People face tradeoffs. To get one thing that we like, we usually have to give up another thing that we like. That principle is one of the most basic in economics — and yet the most frequently ignored when it comes to public policy. A prime example is the tradeoff that is required on two frequently debated political issues: immigration reform and minimum wage laws.
Many of the same people who support increasing the minimum wage also support increased immigration and amnesty for illegal immigrants. But increases in minimum wage can have a severely detrimental impact on immigrants.
(For the sake of argument, we’ll set aside the question of whether amnesty is a policy that should be promoted and assume that is a policy we’d consider beneficial, at least for illegal immigrants.)
Imagine that Congress passes two laws that take effect on the same day — January 1, 2016 — one granting amnesty to illegal immigrants and the other raising the federal minimum wage to $10.10 an hour. What would be the result?
Currently, there around 12 million illegal immigrants living in the United States. While it is impossible to know for certain how many are working or in what sectors, the estimates are that about 4 percent work in farming; 21 percent have jobs in service industries; and substantial numbers can be found in construction and related occupations (19 percent), and in production, installation, and repair (15 percent), sales (12 percent), management (10 percent), and transportation (8 percent). Illegal immigrants have lower incomes than both legal immigrants and native-born Americans, but earnings do increase somewhat the longer an individual is in the country.
Let’s assume that roughly two-thirds of illegal immigrants have jobs that pay them less than $10 an hour. On amnesty day they get both citizenship and a pay raise. Their employers would now be required to pay them all $10.10 an hour. That would be cause for them to celebrate, right? Unfortunately, it wouldn’t — most would now be out of a job.
Last week then nonpartisan Congressional Budget Office (CBO) released a report on the effects of increasing the minimum wage. The CBO estimates that increasing the minimum wage to $10.10 an hour would reduce total employment by about 500,000 workers, or 0.3 percent of the current legal workforce.
Even without amnesty a minimum wage increase would cause half a million people to lose their jobs. But with amnesty that number would increase significantly, up to 5 or 6 million — nearly doubling the current number of unemployed worker in America.
If offered amnesty, many immigrants would simply return to their native lands. But many others would not have that option. They also would not have the skills necessary (e.g., proficiency in English) to be hired at the higher wage rate. The result is that if amnesty is coupled with a higher minimum wage, the immigrants would be worse off than before.
For some people, however, this is a feature rather than a bug. Ron Unz is the most prominent political activist to call for any future amnesty proposals to be tethered to higher minimum wage laws. According to Unz, increasing the minimum wage “would completely eliminate many of those lowest-rung jobs drawing illegals” and “serve as a powerful prophylactic against future illegal immigration.” Unz understands that higher minimum wage laws would eliminate low-skilled jobs and price most of the new immigrants out of the labor market.
Surprisingly, few progressives seem to recognize this obvious conclusion. They seem to believe that amnesty and minimum wage increases could both be implemented and that both would be help immigrants. What they fail to recognize is that Americans face tradeoffs. To get one policy that we like, we usually have to give up another policy that we like. If Americans truly want to help immigrants (whether through amnesty or increased legal immigration) the best option is to oppose minimum wage increases so that workers can keep their jobs.
