Money Never Sleeps

What should a business do when confronted with an increase in the supply of labor from a low ability group that has a high productivity of output? What if this group is a non-native group that carries a racial stigma yet provides the lowest wage cost in the market? The decisions made by a manager will be tied with increasing the profits for the company, producing the best results with the available inputs.

The argument for immigrant labor as a complement to the native labor force follows that an increase in low-skilled work will push the high-skilled native workers into better jobs, more requisite of their skills. Often this movement up the labor ladder coincides with a physical relocation of the worker as better employment is found in other parts of the country.

Two American economists, George Borjas and David Card , have dissenting opinions from one another on the actual impact of immigration in the labor markets. Each have many papers that have been published, some as independent papers and others as responses to one another, filled with all kinds of data, tables, graphs, and math. The most recent housing bubble that wrote the demise of the banking system has, in my opinion, given opportunity for new papers to be written on the future of immigration impacts to the labor market.

An example of the problem has been written in The Economist as recently as the beginning of September. It reads: “Many owe more on mortgages than their homes are worth. Households often opt to stay put rather than default, leaving them trapped in places with high unemployment and unable to move to where jobs are plentiful.” In terms of unemployment, this is structural, requiring government action that is contrary to what has been explored with looser monetary policy.

It will be in the best interest of the immigrants to remain in their current jobs and with their current, lower wages. That is the rational behavior expected of an individual who maximizes well-being. If, however, the native workers become substitutes to the immigrant workers, where both compete for the same jobs in a lousy job market, I can predict a magnification of the racial stigma many immigrant workers already face. Love thy neighbor; because, he is you.