Immigration not main cause of stagnant wages

Earlier this month, three former College of the Atlantic colleagues asked me to lecture at the college on the politics of immigration. I chose as my inspiration a recent edition of CNN media star Lou Dobbs’s ongoing series on “Broken Borders.” He devoted an hour to a live broadcast of a town meeting from Hazelton, Pa. A guest at Dobbs’ forum articulated an impassioned lament that his two sons had been unable to find work in New Jersey because they had lost their jobs to illegal immigrants. These immigrants had undercut their wages.

Dobbs then suggested that jobs for American citizens were disappearing and working class wages had been stagnant for four years because illegal immigrants were taking jobs and undercutting wages. Dobbs insisted that any discussion of this topic must confront the hard facts. All facts, however, emerge from some set of basic understandings and concerns. Dobbs has placed very severe limits on the questions and perspectives he brings to his broadcasts.

One of Dobbs’ guests, a representative of the Chamber of Commerce, argued that with an unemployment rate of 4 percent, everyone who wanted a job could get one and that illegal immigrants were simply taking jobs Americans would not take. Dobbs replied by suggesting that four years of stagnation in working class wages prove that an oversupply of illegal immigrant labor must be undermining working class wages.

Have oscillations in illegal immigrant movement caused the rise and fall of jobs and wages? There are more compelling explanations, and in fact movements of immigrants may be a lagging rather than a leading indicator of economic growth or stagnation. Immigrants enter booming economies and flee stagnant ones. In 2001, the tech/stock market bubble burst, leading to substantial declines in corporate investment and a dramatic increase in unemployment. Federal Reserve intervention combined with Bush administration tax cuts for the wealthy subsequently counteracted the collapse of the tech bubble. Nonetheless, looked at over its whole course, the current recovery has been one of the slowest and most tepid on record. Fed interest rate cuts following the burst of the tech bubble had only a modest impact on corporate investment. The wealthy beneficiaries of tax cuts save more of their extra dollars than poor and working class citizens.

More generally, unemployment is affected by what some economists rather colorfully label the animal spirits of American capitalism. The largely unpredictable willingness of corporations to commit themselves to massive investments in new products and technologies is vastly more consequential than any wave of incoming immigrants, whether legal or illegal. Almost as important are the decisions of the Federal Reserve and the bond markets. In the last year both have worried more that real full employment will increase inflationary pressure and erode corporate or bondholder profits.

Our nation has often faced unexpected incursions of immigrants, but these increases in the supply of labor do not necessarily cost citizens jobs or drive wages down. Doug Henwood, editor of Left Business Observer, reminds us of a natural experiment conducted over a quarter century ago. When the Cuban government released 125,000 of its citizens, they all were boat-lifted to Miami. Despite the massive infusion of new workers into this relatively compact labor market, wage levels – even for unskilled workers – did not decline.

Workers and new plants and technologies are both assets. When new workers arrive, they bring skills, interests, and new ideas. When workers arrive in an expanding economy or in one that is prepared to adopt the social policies needed to foster full employment and to incorporate them into the work force, communities gain in the long run.

Between 1980 and today, the U.S. economy has undergone a sea change, and that change is not primarily immigration. It might best be characterized as leaving the fate of the poor and the working class – if not the corporate elite – to the tender mercies of the market. Even Bill Clinton celebrated the end of the “era of big government.” Government has shredded the safety net for the poor and reduced job creating expenditures on infrastructure even as it has extended new privileges to its corporate clientele. In turn, many pampered corporations have carried out a systematic attack on unions and cavalierly violated even our current meager wage and hour standards.

During his diatribe against illegal immigrants, Dobbs mentioned a statistic that undercuts much of his analysis. He pointed out that U.S. working class wages have stagnated over the last quarter century. But immigration did not begin its dramatic increase until the last decade. The plight of working class citizens owes far more to a quarter century of corporate lawlessness toward workers of all nationalities. Giving all workers more workplace rights, a theme I will develop in subsequent columns, is the only just and effective answer to Dobbs’ complaints.

John Buell is a political economist who lives in Southwest Harbor. Readers may contact him at jbuell@acadia.net.