Tuesday, September 19, 2006

More silly pseudo-economics in the newspaper

I hate writing about newspaper columns and reports, I really do. Many people complain about the perceived bias of the news media, but really, I'm not one of them. It's just that newspapers and columnists are dogs being wagged by the tail: if fundamentally their job is to report about what's going on, then the power to determine the topic of conversation is left to the newsmakers, the politicians and activists and so on, and not to the reporters, whose job is, well, to report.

So in a sense it's futile and pointless to both responding to them. They're just doing their job, and you're never going to make headway solving issues by attacking what mass media and politicians are saying. You have to embark on the far less glorious process of doing actual research. This is my fundamental problem with the blogosphere and the so-called "netroots," whose only purpose seems to be partisanship and yelling louder than the other guy. But still I find myself writing these blog entries about some moron of a newspaper columnist, despite my best intentions.

So what is it today? A lame column in The Seattle Times' business section, by Drew DeSilver, called "Low-paid illegal work force has little impact on prices".

In this piece of specious writing, Mr. DeSilver seeks to make the following point:

"You might assume that the plentiful supply of low-wage illegal workers would translate into significantly lower prices for the goods and services they produce. In fact, their impact on consumer prices — call it the 'illegal-worker discount' — is surprisingly small."

Fundamentally, the problem with his argument is already present in this statement: he seems to assume that businesses are hiring illegal workers to pass savings onto consumers (or more specifically, that's the so-called "realist" position adopted by the likes of the Bush Administration to sell worker-visa programs and amnesties to a skeptical public, that the workers are passing on savings to consumers; but Mr. DeSilver isn't quite so forthright to bring up this point). It's a brilliant straw man argument then.

"The bag of Washington state apples you bought last weekend? Probably a few cents cheaper than it otherwise would have been, economists estimate," he says. "That steak dinner at a downtown restaurant? Maybe a buck off. Your new house in Subdivision Estates? Hard to say, but perhaps a few thousand dollars less expensive."

Ah! So without illegal immigrants, we'd only be paying a few cents more per bag of apples, and the added cost of my house would negligible over time, what with appreciation and all! Brilliant!

Unfortunately, the real story is not to be found in the cost of a few items, but rather in the aggregate. The reason that companies hire lower-paid illegals to harvest apples isn't because they want to pass on a couple cents to consumers but because overall it saves them millions, once you add up all those nickles and times per bag of apples.

"At a local QFC, Red Delicious apples go for about 99 cents a pound," DeSilver writes. "Of that, only about 7 cents represents the cost of labor, said Tom Schotzko, a recently retired extension economist at Washington State University...If illegal workers disappeared from the apple harvest and wages for the remaining legal workers rose by 40 percent in response — and that entire wage increase were passed on to the consumer — that still would add less than 3 cents to the retail price of a pound of apples."

So it's that simple. Just oust the illegals, the legal workers will get better wages (remember, those illegals are taking our jobs, or just depreciating wages enough so that we won't want them) and consumers only have to pay a few cents more a bushel. It makes so much sense that it's a mystery why this isn't already being tried!

The answer, quite simply, is Walmart. Walmart may not be known for employing illegals, per se, but they are infamous for lowering their labor overhead in any way possible, in ways both legal and illegal. According to Mr. DeSilver's specious logic, Walmart would be receiving no real benefit for those couple percentage points of labor savings they squeeze out of their workers, which is of course simply untrue. Those few percentage points have allowed them to dominate much of the retail market. Firstly, Wall Street tends to punish anyone not aggressively cutting labor costs: witness Costco's regular quarterly whoopings for the sin of treating their workers better than Walmart. Secondly, despite the fact that both Walmart and illegal workers can be truthfully be accused of depressing wages, people still buy the stuff for those minute savings. After all, consumer savings need to be aggregated too, in order to grasp the big picture. Mr. DeSilver seems to be trying to make some sort of populist point by the end of his article, writing, "Of course, the "illegal-immigrant discount" affects different layers of society differently.

"The more often you eat out, stay in hotels or get your yard trimmed, the more you benefit from the illegal-immigrant discount.

"And by increasing the supply of low-skilled labor relative to high-skilled labor, illegal immigration effectively boosts the purchasing power of the better-educated, more-skilled — and richer — portion of society."

That's true in a sense, but misleading: that's like saying that rich people benefit more from shopping at Walmart since their total savings are higher, which is true but does not address the fact that everyone seems to shop at Walmart, and if those cost savings are primarily benefitting the upper echelons of society, then why the hell are the poor shopping there too, particularly when that's depressing their own wages and effectively making them poorer?

You can go on endlessly with this crap, but in the end you come back to one point: this is a political argument, not an economic one. The economic justification for why illegal immigrants are employed by American companies escapes Mr. DeSilver's analysis unscathed: they're looking for increased efficiency and lower costs, which cutting back on labor expenses achieves, particularly in labor intensive fields. What Mr. DeSilver is actually trying to accomplish, by talking about the mere pennies we're saving by having our apple picked by migrants, is to undermine part of the logic behind plans like President Bush's worker visa program. After all, if the American public gets only minute savings as a whole, the majority of which go to urban elitists, while our wages are substantially depressed in the process, then why sypathize with the plight of these workers?

Unfortunately, the argument would seem to go both ways, and what Mr. DeSilver doesn't address is exactly where his political sympathies lie, with legalization or deportation. After all, workers with the right to work in the US can demand legal workers' wages. Whether or not as a group legal immigrant workers will still work for less than American born workers would remain to be seen, but I have my suspicions.

Additionally, Mr. DeSilver does a disservice by not pointing out how the illegal immigrant workers issue is related to many of Americans' central economic concerns: its main impetus--cost savings--is the same driving our manufacturing jobs overseas, the same sending our customer service and computer programming jobs to India and China, and the same that's causing Walmart to frequently violate our laxly enforced labor laws. It's a cutthroat world out there right now, and by singling out illegal workers, Mr. DeSilver, I think, betrays his own political sympathies with the anti-immigrant right without saying anything about the uncertainties facing American workers, whose increased productivity has not translated into real wage gains.


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