More Immigration, More Wealth

I was listening to an episode of The Fuze, a local internet show co-hosted by Ken Emanuelson of the Dallas Tea Party, with former New Mexico governor Garry Johnson as his guest.

The show got contentious when the discussion moved to immigration. From my understanding, Emanuelson is concerned that mass immigration will drive down wages of those already in the country. As a self-described libertarian, he also made the point that those who advocate for open immigration “have to be honest” when stating its economic impact on wage rates. I can confidently state that historically and praxeologically the economic evidence gives overwhelming credibility for an open immigration policy.

A leading open immigration opponent in academia, George Borjas, thinks that existing immigration rates are a net positive to income. He said, “Although the entry of immigrants reduces the wages of comparable natives, it increases slightly the income of U.S. natives overall.” Coincidentally, Tyler Cowen wrote about a new study that demonstrates why immigrants create a demand for higher-paying management jobs and that immigrants compete more so with foreign labor than with existing native workers. Those might be some valid points, but I’m not ready to say they are conclusive just yet.

Clarifying Terms

Granted, the purpose of a quota system is to drive up prices (including the price of labor), so it is reasonable to believe that the immediate effect for a particular profession might be to experience decreased real wages if immigration were abnormally high for that profession compared to the rest of the labor market. With an open immigration policy, that problem could be minimized since open immigration would not be restricted to just one or a few classes of workers. But if real wages in a profession did fall, that only tells us that wages for that profession were too high for the market to bear, which was likely brought about by government manipulation of the market in the first place. One thing we know for sure is that the sooner an economic distortion is eliminated, the less harm it will do overall. Certain professions are assuredly propped up by the existing immigration restrictions (like border patrol agents), but they are being supported on the backs of other Americans through taxation and lost economic opportunities. In fact, Frederic Bastiat offers some great advice on this:

Every injustice is profitable for someone (except, perhaps, restriction, which in the long run benefits nobody); to express alarm over the dislocation that ending an injustice occasions the person who is profiting from it is as much as to say that an injustice, solely because it has existed for a moment, ought to endure forever.

Counter-intuitively, immigration restrictions do not raise wages; at best, they shift (or redistribute) wages from honest native workers to ones who benefit from privileged government intervention. Just as it would be a gross misrepresentation to say that sentencing a bank robber to jail time would ipso facto reduce his “wages,” it would be equally absurd to claim that returning to a free market would do anything but restoring the economy to the natural state it should have been in all along. If it seems odd why I would characterize immigration restrictions as theft, it might be helpful to read a past post in which I explained why immigration restrictions against peaceful people are a logical contradiction.

Free Markets, Free People

I said that “at best” immigration restrictions, or any prohibition of consensual activity for that matter, merely shift income patterns. It likely could be the case that increased competition leads to more specialization, more innovation, and thus more demand for the product of that profession, so real wages could rise with a greater influx to that labor market.

Historically, the periods of greatest growth in American living standards took place in a climate of lenient or almost non-existent immigration policies. Part of that came about because the founders had railed against the king’s immigration policy, even levying a charge of obstructing “migrations hither” in the Declaration of Independence, and so purposefully did not give the federal government any enumerated power to govern immigration (only naturalization), save for the importation of slaves into the 13 original states.

Contrary to the predictions of Keynesian interventionists, if we look to the greatest American wealth expansion in the 20th century, which followed the end of World War II, millions of GIs returned home and flooded the labor market, just as some anti-immigration hawks fear would happen with open immigration. As a matter of deductive logic, independent, rational people must produce more than they consume in order to remain alive, creating a surplus of products for the market and driving down consumer costs. Those consumer savings can then be spent on other products that before they could not afford to purchase. Freedom and self-interest provide not only the necessary components for consumer demand but also the supply and ingenuity to meet those demands.

Despite its patriotic backdrop, the contemporary anti-immigration stance has its origin in Marxism as it tends to view people as laborers only and not also as consumers who are going to desire products of their own. Our desires are limitless, practically speaking, and so a free market (if one existed) would never have a shortage of jobs. After Word War II, the economy expanded to accommodate the desires that were now possible to accomplish with an influx of new workers. With more workers, we increase our division of labor, and so we can become more specialized, which enables each individual to exert his or her comparative trade advantage. It was Adam Smith who called the division of labor the source of the “greatest improvements in the productive powers of labour.” Even those workers temporarily laid off could be somewhat placated with falling consumer prices that result from increased competition. They would be able to shift to sectors of the economy that have a greater demand for their labor, and so their real wages (the amount of products they can afford to purchase with their earnings) will increase (since consumer prices have fallen) even if their nominal wages do not increase.

Notice the effect here. People are able to save more because of greater competition, reducing the rate of interest to borrow money, which in turn reduces the costs of capital investments, which increase productivity to pull up wage rates. Various government interventions sharply reduce the availability of capital and raise the barriers to entry through a multitude of regulatory, credit monopoly, legal tender, and intellectual property controls, severely hampering this free-market mechanism from taking place today.

Lying for Liberty

What also stuck with me is Emanuelson’s view that people should be honest when discussing the reality of a political policy. I would agree further that people ought to always be honest, though we would probably differ on how we bridge the is-ought gap.

In reply to an inquiry of mine, he confirmed that he does equates honesty with, at a minimum, not knowingly making a false statement. As for myself, I do not think that honesty and lying (deliberately making a false statement) are mutually exclusive. The classic case is of an angry abusive husband knocking at the door looking for his frightened wife at the neighbor’s house. Would it ethical to lie to the husband? I hope so. The alternative of putting people in direct danger risks having their rights violated by the abusive husband. Honesty is fundamentally a recognition and acknowledgment of the facts of reality; integrity would be acting on behalf of those facts. Ayn Rand called honesty “the most profoundly selfish virtue man can practice: his refusal to sacrifice the reality of his own existence to the deluded consciousness of others.” To be acting honestly does not mean telling the truth no matter the context. Honesty means taking into context one’s full knowledge. In the case of a surprise party, it would be ethical to lie to the special guest because I am have not deprived him or her of any values. Ethics is not a matter of floating categorical imperatives — these principles are derived for the purpose of living happily, which requires the existence of rational values to achieve.

People who support immigration restrictions that stretch beyond those necessary to defend individual rights are necessarily advocating for aggression, as I explained before. In that context, it would be acting honestly to make a false statement about the economic consequences of immigration in the same sense it would be ethical to lie to a thief who wants my friend’s wallet. I am being honest. I am taking into account the full context of my knowledge, including a recognition of the fact that no one has a (natural) right to aggress against others. My lie would not be denying the anti-immigration hawk any rightful value of his or hers, but I would be protecting those values of prospective immigrants and native residents, namely their freedom.

For the record, I do not think it is necessary to lie about the political consequences of freedom, as there is no moral-practical dichotomy. With that said, I do not advocate lying to voters, if for no other reason than their net impact on the political process is negligible and does not present what might be called a “clear and present danger,” and because they are not ethically liable for the actions of the state. That responsibility rests with politicians and their agents, to whom it would be justified to lie given the proper context.

Image credit: Mises Institute, with a Creative Commons license
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