Raising the Minimum Wage to Reduce Immigration
November 28, 2006, 06:07 PM
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Recently Steve Sailer decried raising the minimum wage as over 80% of all Americans are inclined to do:

Say a business employs two workers at $5.15 an hour. The minimum wage goes up to $7.25 per hour, so the owner gives the smarter worker a $2.10 raise and lays off the dumber one. The smarter guy might remember to vote for his Congressman in gratitude. But is the guy who got fired because he wasn't worth the new minimum wage (remember, he probably didn't major in econ at the U. of Chicago) going to understand he's out on the street because Congress lifted the minimum?

Now, as someone that did major in Economics at the U of Chicago, I feel I need to explain a few things. There is considerable debate among economists about the relative extent to which raising the minimum wage tends to cause unemployment-and the extent to which it raises the wages of other workers. Generally the unemployment effect is confined to a fairly small group of workers-including those that are young and less capable—and thus less likely to vote. That is part of why raising the minimum wage makes so much political sense. Young, poor workers are less likely to vote than older, less poor folks. Now, the minimum wage also has strange geographic effects. Raising the national minimum wage may affect a poorer state significantly-but have less direct impact in a high rent district, except to the extent it discourages folks for leaving it by removing opportunities to move to lower rent states and still earn a living.

That said, I am ill disposed to oppose a policy supported by over 80% of all Americans. However, I'm well aware of the potential problems with the minimum wage. I agree there are really limits to the extent the minimum wage raised without having serious side effects. Raising the minimum wage alone can't achieve the same degree of income equality in the US as we see in highly developed, low immigration countries like Japan. I tend to think the Fed was correct when they suggested raising the Earned Income Tax Credit as a less disruptive alternative to raising the minimum wage. The EITC has some advantages because it can specifically targets families in need. I'd personally like to see the minimum wage and EITC both indexed to inflation—and the decision which to increase in a given year could be made according to how high the official unemployment rate was that year. I'd fund the EITC specifically by a tax on concentrated assets like Ralph Nader has proposed on estates over $5 Million (maybe one put in place as a replacement for the existing inheritance tax). If the unemployment rate were higher than say 3%, we'd increase the EITC that year instead of the minimum wage. The penalties for violation of the federal minimum wage laws could also be significantly increased. This would also sidestep the whole debate about the level at which increasing the minimum wage causes unemployment.

Now there is a fundamental problem with the EITC(sometimes classed as a Basic Income Guarantee). A means of income support like the EITC isn't really appropriate for non-citizens(and this would become more apparent if we raised it significantly). I'm not terribly fond of the presence of guest workers in the US or the practice of mass immigration. However at present these are facts of life-and we need to consider how to best minimize their negative impact on US citizens. Also, I think the non-citizens in the US need a fundamentally different compensation and regulatory package than US citizens. For example, I think non-citizens should be presented with tickets home and a resettlement allowance upon demand(provided at employer expense). Also, non-citizens really need subsidized legal services, since as a group they are far less experience with the US legal system(this might be funded by increased legal fees). I would also suggest that non-citizen workers and the American public might benefit by significantly increasing the minimum wage for non-citizens-say to something like double that of US citizens. A portion of that increase in wages might be set aside in a fund to be given to the non-citizen upon repatriation, used for fines committed by a non-citizen, used to fund mandatory health care insurance or surrendered upon attaining citizenship with all its benefits. Raising the minimum wage for non-citizens would mean that fewer non-citizens would work low end jobs or those requiring training. It would have little impact on the migration of moderately skilled workers to the US. The minimum wage is a simple law that a lot of folks understand. It would rapidly become understood that folks paying less than twice the minimum wage had better hire workers for low end jobs with clear proof of not only legal residency, but of citizenship. It would also make it far less likely that US citizens would be pushed entirely out of the employment market by immigration policy. Also raising the minimum wage for non-citizens would ensure the job hunters the US attracts are those far less likely to wind up on public assistance than we presently see. We'd see a lot of employers more subject to minimum wage violations-specifically those employing non-citizens. Raising the minimum wage for non-citizens high enough would have serious side effects-side-effects that would be potentially beneficial to American citizens.

This proposal isn't a panacea—there are a lot of other policies I think we need to solve the immigration crisis. How would Democrats like Nancy Pelosi respond to this kind of proposal—particularly if it were supported by the Immigration Reform Caucus? These Liberal Democrats have already positioned themselves as saying that increasing the minimum wage is a good thing-and they have broad public support. I fully expect that non-citizens would as a group support raising their own minimum wage even though it would mean less new immigration than we might see otherwise—and might mean some of their own numbers would be forced home by increased unemployment. Why? Because those lucky enough to remain would make more money and as long as those making more outnumbered those forced out there would be natural-and growing-base of support. Could folks like Nancy Pelosi really oppose them? If she did, she'd probably come off like a self-serving millionaire vineyard owner.