Economic immigration argument

Politics International Politics
#1

Came across this argument and I’d like to hear others’ thoughts on it.

The argument is against immigration, and goes like this:

Low-skilled immigrants drive down labour costs and thereby do a disservice to industries by making them less likely to invest in innovation.

Not sure I buy it, given that many industries seeking low cost labour merely pick up and move, to Mexico, China, wherever.
Given that, why not allow greater immigration, keep some of those lower-wage industries (allow the lowest to move), and enjoy the economic spinoffs of keeping that portion of the manufacturing sector at home (not to mention harnessing the new human capital)?

thoughts?

#2

Legal immigrants or illegal border crashers?

#3

Either.
(I think it’s irrelevant for the economics of the argument narrowly defined, which is what I’m interested in at the moment.)

#4

[quote=“Jaboney”]The argument is against immigration, and goes like this:

Low-skilled immigrants drive down labour costs and thereby do a disservice to industries by making them less likely to invest in innovation.[/quote]
That doesn’t make any sense to me. How does that explain tech companies with factories in China? Do you have a link to the article?

#5

It’s a podcast, not an article. Here’s the link.

I don’t know which companies you’re referring to, but it may be that manufacturing is going to China while R&D remains in the home country.
Like Apple:
Designed in California
.
Made in China
.
**Edit: I should have said that the companies are divesting themselves of their production units. Following the Nike model.

#6

[quote=“Jaboney”]I don’t know which companies you’re referring to, but it may be that manufacturing is going to China while R&D remains in the home country.
Like Apple:
Designed in California
.
Made in China
.[/quote]
That’s exactly what’s happening. I know all about it from a Taiwan perspective. Many of the tech gadgets you see in the computer markets are Taiwanese owned companies with factories in China.

I think Taiwan used to be a large exporter of laptops, and now there isn’t even one laptop factory in Taiwan, but the R&D and head quarters are still here (uh… I mean in Taiwan :blush: .)

#7

But that argument assumes there are innovations to be had in the low skill labor market.

Dish Washing
Fruitpicking
Lawn mowing
Home Construction
etc.

All seem to have hit their peak in efficiency. The only thing left to do is replace them will robots.

I think Americans need to get use to the fact that they are not willing to pay what they think they are willing to pay for goods and services yet. $500 to monthly lawn mowing service. $6 for an apple. $100 for a sit down meal per person.

#8

Tell me ac, just what innovations China has come up with since gunpowder, aside from cheap brick kiln delivery systems, I’m intrigued.

HG

#9

[quote]Low-skilled immigrants drive down labour costs and thereby do a disservice to industries by making them less likely to invest in innovation.
[/quote]

For some types of industry you could make that argument; however, what is most likely to happen in such an industry that is more viable due to cheap labor is that it will move to where the cheap labor is; such as setting up factories in China. It is much easier to go to the labor than it is to bring the labor to you.

And just like AC said how much innovation is left in dishwashing.

#10

Dish washing isn’t a good example since you can’t actually outsource such services.

My interest isn’t so much in driving innovation, but in the spinoff effects of manufacturing jobs that have been shed by outsourcing. For particular industrial operations, it’s easier to go to the labour than to bring in labour, but it’d be easier still if the gov’t opened the door to immigration and the labour came of its own accord.

*I realize this is a back door approach to the anti-minimum wage argument, but something about it is tickling my mind, and I can’t pin it down.

I’m taking a pretty narrow view of the question at the moment to get it clear in my head before bringing in all the other factors… wondering what the cost/benefits of maintaining those industries at home would be, if that necessitated a large influx of migrants.

#11

[quote=“Huang Guang Chen”]Tell me ac, just what innovations China has come up with since gunpowder, aside from cheap brick kiln delivery systems, I’m intrigued.

HG[/quote]
After PRC wages increases, there will be room to inject innovations (automation) into their manufacturing process. Thus reducing their workforce needed.

However, USA is on the tail end of the labor cost and automation implementation in manufacturing. The only thing left to do is reduce the workforce and introduce full automation in the low skill labor market in the US.

Because the premise of the argument is that if we reduce low skill immigrants, there will be pressure to increase wages. To which I argue the market will not sustain those prices. Since no one in the US is as rich as they believe to buy at a luxury price point. If US were able to buy goods and services at a luxury price point, you think Wal-Mart would be largest retailer in the US?

And some employees at Wal-Mart collect welfare…which is the documented labor solution to the problem. Part-time employment with no benefits, and some government relief to make up the difference.

It is just unrealistic to think it is a sustainable model in the long run. Basically putting workers on government relief, like the auto-industry. Cyclical lay-off and re-hiring, only to have factory workers become a burden to the State 3-4 months out of the year.

#12

[quote]Low-skilled immigrants drive down labour costs and thereby do a disservice to industries by making them less likely to invest in innovation.
[/quote]

If you want the classic economic response it’s that the company is using the extra profits they make by lower labor to innovate in areas that are more valuable and profitable, or if there isn’t room for innovation, they are distributing more earnings to shareholders, who in turn invest in other innovative ventures.

#13

If you mean Americans who had jobs but their jobs were exported to countries with low labour costs then the expectation is that they will retrain. That has social consequences depending on age, capacity for retraining, availability of training, willingness to relocate etc. There are plenty of problems if you are unemployed.

Opening the flood gates to immigration? I doubt that would work. Low cost labour countries have seriously low costs, tax incentives to business, and they compete with one another to get the companies to come. They have billions of people willing to work for very low salaries. These salaries, however, can still afford them a living. They wouldn’t be livable salaries in America.

You can’t view the issues of labour and innovation seperately.

#14

[quote=“ac_dropout”][quote=“Huang Guang Chen”]Tell me ac, just what innovations China has come up with since gunpowder, aside from cheap brick kiln delivery systems, I’m intrigued.

HG[/quote]
After PRC wages increases, there will be room to inject innovations (automation) into their manufacturing process. Thus reducing their workforce needed. [/quote]

I got no idea what you’re babbling on about but to take it back to the first sentence, innovation does not mean automation. Still, I suppose substituting cheap toxic materials in the preparation of medcines and the like is a form of innovation.

HG