time off the books (or are "exploited") say studies early this century.

andy writes:

You solve for the tragic equilibrium.

Only jobs for the mafia would flourish; mafia has means to punish those who would testify against their employer.

Greg writes:

Assuming that enforcement does not drastically change, would not the diabolical proposal offer a relatively easy way for individual activists to ease immigration by purposefully hiring illegal immigrants and continuously breaking labor laws?

Every employee would be able to acquire citizenship by working a day for a business paying them $5/hour.

HH writes:


You're right, which is why my faux-proposal includes a significant fine to the employer, part of which goes to the illegal immigrant (along with a green card) to give them the incentive to report the employer. The fine must be significant enough to deter employers from doing just what you proposed.

Foobarista writes:

We're focusing on the kitten and ignoring the cat. The benefit to businesses, especially small ones, of illegals is precisely their "illegalness". In places like California, where complex regulations only get more complex on legal employment, the only way a small biz can function is to hire people who are willing to work off the books, and they're typically illegals.

Also note that many off-the-books workers actually make more than minimum wage, especially if in-kind compensation (common among restaurants, in particular) is included.

If you really want to address this "demand pull", you have to get rid of a ton of labor laws that essentially make it illegal to hire casual or low-skilled labor in a way that is both legal and make sense business-wise.

MingoV writes: is very difficult for anyone to claim he "forgot" to pay his workers the legally mandated minimum wage...
There are numerous ways around that. The commonest is to require some sort of uniform. An example is a cap, polo shirt, pants, and work boots worn by workers for a grounds keeping service. Each article of clothing has a logo or company name. The employee must buy these clothes at inflated prices, usually via a payroll deduction. If the clothing becomes too stained, the employee must buy a replacement. This process effectively reduces wages well below the mandated minimum.
Glen Smith writes:

Not sure of his states's specific laws but nationally there are many legal ways not to have to pay the national minimum wage. In fact, in my state, there is a way that you can make your employees pay you for the privilege of working for you (not that an employer, want that to happen because that means the employee is not making you a profit). Some states have a training wages that is a percentage of the national minimum (although most states that have them force you to hire that person at a higher rate for a time or owe back wages). Some types of contract workers don't have to earn minimum wage at all (though the burden of proof that the worker falls into that category is on the employer). Every one knows about the server exception and how it can be manipulated. Finally, there is the unpaid intern though that would only be available to some types of employers.

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