Sunday, February 25, 2007

Immigration and Minimum Wage Issues

In a memo I came across on the interent, Alan Krueger, the Bendheim Professor of Economics and Public Policy at Princeton argued that increased immigration has little impact on wages for low income domestic workers. He goes on further to argue for raising the minimum wage, if we want to be serious about helping low income workers. It is strange to hear an economist that is arguing pro minimum wage laws, but that is exactly what he does. Im sure he is aware that minimum wage laws and increases often cause an increase in structural unemployment. The equilibrium wage is lower than the policy set market wage, and will result in less positions of employment demanded. So in the end, instead of helping a portion of low income workers by raising their wage, they are confronted with unemployment. Raising minimum wages will only take away more jobs from domestic workers, since they are the ones which the new laws will affect. Illegal immigrants are often paid under the table, and immigrant work is more like a black market for labor. The black market price for immigrant workers will not rise like that of the legal domestic worker who would be entitled to a higher wage under the new law. This will in turn put more strain on domestic workers looking for employment in low-skill industires. Krueger goes on to say how we must protect the rights of illegal immigrants and should prevent the exploitation of immigrant and domsetic workers. I believe we should protect peoples rights, but saying that we are going to prevent exploitation is just silly. Exploitation is one of the keys of capitalism, without exploitation there would be no profit. In actuality every worker regardless of wage is exploited in a capitalist economy.


Craig T Glackman said...

Shouldn't the market deal with wages? I really don't understand why we have to have a set wage. Is the wage set scientifically? What if whoever sets it gets it wrong? The other day I was listening to the radio as Wal-Mart and the wages it gives are alledgedly too low. One caller stated that Wal-Mart caused stores like Albertsons to go out of business, thus causing workers to loose a good wage and settle for a lower wage at Wal-Mart. I think the wage they were getting in the first place was an artificial wage. Obviously the union negotiated the wage for the employee at Albertson's. Since the market did not determine this wage, it must be artificial. I think minimum wages are artificial.

Larry Eubanks said...

Let me think about your story a bit Jed. Before I do, I will join you in wondering how an economist can recommend a minimum wage. But, that's an aside.

I think your story sounds something like this: The minimum wage leads to a decrease in quantity demanded for workers who earn the forced minimum wage. So, this puts some workers out of work, i.e., as you pointing out some workers become unemployed.

Is there a rest of the story here? I suppose there are other types of workers in the economy, and not just minimum wage workers. There are union workers, and one reason many economists believe unions support minimum wages is because an increased minimum wage causes a shift out in the demand for union workers. Typical substitution stuff, eh?

Now, are there any other workers in the economy that employers might shift to, or substitute to, when the minimum wage is increased? Hmmm. Maybe there is an increased demand for illegal workers when the minimum wage is increased? What do you think?

Now, you also write: "In actuality every worker regardless of wage is exploited in a capitalist economy." I'm not sure I can agree with you on this exploitation thing. Can you give us an explicit definition of exploitation? I've got this idea that maybe we can't see exploitation without coercion or force being used.