Illegal Immigration and the Minimum Wage

Browsing this website campaigning for a higher minimum wage, I came across this Bruce Bartlett blog post discussing one of Ron Unz’ rationales that supposedly favors increasing it. Unz suggests that setting wages at $12 will price illegal immigrants out of the market, helping to mitigate the “problem” of illegal immigration. I’m surprised that Bartlett didn’t include any criticisms of the idea.

In 2003, 20 percent of the low-wage labor force was composed of immigrants. About one fourth of those earned less than the minimum wage. I don’t know what the cut-off for “low wage” is, but it’s probably a few dollars over 12. Nevertheless, there are a substantial amount of non-immigrants who work in low-wage industries that would also see themselves priced out of the market. The firm then has a choice between employing less natives at a higher price, or try to hire more illegal immigrants at lower wages. There is a unique cost to hiring illegal labor, which is a probabilistic legal cost, but if a quarter of low-wage immigrants were earning below the minimum wage, I think it’s safe to say that this cost is relatively low.

Raising the minimum wage to $12 an hour would not only put many natives out of work, but it would also make hiring illegally a much more attractive option. The Federal minimum wage is $7.25 ($8 in California) and a ~quarter of the low-wage immigrant labor force is making less than that. Now, imagine a minimum wage of $12. Illegal immigrants, or legal immigrants working under the table, will become relatively attractive. The implication is that a higher minimum wage will raise the demand for illegal labor — labor willing and able to work for less than $12, without the legal recourse to complain that the firm isn’t paying the legal minimum.

Unz argues that a higher minimum wage will be a disincentive to immigrants. The logic is that few people will be willing to migrate to a country where there’s no work for them. But, it’s very possible that raising the minimum wage will have the exact opposite effect! Instead of pricing immigrants out of the market, it would make them relatively cheaper.

One thought on “Illegal Immigration and the Minimum Wage

  1. PGlenn

    First, let me get this out of the way: I agree with your main point that raising the minimum wage might very well have the opposite effect Unz claims it will have.

    But I really want to use your point to talk about epistemological orientations. In the process, I’m going to engage in gross oversimplification, but what the heck . . .

    From my very inexpert perspective (as a non-economist) I feel like the manner in which you are applying economics-training to inform your analysis of government social policy is usually going to be more fruitful compared to how Unz is employing economic thinking; however, policymakers will tend to be persuaded by Unz’s type of thinking because it’s more in line with what they want to hear.

    What you’re doing above is essentially counter-intuitive analysis – using economics to consider possible unintended consequences of proposed policies. Someone proposes a well-intended policy or program that is supposed to ameliorate socioeconomic problems and then economists explore how/why the proposed “fixes” might cause more harm than good.

    Whereas Unz is using a cursory, first-level assumption, supposedly grounded in economics, to support a policy proposal that he probably supported to begin with, seemingly oblivious to how the policy will actually interact with dynamic and hyper-complex modern realities.

    In general, I feel that economics is a highly overrated tool for designing social policies that will “work” in the real world, but a highly underrated tool for exploring, during the policy development phase via deliberative processes, why they won’t work.

    Granted, I’m a Hayekian libertarian. You’d think, though, that even devoted Social Democrats would want to apply rigorous economics-informed counter-intuitive analyses to their policy proposals so as to design the most ameliorative social policies.


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