Rock and a Hard Place

One of the other problems with the split labor market that mass illegal immigration creates is that it means that welfare state policy is put between a rock and a hard place. If welfare benefits are made more generous than the market wage for illegal immigrant labor, but only for native workers, then native workers leave the workforce en masse, with all the social problems that creates- and much of the native population can easily be disempowered politically now that they are no longer necessary economically. If welfare benefits are made sufficiently less generous, then native and illegal immigrants are competing directly for low-skilled jobs, and the market wage is pushed still further down. Here’s a simple (if messy) sketch of how that might work, with two different reservation wages (A- minimal welfare and B- Generous welfare) determining if the market wage is set by immigrant or immigrant and native labor supply combined.


If you think, as I do, that increasing automation is, sooner or later, going to displace a lot of human labor and require some degree of increased cash support if people aren’t going to become indigent, then this issue is going to become more salient rather than less. The sensible thing is, I think, to consolidate the labor force as much as possible, such that the same regulations and welfare eligibility rules apply to all. This could probably be done without much deportation, if the government were more enthusiastic about sanctioning employers who violated labor and immigration law. But I’m skeptical that that will take place.

5 thoughts on “Rock and a Hard Place

  1. I’m also skeptical that there is any political will to really sanction employers. At this point, pretty much everyone in politics is involved in illegal employment in some way, whether that be nannies, gardeners, or meat-packing plants.

    Liked by 1 person

      1. This seems backwards to me: “The sensible thing is, I think, to consolidate the labor force as much as possible, such that the same regulations and welfare eligibility rules apply to all.”

        If seismic shifts in labor demand are on the horizon, the last thing you would want to do is make “labor” more static, rigid and inflexible. Automation is coming. The best case scenario is that entrepreneurs find new ways to optimize suddenly available (wo) man-hours, as they did when automation put lots of farmers out of work. That is far more likely to happen, if they have the flexibility to experiment, mix-and-match and discriminate for new and different skills and employment models. By contrast, nothing will hasten “labor’s” obsolescence more effectively than forcing firms to treat workers as a uniform and inflexible whole.

        I agree with you that immigration is a symptom and not a cause. Native workers — ironically the backbone of the original Progressive coalition that was nativist, ethnocentric, pro-labor cartel and anti-immigration — became victims of their own anti-competitive behavior. They made themselves too expensive for the private sector, but also the technocratic elite, both of whom were eager to replace the native working class for cheaper imports. This is an American version of Guilluy’s argument

        I suspect that the cultural elite and their technocratic brethren (i.e. the other factions of the Progressive coalition) will turn on the imports as they become more demanding and unruly (perhaps after a few more campus mobs) just like they turned on their old dance partners, the native “blue collar” working class — the latter went from high status, salt-of-the-earth, nobility to low status, corrupt, racist union bosses chomping on cigars in strip clubs. If Trump’s election has shown anything, it’s that the technocratic/cultural factions won’t go down without a fight.


      2. This was Milton Friedman’s argument- that illegal immigration was the best kind because it was free of the regulation that killed economic efficiency. One contradicts Uncle Milton at one’s peril, but I think he’s wrong here, at least at this point.

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  2. I think Friedman may have underestimated some of the externalities of illegal immigration, but he’s still right that competitive labor markets are better (for everyone) than non-competitive ones. In other words, Friedman is wrong only insofar as illegal immigration may do more harm than good when it is unaccompanied by a broader commitment to (classical) liberalism. Under those conditions, it becomes an invitation for Marixst third-worldism that swaps out one parochialism for another (even more self-defeating) one.

    Putting aside supply-side restrictions (i.e. labor law), there is a separate question of subsidies (i.e. the welfare state). I think an unfettered labor market (for natives and imports alike) would be more palatable if welfare subsidies were more strictly confined to natives. Artificially raising the cost of labor is a one-time transfer to current workers in specific sectors that benefits no one in the long run (other than cartel managers). I think back end subsidies are also harmful for moral hazard reasons, but they are politically toxic when they are perceived as a way-of-life, as opposed to a safety net.

    In other words, immigration is destabilizing to labor markets in good ways, but is destabilizing to welfare markets in bad ways. The problem is that the technocratic class vastly prefers front-end regulatory transfers (that create agencies, jobs and funding) to back-end subsidies (that are as simple as cutting a check). They will never make that trade: unfettered labor markets (reducing demand for illegal labor) for a robust natives-only safety net (reducing incentives for immigration).


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