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If Trump Were Serious About Immigration
When looking back at the 2016 election, historians will undoubtedly be able to identify the principal fault lines that drove the tectonic shifts we’ve seen, particularly among Republicans. However, I’m not yet throwing in the towel on the idea that Donald Trump can be denied the nomination. I think his ascendence would be a disaster for the party and our nation, given that the best evidence available indicates that Trump will perish bigly in a ball of electoral flames like Sinclair in The Rocketeer. 
That said, it seems clear that the proximal causes of these ructions revolve around immigration policy. Trump has promised to address this matter and some of his positions aren’t terrible. However, they miss the fundamental issue that bedeviles us. The reason why we have an immigration problem does not lie in the lack of a wall, but in economics.
As we all know, demand tends to create supply. We see this on a daily basis in the the drug war. Why does America have a problem with violence related to drugs despite their prohibition? Mainly, because narco-terrorist gangs are rational actors in the market, and supply their customers with the products they badly desire. Sadly, Americans want drugs and are willing to pay premiums that exceed the risks of criminality, with the inevitable outcome being violence among the gangs and with law enforcement. If demand for drugs were less, there would be correspondingly fewer problems with drug-related violence.
The labor market is little different. There is a demand for hard-working people who are willing to be paid less than prevailing legal market wages. There also happens to be a convenient (though illegal) route for bringing them here.
The issue with both drugs and immigration is one of demand, not supply. So long as we (and through us, Trump) address only the supply side of the matter, we will fail to get the results we want.
Trump’s prescription for addressing immigration’s supply side is to choke it off by erecting a physical barrier at the border. It would simultaneously serve as a powerful symbol of our resolve … and an ironic symbol of our economic illiteracy.
The United States of America is the third largest nation in the world by population. We are also the fourth largest nation by geographic area. There’s a lot of space, with a long series of borders for people to enter and a lot of area where people can hide. That plan to track down and deport 12 million illegals? Good luck with that.
I concede that a wall would make it marginally more difficult to enter the country and would likely reduce illegal immigration somewhat. It would not, however, address the underlying cause of the problem: i.e., the demand for workers who don’t carry the regulatory and wage baggage that Americans are encumbered with.
Outside of some generic discussion about repealing Obamacare, Trump doesn’t bother to address some of the issues that exist with employment regulation (which is a tax on employment hidden from employees) in the form of payroll taxes, unemployment insurance, health insurance mandates, and various costly regulatory burdens that have given rise to the human resources profession. Such people add little value to the bottom line of a company but are, nonetheless, required in order to maintain regulatory compliance with the latest federal and state laws as a company approaches some critical mass of size.
Given all this, many businesses are willing to skirt the law and hire illegals not only to avoid the higher salary demanded by Americans, but mostly to avoid the regulatory headaches that come from hiring them.
To demonstrate the absurdity of this situation, by the time you have hired and employed a person working for just $7.75/hr, (annual salary $16,000) the total annual cost of employing that person balloons to well over $20,000 once you’ve factored in insurance, taxes, and other regulatory costs.
It should go without saying that the practical effect of hiring illegal workers is not only to deprive Americans of potential employment, but to simultaneously drive down average wages within that sector. Moreover, since businesses are in competition with one another, it’s hard for one company to remain above the fray and place themselves at a huge competitive disadvantage by hewing strictly to the rules. In short, legal American labor has been made artificially expensive and uncompetitive not because of any failure of the worker, but — in large part — because of the regulations and taxes imposed upon his labor. Breaking the law, unfortunately, pays dividends in excess of the potential costs. Hence, illegal immigration.
On all this, Trump is largely silent and shows no apparent understanding or interest in developing a plan to de-magnetize employers from drawing in illegals.
Returning to the demand side of the of the ledger — which can and should be addressed as well — a better solution than the wall might conveniently sits in our wallets or filing cabinets: the Social Security Card.
When applying for employment, our SSN is one of the first pieces of information our potential employers look at. It provides employers key insight into a potential employee’s life, employment history, credit, and criminal background.
Bizarrely, SSNs lack even the most rudimentary security features. Various state and federal-issued ID cards already incorporate biometric security features, and it’s high time that a similar scheme were implemented for Social Security. The benefits would be many-fold.
Perhaps President Trump (!) could, upon his ascendance, propose that Congress immediately craft legislation requiring that the Social Security Administration to improve the security features of its IDs to include mandatory biometric data capture associated with our SSNs. This could be accomplished via a variety of means — fingerprint or retina scan, facial recognition or even vascular pattern recognition — many of which are already in place on our drivers’ licenses.
