Illegal Immigration & Capital Spending

A column in the Washington Times recently cited the many negative effects that illegal immigration has on U.S. citizens. Lower wages for all workers due to illegal immigration makes sense from an economics standpoint. When the quantity supplied increases, the price will decrease. Businesses can also be hurt. For example, in the construction industry, companies that do not hire illegal workers are expected to compete with companies who do hire workers for whom they do not face such costs as workers compensation. The most interesting effect cited was one I had never considered. The author claimed that a supply of cheap labor served as a disincentive for companies to invest in technology. Why should a company invest in capital, if they have a large supply of cheap labor? In the long run, this can hurt the entire U.S. economy. This has become a very hot issue lately and the reemergence of white power groups (yes, even in southern Utah) is alarming. However, I think these points would allow a productive discourse to begin.


mason said...

You make a good point. Why invest in capital, when you can hire cheap labor? I don't agree with this at all. I beleive the whole idea of capitalism is to be productive. If an employer is hiring people, especially illegal immigrants to work for almost nothing, who are they helping besides their own wallets? The economy is trying to progress, but there are situations like this that are holding it back. I blame it on the lack of productivity of these type employers amongst other things. But they could change if they would invest. Invest in technology and especially in their employees. Illegal immigration is a problem when immigrants don't have a chance to prosper and become productive, thus hindering the economy.

Kim said...

No matter what time period in United States history, there has always been one culture or nationality that is immigrating to the United State and working the lower-wage jobs. At one time it was the Chinese, then the Irish, and now the Mexicans. This is not a new problem and we should not blame the people who are trying to improve their lives and their standard of living. (What would you do in that situation?) I think the argument that companies are using less capital investment because of illegal aliens is humorous. The major argument against hiring illegals is that they are stealing the jobs. It is humorous because the capital investments (or automation) will steal the jobs instead. I would rather have people employed (even at illegal rates) and paying for their food than unemployed and recieving food stamps.

Dr. Tufte said...

-1 on Mason and Kim for spelling errors.

There's a principal so important a book was written about it called "Economics In One Lesson". The principal is that economics is about extending your arguments beyond the first level of the action.

In this case, it makes perfect sense for an employer to hire cheap (immigrant) labor instead of more expensive labor or capital. But ... what do they do with the money they save? Buy hats? I don't think so. Instead, what they have done is to free up some money that can be spent on capital that they didn't have before. That's a good thing.