Immigration; - Friend or Foe? J. McClure and R N. Van Cott

by James E. McClure and T. Norman Van Cott Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse ofyour teeming shore. Send these, the homeless, tempest-tossed to me, I lift my lamp beside the golden door! -EMMA LAZARUS "The New Colossus" D o immigrants slice themselves a piece of the U.S. economic pie at the expense of Americans? Judging from the xenophobic backlash against immigrants in much of the media, many Americans apparently accept this assessment. As a result, immigration now connotes U.S. international charity. Public debate focuses on whether the United States can "afford" immigrants. Casting immigration as a test of American compassion obscures a rational appraisal of its costs and benefits. Working immigrants do not slice the economic pie against Amer icans. Quite the contrary, Americans obtain bigger helpings of pie when immigrants work. Such immigrants may be likened to labor-saving technical innovations.

Only welfare state handouts enable immi grants to slice the pie against Americans. Prior to the welfare state, immigrants had to work to survive. U.S. history is replete with T. Norman Van Cott and James McClure are Professors ofEconomics at Ball State University in Muncie, Indiana. examples demonstrating that working immi grants benefited not only themselves, but also the Americans who employed them and the Americans who purchased what immi grants produced. Today, handouts have eliminated the necessity of immigrants ben efiting Americans in order to survive. More Pie for Americans To see the value of working immigrants, look at what happens if low-wage Mexican immigrants replace high-wage American to mato pickers. Such a replacement can occur only to the extent Mexicans underbid Amer icans for the picking jobs. For example, if American pickers are earning $12 million, and if the most they can earn in other jobs is $10 million, Mexicans must be willing to pick the tomatoes for less than $10 million say, $7 million.

Regardless of who picks the tomatoes, U.S. citizens cannot have tomatoes without forgoingother goods and services. There are no free tomatoes! Because American pick ers can earn $10 million in other jobs, U.S. citizens sacrifice $10 million of other things when Americans pick. On the other hand, paying Mexicans $7 million for picking means they can lay claim to $7 million of U.S. products. Thus, U.S. citizens sacrifice only $7 million of other things when Mexi cans pick. Opting for Mexican pickers en ables U.S. citizens to have the tomatoes plus an extra $3 million of other things. 395 396 THE FREEMAN • OCTOBER 1993 Does Anyone Lose? Not all U.S. citizens are better off when Mexicans pick the tomatoes. American pickers lose $2 million-they formerly earned $12 million, now they earn $10 mil lion. Many people think this $2 million is part of the $7 million paid to the Mexicans that is, Mexicans capture what the Ameri can pickers lose. Nothing could be further from the truth.

The loss to American pickers goes to other Americans. It is part of the $5 million reduction in wages paid to pickers due to the influx of Mexicans ($7 million versus $12 million). Lower wage costs obviously help American owners of tomato farms. In turn, market forces translate lower wages into lower tomato prices for American con sumers. Not a penny of this goes to the Mexicans. Beyond reshuffling $2 million among American pickers, farmers, and consumers, remember that the Mexicans generate $3 million additional pie for U.S. citizens. This is also the other part of the $5 million reduction in wage costs. Just as happened with the $2 millionreshuffling,market forces apportion this extra pie among American tomato farmers and consumers. Lower tomato prices also give Americans the opportunity of using tomatoes in ways that were uneconomical at higher prices. It follows that the benefits tomato consumers reap from these new uses make the increasein the economic pie even larger than $3 million.

If someone invents a machine that can underbid American tomato pickers, the con sequences for American pickers, farmers, and consumers are identical to those brought about by low-wage Mexican pick ers. That is, the reduced harvesting costs: (1) recut the pie into different pieces for pickers, farmers, and consumers; and (2) en large the pie to the benefit of the same farmers and consumers. Given the similarity between working im migrants and innovation, it is curious that immigrants are seen as parasites. American heroes such as Thomas Alva Edison and Alexander Graham Bell testify to the value that historians assign innovation. Admit tedly, seeing people work for lower wages does not pack the same excitement as seeing new machines roll across the fields. Never theless, both pack the power to increase Americans' living standards. Non-Working Immigrants Instead of picking tomatoes for $7 million, suppose the Mexican immigrants end up on the unemployment or welfare rolls, collect ing$7 millionin handouts. The economic pie available to Americans would be $10 million smaller compared to the case in which the Mexicans worked. In addition to a $7 million tax bill for the handouts, Americans would forsake $3 million of extra pie that working Mexicans would have generated.

The only Americans who would favor non-working immigrants (or no immigrants at all) would be Americans who compete with immigrants for jobs. American tomato pickers in our example would earn $2 million more if shielded from working Mexicans, but don't forget that this comes at the ex pense of American tomato farmers and con sumers. In addition, remember that without working Mexicans, these same farmers and consumers will also be eating from an eco nomic pie that is $3 million smaller. The Statue of Liberty describes immi grants as "tired . . . poor. . . homeless . . . huddled masses yearning to breathe free." Prior to the welfare state, however, Lady Liberty's "golden door" did not open to a golden gravy train. Immigrants worked, and in the process proved a blessing to their American hosts. Immigration is a win-win proposition when people are responsible for their own economic destiny.

The rise of the, welfare state is turning immigrants from friends to foes in America. The xenophobic backlash against immi grants, while understandable, misses the mark. Americans must 'look beyond the immigrants and see that their own govern ment's misguided welfare programs are the source of the problem. D THEFREEMAN IDEASON L1BEAlY THE COMMON GOOD AND THE FREE RIDER by Mack Tanner I f you have ever argued for freedom and individual liberty , someone has probably argued back that the commanding hand of government must be present to provide for the common good and to promote the gen eral welfare. They will tell you that we cannot trust humans to sacrifice voluntarily for the common good, and that any commu nity effort that depends on voluntary con tribution is doomed to failure because of the free-rider dilemma. Too many people will take the benefit without contributing any thing to the cooperative effort.