This information could be curated by some third party that the government contracts with (such as Visa, or another company that specializes in carrying out millions of secure data transactions daily with minimal error rates) in order to guarantee its security and accuracy. Then, Congress could upgrade and mandate the E-Verify system to check a potential employee’s SSN (now paired with biometric data)in order to ensure their legal presence.
This — in combination with stiff administrative penalties for violating these employment requirements and addressing the supply-side matters — will quickly wring most of the illegal labor out of the employment system. Mitt Romney’s self-deportation would quickly begin to outpace actual deportations without the need to pursue costly and inefficient legal hearings against illegals. Having an American birth certificate and a verified Social Security ID would level the playing field and give Americans the leg-up they want in the market.
Is Donald Trump fundamentally serious about these matters? My suspicion is that he is not. If we were, he could use the immense microphone to call attention to them – to communicate to the American people that he has a clue and has done his homework on the issues that matter to them.
As it currently stands, it seems as if he would prefer to continue his current path of insubstantial demagoguery. What a shame.
Published in Domestic Policy, Economics, Immigration
The problem is that foreign aid seems to hurt more than it helps. All too often, it’s in the form of government-to-government payments that help keep dysfunctional regimes in power. Maybe the best way we can help is to stop hurting them as we’ve been doing by: (1) erecting trade barriers that keep their goods out of the U.S., (2) subsidizing our farmers and undercutting food prices in other countries, and (3) creating a lucrative black market in drugs with our prohibition laws.
I think if you read the piece I linked, you’ll find we’re on the same page here. Most of what we need to do is to stop doing harmful things. Then, there are some things that can be done through private charities. After that, there may be handful of things that can be done through the state, but I wouldn’t put much stock in them.
Tom,
Sorry, I should have read the link. You’re right, we’re on the same page.
That’s okay! Even handsome men of right opinions make mistakes. ;)
As ever, Richard, I offer not solutions but possible improvements. The grubby fingers of politicians will always muck up the nicest looking policy, and I readily admit that my proposals here aren’t bullet proof from the perspective of either human nature or politics.
There are clearly other incentive structures that we need to modify in order for these concepts to achieve any sort of effectiveness, but I also didn’t want to write a 5,000 word post when 1,100 was already pushing it. :)
The good news is, I can always write more articles.
I agree with you however, that the tangled web we’ve woven is going to require some cutting in order to get through.
The true minimum wage that employers are frequently competing against is “welfare.” Lifetime limits on welfare payments, phase-outs of payments, favoring those who work by improving the EITC over those who don’t by reducing benefits – all of these ought to be on the table.
We can certainly prevent people from getting into the country or gaining access to the labor market via enhancements in ID technology, but we can’t get employers to eat that dog food if they have to pay excessive salaries to unskilled laborers.
A, arguably ‘the’, key part of a free market is price discovery.
If the wage appreciate takes place and that will reallocate capital (monetary an human) appropriately.
I think I agree. The reason there’s an immigration problem is their access to the welfare state. Otherwise, it’s not much of a problem. If that’s what you mean by “recourse to public funds”, then I’m on board. Going farther than that might give me reason to take issue. For example, it’s counterproductive to call for assimilation and deny access to public education. I’m not suggesting it can’t be done, but it makes what should be the common goal of both citizen and immigrant harder to achieve.
If you remove all of the regulatory burdens (by the way, your 25% overall burden example is too low; the actual figure exceeds 50% in most regions), the price of the average worker will not fall by nearly the same amount. It can be shown that regulatory burdens on labor suppress wages by roughly the same amount as the burden, because the price of the labor is set by the market.
As an example, if you have an engineer on your staff who earns a $100,000 salary, her payroll cost, when including payroll taxes and fringe costs, is over $150,000. If you eliminate her position and contract a consultant to perform her duties, your cost will still be $150,000 for an engineer with similar qualifications, and while your HR department will administer one fewer employee, your contract department (you) is now administering an additional contract. So, no real savings.
Unskilled illegal immigrants are private contractors, and the wages they earn are market wages. No one earns “below market” wages in the U.S., because that would be the same as working at a net loss, i.e., giving away some of their labor for free. But every new unskilled worker increases the supply, and this increased supply increases competition and reduces the market price of unskilled workers. At some point the market price becomes too low to live on, and the supply decreases. So it’s really a supply issue as much as a demand issue.
“If Trump were serious about immigration” he would campaign end it – all of it: legal, refugee resettlement, asylee and illegal.
If you think that policy would cause terrible consequences for the United States I have a two-word challenge for you:
Prove it.
