Coyote Blog

I am constantly amazed how little people understand about economics and prosperity.  I have to give some background first.  Yesterday Mickey Kaus tweeted, "Isn't point of 'Americans are dreamers too' that there *are* zero-sum aspects: American lo-skill workers, who haven't done well for decades, have to compete for jobs/wages w/ DREAMers and (more important) new illegals a big DREAM amnesty will attract."

People talking about zero-sums in economics always get my hackles up, because they are frequently feared and seldom actually exist.  There is a lot of research that immigration does not reduced native-born unskilled employment, but it is impossible to discuss such things on Twitter without devolving into dueling appeals to authority.  Instead I wrote:

So what about a bipartisan compromise that increases immigration while simultaneously repealing labor regulations that make profitably employing low-skill workers difficult?

This was towards the end of my time on Twitter when I was mad that it was making me a worse person and I resolved to instead focus on trying to bridge differences.  But this proposal got a response I had not expected.

Someone doesn't quite grasp the notion that "profitably employing low skill wokers" is only good for employers, whereas immigration restriction is focused on workers. https://t.co/W4HytSKGKl

— EdReal (@Ed_Realist) January 31, 2018

I am willing to believe I don't understand his point or Twitter is limiting his ability to explain himself, but this just seems really ignorant of how markets work.  How are jobs for low-skill workers going to exist if it is NOT profitable to employ them?

Here is how the world works:  Profits attract investment.  Profits are the fresh blood in the water that attracts sharks.   If I am making a good profit employing low-skill workers, then I am likely to reinvest those profits to grow and get more of those profits next year.  But even if I don't, at the same time other people will start to notice my profits and want to copy what I am doing.  Through all of this, we will all be hiring more and more unskilled workers.  None of this growth, none of this investment, none of this job creation happens without the profits.

This is why I have said for years that the greatest thing that could ever happen to low-skill workers in America is for entrepreneurs to find ways to make a fortune employing them.  I always get folks who consider this statement grossly exploitative, but it is the literal truth.  There are tons of well-paying jobs for programmers because a bunch of companies like Google are very visibly making a ton of money employing them.  Unfortunately, it is harder and harder to make the economics of a business that hires low-skill workers a success, something I know well because I run such a business.  The local, state and Federal governments are layering on more and more labor regulations that make it increasingly difficult to viably employ lower-skill workers.   I have a lot to say on this, and hopefully a paper I have written on the topic will soon be published and we can talk about it more.

Postscript:  Margaret Peters argues that one reason the Republican Party is more nativist is that the business sectors of the party that traditionally lobbied in support of immigration have reduced their support, at least for unskilled immigration, because they just don't have as much demand for unskilled labor any more.

As part of my research, I checked to see whether businesses are indeed lobbying less often on immigration. To find this out, I examined which groups testified before Congress on immigration, using that as one measure of lobbying.
Here's what I found. In the 1950s, on average, more than eight businesses used to testify before Congress at each hearing on immigration. By 2010, that number had dropped to two, as you can see in the figure below. The decline has been even steeper for industries that have been exposed to increased imports from foreign countries -- from eight businesses that produce goods that can be traded per hearing in the 1950s to less than one today.

Some industry groups have increased their lobbying for more immigration -- but those are in the tech sector and others that use high-skill labor. We should expect, then, that Trump will continue to push in his State of the Union address Tuesday for a "merit-based system" in which immigrants with high skills get priority.

In contrast, lobbying by nativist groups has hardly increased.

Google beats the doors down in DC lobbying for more immigration spots for programmers.  If someone were making good money hiring unskilled labor, they would be doing the same for unskilled immigration.