More info on flawed Judith Gans policy paper.

     In July 2007 we analyzed a misleading Udall Center study about the economic effect of illegal immigration. One of the multiple problems with the report was the lack of accounting for the economic effect of remittance of wages to the country of origin by illegal immigrants. This is money subtracted from the economy that would have mostly remained in the U.S. if earned by legal immigrants fully invested in the U.S. experience.

     A recent report by the Inter-American Development Bank estimates the remittance will total $45,900,000,000 (yes that’s Billions.) This is the remittance figure just for the Americans and does not cover the whole world. The bank report does not disclose what portion of this is from legal / illegal immigration. The report does detail the loss of economic wealth state by state.

Previous stories on this topic.

Immigration Study deeply Flawed
Update on flawed Udall Center Study
Illegal immigration costs AZ workers $1.4 Billion


Comments

  1. Antifederalist says

    Don’t get me wrong, I think all illegals should be deported, period, and I favor local enforcement of immigration laws more strictly than most other things (lay off the speeders, prostitutes, and drug consumers and get the illegals out of the country instead!). However, be careful with these remittance numbers. They’re not hard and fast and they don’t reflect the totality of the economic situation. We shouldn’t be too upset over remittances. Granted, companies are paying illegals for labor, but companies are exchanging their excess of capital for work. They value the work more highly than they value their capital, otherwise, the exchange just wouldn’t take place. THERE IS NO LOSS OF WEALTH in that transaction. In fact, there’s an INCREASE of wealth because both parties have made an exchange they agree to: the worker receives money he wants, and the business receives the work he values more highly than money. Illegal labor also translates into lower costs for us thanks to governemnt medding in the form of wage and labor laws. Now, once an individual earns a wage, he should be able to do with that cash as he sees fit. That way, resources are best distributed in society (read Thomas Sowell’s Basic Economics for more on this). If he sees fit to spend some money here to support himself and send the rest home, those of us believing in a free market shouldn’t care. THIS IS ALSO NOT A LOSS IN WEALTH because he who earned the dollar is doing with it as he pleases in that he values supporting his foreign family more than retaining his dollars for himself. Besides, what he sends home may be used by the recipient to buy American imports. It may also be used to keep the recipient off social programs at home, meaning less pressure on the US for foreign aid (Personally, I’d stop all foreign aid cold, unless that aid is being used to kill our enemies). Additionally, remittances aren’t free. So, when an illegal pays for a remittance, he’s dumping money into local financial services entities, thereby enriching them. Just be careful in throwing all the numbers around and assuming remittances are a pure evil.

  2. Anti,

    I was not trying to intrude on the private transaction between an employer and a legal worker. Of course a legal employee should be free to spend their wages as they see fit. Even some legal immigrants may send some money back to their country of origin.

    This issue is that a study looking at the economic impact of immigrant labor should take into account remission. The more money that stays in the U.S. the greater the multiplier effect. I am all for legal immigration where the whole family comes in and the maximum possible wages get reinvested into the U.S. economy because the new immigrants are fully invested in this country.

    Is foreign aid really based or remittance rates?

  3. Frank Soto says

    Hey look Anti, you and I agree (must be all that law and econ we learned in law school — albeit at different schools). I have said this numerous times in the comments but I’ll say it again because lawyers like to hear (or see?) themselves talk: I think the weakest argument that conservatives have when it comes to the immigration issue is an economic stance. In order to argue against the illegal immigration problem with economics, conservatives essentially have to abandon basic free-market principles. It seems to me to be a much stronger argument that we need to reform immigration/close the borders based on national security. This is already one of the conservative platforms that almost everyone agrees with, and does not require such a big compromise. You can see the compromise in Josey’s response:

    “I was not trying to intrude on the private transaction between an employer and a legal worker. Of course a legal employee should be free to spend their wages as they see fit. Even some legal immigrants may send some money back to their country of origin.”

    But, of course you are intruding in the transaction between an employer and a ‘legal’ worker, because you are artificially determining what a ‘legal’ worker is, instead of letting the market decide which workers are most ‘valuable’ and create the right incentives within the market. Artificial/arbitrary controls are bad for maximizing economic welfare (which is why most conservatives are against the minimum wage). This is of course overly simplistic, and I am sure that people will think this is some sort of secret liberal attack, but really it is just the same arguments that Hayek makes in Road to Serfdom.

  4. Frank,

    I am not artificially determining who is a legal worker. The state and federal governments have already covered the matter.

  5. GOP Boomer Gal says

    Frank,

    The problem with your argument is that we have a welfare state. People who would normally take these jobs would rather sit on their butts and be supported by the rest of us.

  6. Frank Soto says

    “I am not artificially determining who is a legal worker. The state and federal governments have already covered the matter.”

    Right… that’s, um, the point.

