Skip to comments.Importing Poverty: The Cheap Labor Trap
Posted on 09/06/2005 10:35:51 AM PDT by Willie Green
For education and discussion only. Not for commercial use.
Even with the economy adding jobs last year, the number of Americans who fell into poverty in 2004 rose to 37 million, up 1.1 million from 2003, according to Census Bureau figures released August 29. It marks the fourth straight increase in the government's annual poverty measure, indicating that the recovery from the 2000 recession has not "trickled down" to everyone. Indeed, the Census Bureau also reported that "2004 marked the second consecutive year in which real median household income showed no change."
These new statistics put a damper on the statement made by Commerce Secretary earlier in the month: "President Bush has created the healthy economic environment that is encouraging businesses to hire, and is raising the standard of living in America . President Bush's ambitious economic agenda has helped nearly four million Americans find employment since May 2003." However, the kind of jobs being created makes a difference as to whether living standards are being raised and whether the country is really moving forward.
One of the factors "encouraging business to hire" is the availability of cheap labor, much of it from illegal immigrants. According to an article in the November/December 2003 issue of Southwest Economy published by the Federal Reserve Bank of Dallas, "Immigrants overwhelmingly filled blue-collar jobs (operators, fabricators, and laborers) but also accounted for as much as half the growth in categories such as administrative support and services....It also means that as immigrants entered these occupations, native workers exited." This was particularly true in the blue collar category where immigrants accounted for nearly 700% of the new jobs! That means they pushed tens of thousands of Americans out of those jobs, by underbidding their wages.
As the Dallas FRB stated, "the foreign-born share of growth has risen, and it reached 51 percent of the total between 1996 and 2002." The report writers tried to put a positive spin on the situation, claiming "natives typically have more options, and during periods of weak job growth, they can exit the labor force and pursue other alternatives, such as going back to school." Of course, many Americans have no viable alternatives to working, but even those who do go back to school may not be able to find jobs when they finish their studies.
The great success story of the United States is that it raised the working class into the middle class, the real path to higher standards of living for the population as a whole. But there are those in the business community who seem to think the American achievement has been overdone. In their view, we need more poverty, not less. Open borders and a new "guest workers" program to legalize millions of illegal aliens is what groups like the Chamber of Commerce desire, in effect creating a proletariat.
To many businessmen, cutting labor costs by reducing wage levels seems expedient. And in an economy where the laws against illegal immigration have collapsed, there is even competitive pressure on firms to match what rivals may be doing, even if owners and managers may personally find the practice distasteful. But the proper way to cut labor costs per unit of output is to increase productivity, a process that boosts worker incomes and company profits at the same time, and that is the only way to elevate the living standards of an entire society. The unregulated availability of cheap labor leads away from innovation. Technological progress is promoted by the pursuit of "labor saving" methods in markets where labor supplies are tight and expensive.
Last May, a report from the Federal Reserve Bank of Philadelphia looked at whether the availability of cheap, unskilled workers with limited educations slowed the adoption of new technology. The paper, "Immigration, Skill Mix, and the Choice of Technique" by FRB economist Ethan Lewis, concluded, "Using detailed plant-level data from the 1988 and 1993 Surveys of Manufacturing Technology, we found in both 1988 and 1993, in markets with a higher relative availability of less skilled labor, comparable plants even plants in the same narrow (4-digit SIC) industries used systematically less automation. Moreover, between 1988 and 1993 plants in areas experiencing faster less-skilled relative labor supply growth adopted automation technology more slowly, both overall and relative to expectations, and even de-adoption was not uncommon." De-adoption! There is no positive spin for a retreat from technological progress.
Dr. Evans continued, "Manufacturing automation is particularly suited to evaluating the impact of immigration because less-skilled workers in SMT-covered industries, especially immigrants, are concentrated in labor-intensive assembly, welding, and other tasks that these technologies replace....The combined data show that, in two separate cross sections, the higher the relative number of workers who were high school dropouts in a metropolitan area, the less automated the plants in the area were. In addition, between 1988 and 1993, plants' use of technology grew more slowly, both overall and relative to forecasts, where the relative number of dropouts in the local work force grew more quickly."
The FRB studies from Philadelphia and Dallas mesh. A third of immigrants have less than a high school education, and these are heavily concentrated among illegal immigrants. The legal immigration system puts a priority on those who are educated and possess needed skills. The poverty rate among Hispanics was 21.9% in 2004, reflecting the fact that so many in this community, though hard working, are unable to make a living because they lack the skills to operate in an advanced economy. So to accommodate them, should we make out economy less advanced?
