Immigrant Economics

I keep reading and hearing about how big business benefits from illegal immigration and is therefore against any type of immigration reform. The assumption seems to be that lower labor costs equal higher profit margins. As usual, the assumption is simplistic and wrong.

Obviously, there are many business people who oppose immigration reform and who pay lobbyists to represent this anti-reform position to congress and who support politicians who will maintain the status quo. Some of these business people may even believe they are profiting from a low cost of labor, but most businesses are always in favor of the status quo when a change to the status quo involves considerable risk.

Business people are only in favor of changing the status quo when changing the status quo involves reducing risk. Immigration reform would create more risk to individual businesses because of the market turmoil that would result from modifying labor and pricing strategies. This turmoil would create a situation where some businesses would gain market share and some businesses would lose market share, but overall, the profits for all business would remain the same. The fear of losing market share is what motivates some businesses to oppose immigration reform.

The Fortune 500 companies that are most often villanized by the left are probably the least affected by current immigration policy or any change to the current immigration policy. Most Fortune 500 companies pay most of their employees in America way beyond minimum wage. At the same time, these big companies are moving manufacturing and other operations outside of America to reduce the cost of labor and avoid American regulation. Hilton Hotels at number 438 on the Fortune 500 list may be a slight exception because they do rely on illegal immigrant labor in the United States, but Hilton Hotels is still international enough to shift new development outside of the United States in the event of reform.

In America labor is a commodity that is sold on the open market. The more specialized the labor, and the more demand for the specialized labor, the higher the price for the labor. The less specialized the labor, and the less demand for the labor, the lower the price for the labor. If all of a sudden all of the illegal immigrants were removed from the available labor pool in America, the price for labor would rise and unskilled Americans at the low end of the salary scale would see an increase in pay. But guess what else would happen? The price of goods and services produced in the United States would also rise and the buying power of the increased wages would be reduced. Profits for individual companies might change, but overall profits for business would remain unchanged. Buying power should also remain unchanged, but buying power could be reduced if prices rise faster than wages.

An unfortunate side affect of increased wages will be an increase in tax revenue sent to the Federal government in the form of Income and Social Security taxes. This may help reduce the Federal deficit, but it will also be an incentive for the Federal government to authorize more programs that control our lives and reduce our freedom. Shouldn’t we be advocating more legal immigration and less welfare as a way to fix the immigration problem instead of advocating policies that make government bigger and more intrusive?