Sunday, October 31, 2010

Underutilized Labor

During debates on immigration, more sophisticated progressives often present the argument that a relatively high flow of immigration is essential for the economic welfare of the United States. This argument is used to justify raising the number of visas, as well as the non-enforcement of existing laws.

After driving through the West Side of Chicago, I realized that there is a flaw in this argument: it does not take into account the large pool of underutilized labor that is present in the United States. Specifically, in the middle of the day, I encountered quite a few apparently unemployed, young African-Americans. This presented me with several fundamental questions of why these individuals were not working (or not hired) when there existed a myriad of positions that employers had to fill with immigrant labor? Where progressives right that there exists a large class of labor that even unemployed, native born Americans were unwilling to do?

The answer to the last question is "yes, there are a host of jobs that many unemployed Americans are unwilling to fill, given the incentive structure that has evolved over the last 40 years. The incentives (SSI, subsidized food, housing & health care) provided by the state to not work were often greater than the incentives (wages) provided by employers to work. The increase in the supply of unskilled labor decreased wages for unskilled labor, lowering incentives to work. So, the economic logic of welfare dependency is clear. And as costly as it may be for the nation as a whole, the countless government bureaucrats employed by the welfare state have no incentives to lessen dependency on it.

This equation also involves cultural factors, primarily the distinctly American belief that each individual is entitled to employment that is more economically and personally fulfilling than that which their parents and grandparents had. In most cases, this has held true; the children of poor immigrants do better than their parents. But, this has been less true in the case of African-Americans, historically this stemmed from deeply entrenched discrimination in the work force that made in difficult for many to progress into the white color or even skilled blue color sectors.

With the onset of strong sanctions against employer discrimination formal barriers to upward mobility have significantly decreased. However, in its place, an even more daunting barrier has emerged - the (relative) lack of academic progress among African-Americans. In other words, the large pool of underutilized labor that I encountered lacked the education and skills necessary to obtain more prestigious employment, yet were not enthusiastic about low wage, entry level positions available to them. A multitude of theories exist to explain this, but I believe that two of the most significant factors are: abysmal public schools, family structure (70% rate of single motherhood) that does not lend itself towards academic achievement. Even good public schools offer little or no training to prepares students for relatively high wage blue collar positions, such as being a plumber or electrician. Another pertinent cultural factor, is the general failure (that cuts across race, culture and class) of most Americans to recognize that the experience that low paying entry level positions can be vital for long term economic advancement.

During this time, government policies that increased the actual cost of legal labor, provided more incentives for employers to seek more flexible undocumented labor. Rising payroll taxes (social security, medicare, unemployment & work-men's compensation), liability (risk of lawsuits) and regulation increased incentives for employers to choose undocumented labor rather than seek workers from the large pool of underutilized labor. Limited access to the welfare state, harsher penalties (deportation) for criminal conduct and a culture that (for historical reasons) views labor more favorably, generally made undocumented immigrants far more enthusiastic workers than their low skilled American counterparts. Coupled with this, the decline in the rate of government sanctions against employers , further increased their incentives to choose undocumented laborers.

So, progressives who claim to be concerned about the fate of poor African-Americans should take heed of policies that can help improve employment opportunities for them:

1) Welfare bureaucracies should make employment a prerequisite for receiving any benefits and forever excise the notion that any honest labor is below the dignity of Americans.

2) Welfare bureaucrats should be offered financial incentives for finding employment for their clients and weaning them of their dependency on the state.

3) Schools must offer training in high paying blue collar trades for students who show an interest and aptitude in them.

4) Government policies, especially the tax codes, must be revised to offer greater incentives for employers to hire native born Americans and documented immigrants.

5) Immigration policies that increase the supply of low skill labor must be eliminated, until employers show that they cannot find individuals from the already existing labor pool to fill a position.

6) Policies that make it costly to set up businesses in blighted areas must be eliminated. For example, Chicago's high taxes and burdensome regulations dissuade many employers from setting up shop in the city, much to the detriment of Chicago's large pool of underutilized labor.

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