If one looks around the world at those foreign societies with the worst living standards, their problem is clearly not a lack of cheap labor. Indeed, their problem is that cheap labor is all they have. What they need is capital investment in advanced methods. Economic theory, however, argues that managers will use the least-cost method of production, and when labor is the abundant factor, labor-intensive methods will be chosen over capital-intensive methods that use relatively expensive technology. This can restructure an entire economy in the wrong direction. America's shift from a manufacturing economy where scientific progress is most fruitful, to a service economy dominated by cheap labor fits the model of a country in long-term decline.
The United States needs to choose which path it wants to follow. America has historically been an economy short on labor. Though a "nation of immigrants," there was an entire continent to fill up. Until the frontier closed a century ago, there were never enough people to utilize all the land, resources, and business opportunities available. The emphasis was thus on boosting productivity, substituting capital for labor in both field and factory, to make the best use of the working population.
The one exception was the pre-Civil War South, which used slave labor. The slave-owners prospered on their plantations, but the South as a whole stagnated. To defend their reactionary system, their political leaders even tried to undermine the policies that promoted the much more productive development of Northern industry and Midwest agriculture. The Civil War was as much a contest of economic systems as soldiers, and the Confederacy lost that audit in decisive fashion.
Economic progress needs to be U.S. policy. But to keep on that path, the flood of unskilled and impoverished aliens needs to be halted before they further drag down American living standards. National legislation, and its enforcement, must overrule the short-sighted inclinations of business. Maximizing output per worker, rather than the number of workers; and building up the skills and incomes of workers, not undermining them with the poor and the uneducated, is the right way to advance American civilization.
Get a better education - get a better job. Start your own business. Stop whining.
William Hawkins ping!!!
Please take time to read the article before posting an uninformed response.
I read it.
Poverty isn't defined in this article, and "poverty" wages in one part of the country wouldn't be in another.
I assume he means 70%. Anyway, for those of you watching "Rome" on HBO, the last episode had an interesting line by the bad-ass legionnaire when he said that he would march with Caesar on Rome because the Roman's were all unemployed as the slaves are doing all of the labor.
Amongst the most stupid remarks I've ever heard on FReeRepublic. Good going. Blackbird.
There is no illegal immigration problem, nothing to see here. Move on.
I couldn't detect any subtantive content in your response to indicate that you did.
It's entirely my fault.
Just out of curiousity, can you name one member here who is part of the "free trade/open borders" crowd and ping him or her to this thread? I have yet to meet one.
This thread is a candidate for your illegal immigration ping list.
At the end:
But to keep on that path, the flood of unskilled and impoverished aliens needs to be halted before they further drag down American living standards.
If median income shows no change, then that means that for every "poor" alien, another "rich" one (alien or otherwise) was added to the calculation.
In effect that's what they are doing, but most aren't thinking why, and the effects on America. They want to increase profits. One cost to be reduced is labor. What labor that can't be practically outsourced overseas, illegals will be insourced.
It's a short term profit strategy, not looking to long term macro economic issues, which, btw, they don'tcare about. Bush is all for this, still there are some who express shock when they wonder why Bush doesn't see this. He does see this, and he's for it.
Another logic free article from Willie Hawkins.
Yes, as population at the extremes expand, it is the Middle Class that is squeezed and eroded.
What's wrong with people moving up and out of the Middle Class?
Nothing wrong with it, except that those opportunities are greatly diminishing.
The greater possiblity is that they'll move down and out as their occupations are downsized and outsourced.
mlc9852: "Get a better education - get a better job. Start your own business. Stop whining."
BlackbirdSST: "Amongst the most stupid remarks I've ever heard on FReeRepublic. Good going. Blackbird."
Well, the only other people I've known to respond to mlc9852's advice like that are lazy, shiftless bums living from government handout to government handout, aside from the occasional bout of looting during riots and natural disasters.
"Simply typing that "those opportunities are greatly diminishing" does not make it so."
Perhaps he is mistaking his particular situation as being the general situation for all.
"It marks the fourth straight increase in the government's annual poverty measure, indicating that the recovery from the 2000 recession has not "trickled down" to everyone.
Actually what has gotten better for citizens since 2000, good jobs are down and the terror flag is up.
I suppose they all post their remarks on FR too. Get real. Blackbird.
