Ron Unz on Immigration, Part IV: Strange Bedfellows

by Reihan Salam

My Tuesday column for The Daily is on the Ron Unz strategy for reducing illegal immigration, and I’ll be sure to post an excerpt here once it’s been published. A reader kindly alerted me to the fact that in 2006, Michael Dukakis, the former Massachusetts governor and the 1988 Democratic presidential nominee, and Daniel Mitchell, a management professor at UCLA, advanced a similar proposal. After outlining objections to immigration enforcement strategies from the “right” (strengthen the border and employer sanctions) and the “left” (create a temporary worker program), the authors call for an increase in the minimum wage:

If we are really serious about turning back the tide of illegal immigration, we should start by raising the minimum wage from $5.15 per hour to something closer to $8. The Massachusetts legislature recently voted to raise the state minimum to $8 and California may soon set its minimum even higher. Once the minimum wage has been significantly increased, we can begin vigorously enforcing the wage law and other basic labor standards.

Millions of illegal immigrants work for minimum and even sub-minimum wages in workplaces that don’t come close to meeting health and safety standards. It is nonsense to say, as President Bush did recently, that these jobs are filled by illegal immigrants because Americans won’t do them. Before we had mass illegal immigration in this country, hotel beds were made, office floors were cleaned, restaurant dishes were washed and crops were picked — by Americans.

Americans will work at jobs that are risky, dirty or unpleasant so long as they provide decent wages and working conditions, especially if employers also provide health insurance. Plenty of Americans now work in such jobs, from mining coal to picking up garbage. The difference is they are paid a decent wage and provided benefits for their labor. …

 

[E]nforcing the minimum wage doesn’t require walling off a porous border or trying to distinguish yesterday’s illegal immigrant from tomorrow’s “guest worker.” All it takes is a willingness by the federal government to inspect workplaces to determine which employers obey the law.

Curiously, most members of Congress who take a hard line on immigration also strongly oppose increasing the minimum wage, claiming it will hurt businesses and reduce jobs. For some reason, they don’t seem eager to acknowledge that many of the jobs they claim to hold dear are held by the same illegal immigrants they are trying to deport.

But if we want to reduce illegal immigration, it makes sense to reduce the abundance of extremely low-paying jobs that fuels it. If we raise the minimum wage, it’s possible some low-end jobs may be lost; but more Americans would also be willing to work in such jobs, thereby denying them to people who aren’t supposed to be here in the first place. And tough enforcement of wage rules would curtail the growth of an underground economy in which both illegal immigration and employer abuses thrive.

Raising the minimum wage and increasing enforcement would prove far more effective and less costly than either proposal currently under consideration in Congress. If Congress would only remove its blinders about the minimum wage, it may see a plan to deal effectively with illegal immigration, too. [Emphasis added]

Since 2006, the federal minimum wage has been increased to $7.25. Given that Dukakis and Mitchell were calling for an increase to $8, it is worth noting that no one, as far as I know, has claimed that the increase has had a pronounced impact on the size of the population of illegal immigrants, or on the size of the unauthorized influx. The collapse of the housing bubble is often described as the primary reason why the influx has decreased in size. It would be interesting to see if we could reliably tease apart the impact of minimum-wage laws and the cratering economy.

Regardless, one could argue that the steeper increase Unz calls for — to $10 or $12 an hour — would have a far more significant impact. I’d want to know what has happened to the market for undocumented labor in Australia, which has a very high statutory minimum wage ($16 an hour). Australia is a particularly interesting case, as illegal immigration has been a central political issue there for the better part of the last two decades, and it fueled to some degree the Australian left’s disdain for the John Howard government that presided over controversial asylum policies. I wouldn’t be surprised if minimum-wage laws were seen in Australia as a strategy for curbing illegal immigration, as it fits the stylized facts of Australian politics as I understand them. Any insight from Australian readers would be greatly appreciated.

To return to Ron Unz’s article, it’s worth noting that the argument is made in a spirit of humility; indeed, it can to some degree be described as a proposal for a research agenda:

 

The automatic rejoinder to proposals for hiking the minimum wage is that “jobs will be lost.” But in today’s America a huge fraction of jobs at or near the minimum wage are held by immigrants, often illegal ones. Eliminating those jobs is a central goal of the plan, a feature not a bug.

Let us explore the likely implications of this simple proposal. The analysis that follows should be regarded as impressionistic and plausible rather than based on any sort of rigorous and detailed research. It is intended to raise possibilities rather than provide answers. Also, let us assume for the moment that these higher wage requirements would be very strictly enforced. [Emphasis added]

Unz advances a number of claims that I imagine others will contest. But rather than dismiss his arguments out of hand, we need to see an informed, detailed discussion, drawing on recent scholarly work, including work which suggests that the impact of the large unauthorized impact on the wages of less-skilled U.S. workers has been negligible. One aspect of Unz’s article that gives me pause is that he seems strongly inclined to embrace anxiety about inequality as such that I tend to associate with the social democratic left. I hope to discuss this further. Given that I tend not to share this anxiety, or at least not the strongest form of it, I wonder if I’m missing something else. 

