Immigration Causes Unemployment And Other Economic Fallacies
Despite America’s long history of economic prosperity almost from the beginning and frequent historical lessons to the contrary, there are certain economic fallacies that just won’t go away. In the next few posts, I aim to briefly expose and refute certain of the more popular fallacies.
Fallacy: Immigration Causes Unemployment
Few fallacies are more widespread these days than the idea that immigrants cross the border and steal jobs from hard-working Americans due to their willingness to work for what amounts to slave wages. Unfortunately, there’s not a single shred of evidence these immigrants have actually stolen a job from anybody nor driven up the unemployment rate (if you have evidence to the contrary, post it in the comments and I will publicly address it). There are several reasons why the idea that immigrants cause unemployment is fallacious:
- Immigrants do increase the supply of labor, but they also increase the aggregate demand for the output of labor.
- The average immigrant actually tends to pay more in taxes as a percentage of their income than the average U.S. citizen because they aren’t entitled to a tax refund if they overpay, and very few illegals work for cash under the table. Most provide a fake social security number and thus pay taxes (again, if you have evidence to the contrary post it in the comments).
- The best refutation is historical: Why did the U.S. have extremely low unemployment throughout the 19th century when immigration numbers were much, much higher than they are today? Because the increased aggregate demand created by the immigrants created at least as many (if not more) jobs than they took.
Fallacy: War Is Good For The Economy
There has been no shortage of people accusing the last administration of instigating the war in Iraq in order to bring the economy out of a recession. On the surface, many people might think this makes sense. After all, didn’t World War II bring the U.S. and U.K. out of the Great Depression? Well, no. And here’s why. Certainly certain industries do well in times of war: arms manufacturers, steel producers, and the like just to name a few. But it is important to understand this only represents a shift in the way existing resources are allocated and not new production. The economy itself doesn’t grow, its priorities simply shift from peace-time production to war-time production. The downside of heavy war spending, of course, is heavy war debt which weighs on the economy for years if not decades to come. At the very least, taxes must rise, which leads to a reduction in private investment and eventual reduction in output below what would otherwise be possible. War is a net drain on the economy, not a boon. The idea that Bush started the war to stimulate the economy is patently absurd.
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This post appeared in the 193rd edition of the Carnival of Personal Finance hosted by Broke Grad Student.
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Good article. I agree and believe immigration has hepled the economy and now that we are seeing immigrants leave the country, we are going to see tax revenues drop.
As you said, war is a drain on the economy, but wars are usually paid for after the war with higher taxes. Bush got to spend a lot of money on the Iraq and Affganistan wars, and now the bill is coming due – on top of the housing and stock market crash.
“Most provide a fake social security number”
Most are not fake. Most are stolen from citizens of the U.S.
Illegal immigrants also use our schools, medical care, food programs, and basically anything they apply for and get with the stolen social security numbers. These programs are expensive to the citizens of the U.S.
I think that the US has a very bad immigration policy. Most people currently are brainwashed to the point where they have forgotten that USA is a nation of immigrants, and that the country’s success comes exactly from the diversity of the people that live there.
Creating borders and walls with Mexico is the dumbest idea ever. This is very totalitarian. A country that depends on the free flows of goods and capital is not willing to provide a free flow of labor, skilled and unskilled, and use free market capitalism to make the ultimate decisions of whether to hire immigrants or US citizens.
In my company there are a lot of smart and skilled non-US citizens that apply for work. On average they are much more motivated than american workers, who believe they are entitled to benefits from day one. We nevertheless hire mostly people who were born in US, since it is extremely difficult to hire a non US person and get them a proper work authorization.
I personally know hundreds of extremely smart foreign students, who work hard at US schools by getting bachelors, masters phd degrees from US schools and excelling there, who cannot find employment in the US, since most employers know that the work authization visas take a lot of time to process and some of them are even given to workers in a lotter system with a 50% success rate.
Despite the fact that foreign students typically pay out of state tuition, US resources are still spend on foreign students studying in the US. However as most of them cannot find a way to stay legaly in the US ( bc the system is screwed and most citizens believe in the lucky sperm syndrome) they leave for their own countries and make their “american dream” there.
It’s no surprise that after 9/11 when the US enforced tighter border patrols and decreased the amount of visas for skilled workers, many of the so called emerging economies experienced a boom in their economies. The reason is that the skilled workers came back to their native countries.
If the US really wants to excel, then a more open immigration policy should be started. If not, then in 50 years the US will most probably become a third world country.
its too shallow
Quote:
“”In my company there are a lot of smart and skilled non-US citizens that apply for work. On average they are much more motivated than american workers, who believe they are entitled to benefits from day one.”"
If they aren’t motivated, that’s your fault. They have spent a lot of time and money on education and your company is enticing the flow of skilled labor into the country, continually devaluing the salaries they were promised while studying. Of coarse you’ve sabotaged their motivation out of the gate.
If a job is worth $75,000 a year when only 100 students are graduating and capable of getting the job, then if you bring over 100 immigrants who are primed and ready to accept less and they compete with the existing foray of new recruits then the job automatically gets devalued to $35,000 a year. And you, the employer will become addicted to the idea and are oblivious to the ramifications, including ones you’ve mentioned yourself but have failed to pinpoint the actual reason for. “On average they are much more motivated”, those are your words, and they imply the effects of a problem you helped perpetuate. Good luck finding loyal workers in the future.
Outsourcing and Insourcing do certainly devalue salaries. It’s the controlling of the supply and demand of skilled labor. When the supply is high salaries go down, and at that point, even if the demand goes up, entry level salaries have already crashed and the demand is only being fought over for senior level workers who now aren’t making nearly what they should be.
Importing skilled labor that comes from foreign middle class money is not our history. Our history is give us your tired, your poor and your hungry and huddled masses, not -give us your middle class strangers who are willing to undercut our own children’s futures. If it continues, there is going to be little incentive for US citizens to go to college, putting themselves into debt for no reason other than to disappoint themselves after graduating with honors.
Bubble Burster, you seem to have fallen victim to the “Lump of Labor” fallacy. Simply put, there is not a fixed supply of high-paying jobs in the world. Giving one to an immigrant does not necessitate taking one away from somebody else.