    “The problem with your argument is that we have a welfare state. People who would normally take these jobs would rather sit on their butts and be supported by the rest of us.”

    Ok, so are you then acknowledging that illegal immigrants are not ‘stealing’ anyone’s job, and are in fact filling a need within our society, as it presently stands?

  7. GOP Boomer Gal says

    No, I’m saying we should stop supporting able bodied people, and you’d see how fast they’d take these jobs.

    AND there ARE jobs that WERE taken from Americans and given to illegals whom were paid much less.

    IF we need to fill jobs, they should be filled legally. The system as it is now steals from Americans, and allows other countries to continue to treat their own people with contempt.

  8. Antifederalist says

    Josey, I’m not saying remittances are tied to foreign aid. I’m saying they may put tangential pressure on the US. My point is that economic phenonena can have broad, rippling effects that are rarely considered.

    Frank, I agree, determining who is a legal worker, or who has legal presence to be in the US in the first place is a contrivance. We have to have a constitution and laws to determine that. Otherwise, we’d have anarchy. While I may LOVE de minimis government, I abhor anarchy because it will ultimately lead to tyranny when some stongman siezes power from those just going about their business. Contrivance or not, I’ll defend the federal government’s right to control the borders to the death. We HAVE to, otherwize radical Islamics who want to kill us would cross our borders with impungity.

    GOP Boomer Gal is right: the problem is that we have a welfare state. We are taxed and our wealth is redistributed to illegals sometimes. Any free marketeer, like myself would like to see that end. In fact, if the welfare state were dead, I’d be willing to let any foreigner come here to work with the exception of the radical Islamics. Granted, Iwould oppose letting them import their foreign socialism by allowing them to vote.

    Besides the welfare state, there are other, government created market distortions at work here. I sorta cheer on businesses getting around minimum wage and other labor laws by hiring illegals. I’d like to see minimum wage and other labor laws repealed. We also need to stick a fork in labor unions. They drive up the cost of labor and they flat out would not exist if not for those purely insane pro-union laws like the Wagner Act and related acts. We need to repeal them all. If we kill the minimum wage laws, union protections, and other labor laws, we would go a long way to making American labor competitive. For that matter, we’d probably halt outsourcing because we’d be killing the things that make American labor so expensive.

    My main point in all of this is that we have to be acutely aware of the economic rammifications of the actions we take and the laws we enact. For instance, if we throw out all the cheap illegal labor, we should be prepared to pay more for our lettuce. I, for one, will be first in line to buy more expensive lettuce!

  9. Mark AZ says

    Anti & Frank, Even if I granted you illegals are a great boon to the U.S. Economy (they’re not, they and their remittances are a prohibitive net drain), and we cancelled out employer sanction laws tomorrow, you still have a losing argument. The incentive for third world “migrants” to come partake of the American dream is too overwhelming. Too many die and/or are raped or are otherwise damaged for life on the way here. We are not going to cancel out federal immigration law. They can only travel on the black market. The dead souls in the desert do not calculate in to your economic theory. They are not a factor in your argument. They are dead and shriveled up under a Palo Verde tree so they are irrelevant to you and to Carl’s Jr. Compassion for fellow humans demand we eliminate every incentive possible to the illegal and inhumane invasion. Illegal employers start doing your part to protect the great country you decided to set up shop in or your motivations will soon dissipate.

  10. Frank Soto says

    I think I agree with you Anti – I am not saying we should have open border, etc becuase you are absolutely correct; but we should note that that is not a specifically free market argument, and in fact cuts against it. Immigration control has more to do with federal sovereignty in dealing with foreign governments, and so we give the federal gov’t the “plenary” power to deal with it, I am fine with that. All I am saying is that we conservatives (although I guess many of you think I am not…) have a much better argument in national security, which I just think we don’t use enough.

    Mark AZ: I don’t really get what you are saying. FIrst, you say: “The incentive for third world “migrants” to come partake of the American dream is too overwhelming.” Then you say: “Compassion for fellow humans demand we eliminate every incentive possible to the illegal and inhumane invasion.” So, you want to eliminate the American dream? What I think you are saying is that “tough” laws like the employer sanctions will stifle the job market for illegal immigrants, thus making it so that they will not come here. But that’s not absolutely correct, I think. All this talk about econ made me look at my old copy of Judge Posner’s Economic Analysis of the Law book, so if I use a symbol wrong, I’m sorry; I learned econ from a crazed old jurist. First, assume that the cost (c) of being caught is 100k (losing license, re-gong through process under spouse name, etc). However, maybe the probability (P) of being caught is only 10% (probably actually too high, but it’s too soon to know). The value of using illegal immigrants is both the difference between their wages and minimum wage (v), and let’s imagine that is roughly 400/wk (two people working five days a week, for 8 hours at a 1.50/hr instead of 6.50/hr). They also probably reap additional benefits in being able to sell their product cheaper, and therefore moving more volume, reaping more profit/money (m), that is pretty speculative, so well leave that out for now. So, I think that this particular tough law will only be effective if Pc is more than or equal to v+m; if it is not, than a ‘rational actor’ ought to break this law because that is what the market encourages. In this instance 10,000 is certainly not more than 20,800 + m. Therefore, market economics would predict that employers should continue to higher illegal immigrants. Now, you can play with this by changing the damages, or the probability of being caught, which I obviously made up. The point being that you can’t be positive these laws will have the affect you think they will just because they seem “tough.”