"I suppose they all post their remarks on FR too. Get real. Blackbird."
Does FR have some sort of special software to keep lazy, shiftless bums living from government handout to government handout from posting?
Since me and my family are part of the 1.1 mil added to the poverty level this year, then I reckon not. ...and the horse you rode in on! Blackbird.
"The United States needs to choose which path it wants to follow. America has historically been an economy short on labor. Though a "nation of immigrants," there was an entire continent to fill up."
We are at a fork in the road that the "absolutist" free border and free traders fail to notice. A labor surplus in a capitalistic economy is the formula for civil and political unrest. The middle managers who are waving the absolute free trade flags are doing so only to get attention of higher ups. When push comes to shove, as it did with computer programers, the wealthy won't hire them to muck the stables of their thoroughbreds. They'll hire Mexicans. AAMF, they already have.
Good to hear from you, Willie, I hope you had a pleasant Labor Day.
Are you referring to illegal aliens?
That's why no one takes your little group of elitists anarchists seriously. You desparage posters who you know nothing about. The difference between CITIZENS who want to stop this invasion and you is that we offer facts, reasons. You only offer insulting excuses.
"Are you referring to illegal aliens?"
No, I'm referring to lazy, shiftless bums living from government handout to government handout. Most of them are US citizens. A minority are illegal aliens.
"You desparage posters who you know nothing about."
I know that when people insult others who tell them to improve themselves, it's usually because they're lazy, shiftless bums living from government handout to government handout. I've seen it ever since LBJ started "The Great Society." We now have fourth generation welfare recipients in this country--and they're working on starting a fifth.
"The unregulated availability of cheap labor leads away from innovation."
Please read the article first.
Forgot a couple after "start your own business"......break federal law, EVADE numerous payroll taxes, stick the taxpayers with some of the living expenses your new employees cannot afford, don't do any background checks etc.
I live in the DC area and we are importing crime and a draining welfare class. Its ridiculous.
"Have you never taken a government "handout" or benefited from government "largess"????"
No, I've been too busy funding the handouts and largess to take any.
Work hard, folks: millions of welfare recipients are depending on you.
Ever attend college, or your children attend college?????
Another unintended consequence of a "guest worker" program is that for the first time since the civil war we will have official second class citizens. And that's too high a price to pay for cheap labor. Having two classes of citizens will diminish the dignity of all.
I liked your post....
Just because it's cheap labor, don't mean it's better labor. A lot of outsourcing has not produced the paybacks that some companies claim. I can see it where I work.
Ever attend college, or your children attend college?????"
No. I was too busy paying tuition for those poor, indigent children of the upper classes--the ones who burned their draft cards, the flag, and gave me a "liquid welcome home" at Travis--to go to college.
"OK...Ever take any benefit funded by tax dollars from the military or VA????"
I wont pursue it further but I have yet to meet anyone, elite to unwashed masses, that have not benefited from tax dollars. Not one.
I see you've moved the argument from "lazy, shiftless bums living from government handout to government handout" to anyone receiving ANY benefit (direct benefits only--i.e., subsidies--or are you now counting indirect benefits such as law and order?).
In other words, you seem to believe that my comment hit a wee bit to close for your liking, and you're now trying to lump EVERYONE into the category of "lazy, shiftless bums living from government handout to government handout."
Perhaps you find yourself in an untenable position. Anytime you receive tax dollars for your personal benefit, that is a handout. Someone had to work to pay those dollars. The shiftless bum at the bottom for instance takes his via a welfare check or whatever. The stand alone guy sends his kids to college and takes his indirectly via the taxpayers paying for part of their education.
Mind you now, both come out of the same tax drawer.
I benefited from World War II and so has everyone I know, but it doesn't mean I'll support every future war. Likewise, I didn't benefit personally from the Spanish American war, which again tells you nothing about how I'd feel about a future war.
"Perhaps you find yourself in an untenable position."
No, that's not me--that's you. The only folks I've ever met who immediately denigrate those who preach self-reliance and self-improvement are lazy, shiftless bums living from government handout to government handout. Thrift and industriousness are anathema to those folks. When I see someone adopting that rhetoric, I conclude that they are lazy, shiftless bums living from government handout to government handout.
Good enough...You are wrong but that does not matter. You have a good day.
Allowing Illegal Immigration is government subsidized slavery.
Protect our borders and coastlines from all foreign invaders!
Support our Minutemen Patriots!
Be Ever Vigilant ~ Bump!
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