Ron Unz’s Campaign for a Higher Minimum Wage

by Reihan Salam

Jennifer Medina of the New York Times profiles Ron Unz, the software entrepreneur and political activist who has had one of more interesting and unusual careers in modern American political life. Unz first came to prominence as a libertarian-leaning candidate for the Republican gubernatorial nomination in California in 1994, and he later led a series of political campaigns against bilingual education and in favor of English-immersion. After leaving the political fray, Unz served as publisher of The American Conservative and he pursued a wide array of small-scale philanthropic projects, supporting controversial scientists and public intellectuals through his foundation, building ambitious web archives of long-defunct political periodicals, and even offering prizes to people who proved particularly good at improving Wikipedia articles, a strategy that arguably has more potential for improving society’s collective well-being than, say, giving money to an elite private research university. Unz has also found the time to write about a wide range of issues, including Asian American underrepresentation at elite U.S. universities. But Medina focuses on Unz’s latest effort:

[A]fter decades in the conservative movement, Mr. Unz is pursuing a goal that has stymied liberals: raising the minimum wage. He plans to pour his own money into a ballot measure to increase the minimum wage in California to $10 an hour in 2015 and $12 in 2016, which would make it by far the highest in the nation. Currently, it is $8 — 75 cents higher than the federal minimum.

Using what he sees as conservative principles to advocate a policy long championed by the left, Mr. Unz argues that significantly raising the minimum wage would help curb government spending on social services, strengthen the economy and make more jobs attractive to American-born workers.

“There are so many very low-wage workers, and we pay for huge social welfare programs for them,” he said in an interview. “This would save something on the order of tens of billions of dollars. Doesn’t it make more sense for employers to pay their workers than the government?” [Emphasis added]

Though I am an admirer of Unz, this argument is among the least persuasive for raising the statutory minimum wage, for reasons Andrew Biggs of the American Enterprise Institute has addressed. Banning low-wage work won’t suddenly raise the value of less-skilled labor, and if less-skilled individuals remain a large share of the population, social welfare programs designe to increase their purchasing power will continue to have a place. Unz’s argument makes more sense if we assume that raising the statutory minimum wage will lead to a reduction in the size of the less-skilled labor force — and indeed, Unz maintains that a higher minimum wage, vigorously enforced, would reduce the influx of less-skilled immigrants, and it might even encourage some number of less-skilled immigrants to return to their native countries:

Mr. Unz wrote in the magazine last year that manufacturing “sweatshops” that rely on immigrant workers, including those in the country illegally, were among the few industries that would be devastated by a higher minimum wage. “There’s a legitimate argument to be made that those kinds of businesses have no place in our economy,” he said, “and getting rid of them would eliminate the low-rung jobs that bring in new poor immigrants.”

Unz has explored this idea at length (and which I’ve written about as well):

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]

My sense is that Unz underestimates the number of less-skilled native-born U.S. workers who would be negatively impacted by a higher minimum wage, e.g., ex-offenders, teenagers, the long-term unemployed, and workers plagued by substance abuse, mental illness, and other maladies, etc. These workers might be too expensive to employ at a high minimum wage, though this problem could be mitigated through wage subsidies paid to firms for employing less-skilled U.S. citizens. This, of course, means paying for a huge social welfare program. But this combination of labor market policies might be better than the status quo. 

For further reading, I recommend Peter Coy’s short Bloomberg Businessweek article on Ron Unz’s proposal, which includes a quote from open-borders advocate Bryan Caplan, an economist at GMU:

Free-market economists respond that raising the minimum wage is the wrong way to deal with illegal immigration. “There is an evil logic to the idea,” admits Bryan Caplan, a professor at George Mason University and blogger for EconLog. One drawback, in his view, is that illegal immigrants who are working and contributing to the economy—even, in some cases, paying taxes for Social Security benefits they’re not eligible to collect—would be thrown out of work. “They’ll go from illegally employed to legally unemployed,” Caplan says.

And Pia Orrenius and Madeleine Zavodny, economists at the Federal Reserve Bank of Dallas and Agnes Scott College respectively, released a pager in 2008 which offers mixed results as to whether Unz’s proposal could work as advertised:

Minimum wage increases might have larger effects among low-skilled immigrants than among natives because, on average, immigrants earn less than natives due to lower levels of education, limited English skills, and less social capital. Results based on data from the Current Population Survey for the years 1994-2005 do not indicate that minimum wages have adverse employment effects among adult immigrants or natives who did not complete high school. However, low-skilled immigrants may have been discouraged from settling in states that set wage floors substantially above the federal minimum.

And later:

The results indicate that a higher minimum wage in a state is associated with a significantly lower average education level among immigrants leaving that state but not among natives who do so; the estimated coefficient on the minimum wage variable is -5.187 (2.592) for immigrants and -1.061 (1.219) for natives. We caution that this sample includes only individuals who moved across states within the U.S., not those who left the U.S., and therefore may not capture the true effect of higher minimum wages on mobility. However, the results are consistent with the population composition results shown in Table 6 and suggest that minimum wages likely affect locational choices among low-skilled immigrants.

I eagerly await research on how the 2009 increase in the federal minimum wage impacted less-skilled immigration, if at all.