    Now, there are of course “externalities” (what you say I ignore in people dying in the desert, etc.) but those have a much more subjective calculation, that we usually allow to be priced by the market instead of regulation (but not always, see coal workers hours limits, child labor, etc). This is the part of the calculation where you could throw typical emotional arguments about immigration: new laws are racist (from the left), you are creating a sub-class/ new type of slavery/people dying in the desert even though I oppose having water stations in the desert arguments (from the right).

    Instead of having to make all of these arguments, and deal with incredibily complex emprical claims that in the end won’t matter because people will point to externalities, it just seems easier (I am quite lazy) to argue for immigration reform based on national security. This avoids having to undermine traditional conservative economics, and achieves the same result.

  11. Mark AZ says

    Frank, Free Market, which we Republicans champion, has to be based on legal and legitimate practices. If the market is not legal then don’t talk to me about Free Market. I’m not going to twist the logic with illegal employers or their sympathizers. If the laborer is in the market illegally, then the “Free Market” is hopelessly skewed. You’re not paying market level wages, you’re paying illegal alien level wages.

    And no, you don’t eliminate the American dream. You build a Duncan Hunter fence and take pride in your sovereign border. Open up your business in Mexico instead of the U.S. There you can pay third world wages in a Free (and Legal) Market. Trying to have it both ways will land illegal employers in jail, hopefully.

  12. Frank Soto says

    “Frank, Free Market, which we Republicans champion, has to be based on legal and legitimate practices.”

    You are begging the question. For instance, what if the government made it so that no one over 50 was allowed to work? It is now the law that if you are 51, you are not allowed to get paid for your labor. Free market economics dictates that this law should just be followed, because the goverment is allowed to dictate what the market is? That certainly flips what traditional (Von Mises, Hayek, et al) free market reasoning is. You can try to distinguish the two situations all you want, but in a purely economic sense, they are just as arbitrary.

    Let me give you a real life example. Many different states have different tonnage requirements for truckers. For ease of example, let’s say in State A you can have 1 ton, State B you can have 1.5 tons, and State C 2 tons. The fine for possessing more than the required tonnage is $50 in all three states. What do you think that shipping/trucking company’s do? They always ship 2 tons, regardless of what states they are going through, because the cost of complying with the regulation is substantially higher than the probability of being caught in both states times $100. Should they be put in jail? It is illegal for them to do this, and they do it knowingly and willfully.

    The thing is Mark, markets are effected by legal regulations and laws. Free markets capitalists believe (or used to believe) that there should be minimal state interference because that promotes the most ‘natural’ markets that are both the most efficient and wealth maximizing (not necessarily ‘welfare’ maximizing). The point is, and apparently this is not coming through, that when you argue for immigration regulation based on economics, you are necessarily abandoning true free market economics. I don’t know when this invention of a “legal free market” developed. There are not different versions of the free market, a market is either free(er;ish), or it is not. Law impact the market, but do not define a free market. Otherwise, you would have to say that a socialist country has a “legal free market.”

  13. Mark AZ says

    Frank, As long as your illegal alien employing free market exists only in text books, or anywhere outside the U.S., I’m okay with that. America can do better. We have appropriate immigration law. When it is not enforced we all lose, except that some businesses experience ill gotten profits. Nothing against profit, of course. No forgiveness for illegal employers who compete with legitimate employers, or otherwise provide the incentive encouraging the illegal invasion.

  14. Mark AZ says

    Frank, you said “I think the weakest argument that conservatives have when it comes to the immigration issue is an economic stance.” We agree. Also, to point out the obvious, there is no argument for intentionally breaking the law. And our immigration laws are just fine now. I believe enforcement of those laws will benefit our economy and the quality of life in this greatest country.

  15. Frank Soto says

    I figured that we probably agree, and I also agree that the laws need to be enforced, etc., I just want to make sure that we have the best arguments against open borders advocates.

    I do think that I disagree with this though: “Also, to point out the obvious, there is no argument for intentionally breaking the law.”

    But, since we have finished the conversation for the most part, there is no point on going down this digression :). Have a great weekend! Chicago is finally starting to get warm, maybe I’ll go outside!

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