As promised, I wrote my latest column for The Daily on Ron Unz’s call for raising the minimum wage as the most effective strategy for curbing illegal immigration. I began with the last Republican presidential debate and the conversation around government benefits as a “magnet” for illegal immigrants:
While it is certainly true that the promise of government benefits will be attractive to at least some immigrants, the far more powerful magnet is what the economists Michael Clemens, Claudio Montenego and Lant Pritchett have called “the place premium.” After adjusting for all kinds of individual characteristics, including appetite for risk and level of educational attainment, they estimated that the wages of a Peruvian working in the United States would be 2.6 times what she’d make back home. A Haitian worker would make 7 times as much, while a Filipino worker would make 3.5 times as much.Even if we turn off the magnet of extraordinary government benefits, the prospect of tripling or quadrupling your income would likely remain very attractive, particularly for workers at the low end of the economic totem pole. That is why the United States has attracted so many less-skilled workers from Mexico. College-educated Mexicans tend to stay close to home, because though they might be able to earn more in the U.S., they also have more to lose. But when you’re living close to the economic edge, the prospect of a big boost in pay is very much worth the risk.
After discussing the limits of border enforcement and mandatory e-verify, which we’ve addressed in this space, I introduce the Unz thesis:
There is, however, one way we could turn off the immigration magnet. In the latest issue of The American Conservative, Ron Unz, a software entrepreneur and conservative activist, calls for a steep hike in the minimum wage from $7.25 to $10 or $12 an hour, which is around the level in Ontario and France and lower than the $16-an-hour minimum wage in Australia. The idea is that such a steep hike would wipe out employment opportunities for large numbers of illegal immigrants, who tend to be less-skilled. Low-wage employers would either automate much of the work now done by people or they’d go out of business. Restaurant meals and other services would become more expensive, particularly in cities like New York, Houston, and Los Angeles, and that would put a crimp in the lifestyles of two-earner households. But minimum-wage laws are popular, particularly among liberals, and so, Unz argues, they might prove easier to enforce than a crackdown on hiring illegal immigrants.
What I didn’t do, and what has proved confusing for many readers, is explain why minimum-wage laws are easier to enforce than laws barring illegal immigrants from living and working in the United States. A number of people, including Ezra Klein, have suggested that all we’d see is an explosion in the size of the underground economy as a result of a steep minimum-wage increase. Unz anticipates this line of argument and he offers a reply:
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.
The proposed change would simply be in the rate of the minimum wage, rather than in the structure of the law, so certain relatively small modification and exceptions, such as including estimated tips for some restaurant employees, might be maintained, so long as these did not expand as a means of circumventing the statute.
The argument from the underground economy has some merit, in my view, but it’s not obvious that this is more of a problem for Unz than for those who believe in pursuing the mainstream strategy, relying on border enforcement and e-verify systems.