Over at Frum Forum, Howard Foster argues that we should strongly reduce immigration in order to create jobs for native workers. I’m going to put aside the issue of the welfare of immigrants, which to judge from Mr. Foster writing appears to deserve approximately zero consideration, and focus strictly on the question as he frames it: would reducing immigration stimulate native employment? The answer here is a pretty clear no.
For one thing, there the fact that low growth in the number of households has already declined, and with negative consequences. Less household growth means less new houses are needed, and this, in part, explains why the housing sector is failing to contribute to the recovery. This is a problem because housing investment usually is an important component of post-recession economic growth. Current economic activity is based in part on expectations, and the expectation that households would increase more slowly than expected, for instance because we were cracking down on immigration, would make businesses less likely to invest if they expected immigrants to be their customers. In the aggregate, less immigrants mean less households, which means less houses built, which means a slower recover. It’s really foolish to wish to exacerbate the problem of low household growth as Mr. Foster does.
No matter how much Mr. Foster may wish it to be true, there are significant adjustment costs to transitioning to a lower population level, and even a lower population growth rate. I would hope it would be obvious even to him that if we kicked out all 14 million immigrants that came to the United States between 2000 and 2010 that the effect would not be a boost in employment, but a lot of vacant homes, businesses, and schools, and widespread economic problems. After all, if Mr. Foster is right and less competition from other workers is the best thing for people, then why isn’t Detroit an oasis of full employment? After all, the mass exodus of competitors surely leaves more jobs for those left behind?
One thing that always puzzles me about arguments like Mr. Foster’s is why they don’t they apply the same logic to capital and goods markets that they apply to labor markets? If one can boost employment of domestic labor by legally mandating a decrease in imported labor, than surely one can boost production of domestic goods by legally mandating a decrease in imported foreign goods.
Imagine a Mexican immigrant lives in Texas and takes the job of a native Texan in the most literal sense: the American burger flipper is fired from a burger stand and the Mexican is hired to replace him. Now imagine instead that the Mexican man never comes to America but instead works for a burger stand across the border in Juarez Mexico. The burgers he makes are shipped to the U.S., putting the Texas burger flipper’s employer out of business. From the perspective of the employment of the Texan, these two situations are identical.
Why wouldn’t Mr. Foster have us ban the import of the burger if he would have us ban the immigration of the burger flipper? To the extent that these situations are different, the immigration of the Mexican burger flipper is clearly preferable. Since there were likely some other natives employed at the Texas burger stand, native employment is hurt less by immigration of burger flippers than the importation of burgers. Better to keep the stand open and in the United States with some immigrants displacing natives than to have the whole operation move to Mexico.
The foolishness of the argument that we can spur the economy by banning imports should be pretty obvious. If you find yourself tempted to accept the idea that banning immigrants would help native employment, consider the parallels between restricting the flow of labor and the flow of goods and capital.