I’ve got proof that a 50-year policy of unprecedented legal and illegal immigration into the US has caused terrible consequences.
I’ve got proof that large global economies can thrive and grow with virtually no immigration whatsoever while other large global economies can be tipped over into violence and social chaos under the stress of high levels of immigration.
Pro-immigration enthusiasts on the other hand have romantic fantasies and utopian illusions. Like all romantic utopians they are free with wild claims of disaster which will befall America if we dare enact a pause in this jewel of the Great Society.
Prove it.
Define the immigration you are speaking of. The definition of immigrant I assume Majestyk is speaking of is peaceful immigration where one leaves their home country and then permanently settles in another and assimilates to accept the langua franc of the new nation and some assumed cultural values. From 1850 to 1900 we didn’t see any massive revolution or horrors due to mass immigration (counter example).
Likewise I haven’t seen anything like rebellion or terror from major immigrating populations aside from islamic ones and that is an obvious exception. So I would ask for you to prove immigration equals upheaval as an absolute or even pluralistic rule.
On the issue of leftist progress and the presence of anti-immigration policies I can point to 1921-1965. We got both the New Deal and Great Society during that time. Disprove that.
So these are jobs are not the good paying blue collar manufacturing jobs then? I thought they were taking all the hard working American jobs that many Americans want (not implying you specifically think such, just that some others have voiced such an opinion)?
Regardless, assuming Americans are just as happy to work for even those low skill jobs then adding the elimination of all assumed regulations in addition to their relative location and how much faster it would be to find them would create a cost incentive to hire here over abroad.
Finding and moving illegals vs locals would probably put the short term appraisal for labor in a native’s favor as is. If the native is not willing to work for the highest wage possible from the employer then maybe its possible the native has an unnecessarily inflated value for that job than the illegal and perhaps that speaks to some cultural flaws of America.
Wasn’t that what NAFTA was supposed to achieve for Mexico through enhanced trade?
But what actually happened was that growth in per capita GDP in Mexico fell post NAFTA. Counter-intuitively, Mexico’s growth rate in the two post NAFTA decades was among the lowest in Latin America (18th out of 20 countries), not the highest.
To some degree it’s arguable that this happened because Mexican agriculture was wiped – by competititon with heavily subsidised US producers.
Migration from Mexico to the US actually rose after NAFTA – to the extent that at this point something like 10% of the Mexican population lives North of the border.
So – I think it’s a great idea, but I’m wondering about the specifics. Free trade seems like the obvious answer, but it didn’t work that way for Mexico. What else is there?
Go ahead and argue it. Agricultural exports from Mexico (and Chile, another Nafta member) boomed because of Nafta. If you have been in your produce market over the winter, you would have noticed the wide varieties of fresh berries, grapes, avocados, and orchard fruits available all winter, even organic. When drought hampers production in one of our three countries, the other two pick up the slack. Without the U.S. in Nafta, you’d have to go to Canada (also Nafta) to buy fresh fruits in winter.
I’m sure you’re right, but somehow it still resulted in a greater flow of migrants. This looks at the impact on Mexican producers of things like corn – obviously they still had a comparative advantage on avocados (for eg), but the absolute benefit from that didn’t outcompete migration, which was one of the things the US and Mexico were hoping (?) that NAFTA would achieve.
Do we know if there has been any agricultural consolidation in Mexico since NAFTA? Just hypothesizing, but if small farms were combined into larger, more efficient operations, I would think you could see both an increase in exports and an increase in people without local means of support, i.e., potential migrants.
The immigration is America’s – a non-stop annual one million-plus legal inflow for several decades plus a coincidental multi-million illegal inflow from an adjacent nation with a different language and culture, one which has an historical claim to the largest region they are invading. And all of this immigration happening to a liberal welfare state which no longer has a frontier as in previous times.
Now, prove that a respite from such a policy will be a disaster.
Two main problems.
First, there is the “per capita” part. Mexico’s population has gone up by 50% in that period. They are not adding from the top of the productivity spectrum.
Second, you are not comparing to how bad things might have gotten in the absence of NAFTA.
In fact a lot of productive people were moving North. Though this starts becoming circular.
True, but Mexico didn’t exist in isolation before NAFTA. If, growthwise, it did better than other Latin American countries pre-NAFTA and then worse than most of them post-NAFTA it’s worth considering that NAFTA, as it played out, was not an unalloyed blessing – no matter the intentions.
And honestly – I am truly surprised at that. My assumption has been that trade is a mutually beneficial thing under almost all circumstances, but that’s hard to square with these stats.
I think that happened on both sides of the border, so yes.