First, the vast majority of workers in America’s surviving manufacturing sector—whether in unionized Seattle or non-union South Carolina—already earn far more than the existing minimum wage, so their employers would hardly be affected, resulting in almost no impact on our international competitiveness. The same would be true for government employees, resulting in negligible cost to the taxpayer.

By contrast, the bulk of the low-wage jobs affected fall into the category of domestic non-tradeable service-sector jobs, which cannot be replaced by overseas workers. Many of these jobs would disappear, but a substantial fraction would remain viable at the higher wage level, with employers either raising prices or trimming profits or more likely a mixture of both. Perhaps consumers would pay 3 percent more for Wal-Mart goods or an extra dime for a McDonald’s hamburger, but most of these jobs would still exist and the price changes would be small compared to ongoing fluctuations due to commodity prices, international exchange rates, or Chinese production costs.

This part of the argument reminds me of Tim Worstall’s recent observation on minimum-wage laws, which we’ve discussed previously. To quickly summarize, Worstall suggests that studies like the Card-Krueger study of the impact of minimum-wage laws that define the relevant industry narrowly, in this case fast-food chain restaurants, actually define it too narrowly, i.e., we also want to know the impact on “the independents,” single-unit business that also serve fast-food yet that have a different business model. “The chains are better equipped, differently supplied (things as seemingly trivial as buns for hamburgers arriving pre-cut instead of having to be sliced open in store) and labour as a portion of turnover is much lower (and capital correspondingly higher) than in that independent sector.” One can imagine a scenario in which a steep increase in the statutory minimum wage wipes out large numbers of independent establishments. Consider the fact that in 2005, the CEO of Wal-Mart called for an increase in the minimum wage, as CNN reported at the time:

 

“The U.S. minimum wage of $5.15 an hour has not been raised in nearly a decade and we believe it is out of date with the times,” Scott said. “We can see first-hand at Wal-Mart how many of our customers are struggling to get by. Our customers simply don’t have the money to buy basic necessities between pay checks.”

Given increasing gas prices and other economic pressures on Wal-Mart customers, Scott went on to say that Wal-Mart shoppers will further be challenged to “support themselves and their families.”

“While it is unusual for us to take a public position on a public policy issue of this kind, we simply believe it is time for Congress to take a responsible look at the minimum wage and other legislation that may help working families,” he said.

The logic of the Wal-Mart strategy is straightforward: many of its competitors won’t be able to sustain a steep increase in the minimum wage as well as Wal-Mart, with its sophisticated supply-chain management, its deep pockets, etc. As Unz suggests, however, this isn’t in itself a reason to oppose a hike in the minimum wage. I’d add that it underscores the incoherence of the minimum-wage debate: the kind of people who hate chains like Wal-Mart tend to also like the idea of increasing the minimum wage. Yet an increase in the minimum wage will undoubtedly work to the benefit of large national chains relative to mom-and-pops.

Unz argues that a minimum-wage increase would have many salutary benefits:  

Meanwhile, many millions of low-wage workers would see an immediate 20 percent or 30 percent boost in their take-home pay, producing a large increase in general economic activity, not to mention personal well-being. We must bear in mind that an increase in the hourly minimum wage from the current federal level of $7.25 to (say) $12.00 would also have secondary, smaller ripple effects, boosting wages already above that level as well, perhaps even reaching workers earning as much as $15 per hour.

I’m actually not sure that this is true. I buy that jobs at the bottom of the ladder will evaporate. I don’t know how many workers who currently earn the minimum wage will find themselves with a sudden boost in take-home pay. This is an empirical question that is contested. 

The likely impact upon immigrant workers, whether legal or illegal, would be quite varied. Those most recently arrived, especially illegal ones with weak language or job skills, would probably lose their jobs, especially since many of these individuals are already forced to work (illegally) for sub-minimum wages. However, workers who have been here for some years and acquired reasonably good language and job skills and who had demonstrated their reliability over time would probably be kept on, even if their employer needed to boost their pay by a dollar or two an hour.

Thus, the force of the policy would fall overwhelmingly on those immigrants who possessed the weakest ties to American society and still retained the strongest links to their country of origin. By contrast, those immigrants—legal or otherwise—who had lived here for some years and therefore had gradually become part of the community would mostly emerge unscathed, probably receiving a very welcome boost to their family income. Some anti-immigration activists might find this prospect extremely distasteful, but half- or two-thirds of a loaf is better than none. [Emphasis added]

Unz has given us a lot to think about. One aspect of the Unz strategy strikes me as particularly appealing: it takes a potent issue that has traditionally worked to the benefit of the labor-backed left, yet it marries it to an agenda that is skeptical about the state’s ability to undertake a successful immigration enforcement strategy and that is broadly compatible with pro-market policies in other domains. It is easy to imagine favoring this particular labor market regulation as part of an effort to “turn off the immigration magnet” while opposes most other labor market regulations. 

Another question, of course, is why we should turn off the immigration magnet, a question to which Unz has a number of interesting answers.