This echoes the objection that some levied against raising the minimum wage. Minimum wage workers also constitute a small percentage of the workforce (less than 5%), but are highly concentrated in a few economic sectors (like fast food). Critics of non-trivial increases in the minimum wage argued that such raises would end up posing significant burdens for certain businesses, even whole sectors of the economy, as employers saw their labor costs rise. Advocates countered that the price impacts would be relatively small, and that if a business couldn’t survive without paying a decent wage, then perhaps that business model was broken and we’d be better off without it anyway.
The results are in - and while economists are still arguing about the results, it’s clear that the results are small enough to be in the realm of economists’ arguments. Not of the magnitude that would be visible to voters in their day-to-day, and drive them to the polls in reaction to the policy.
Tighter workplace compliance with immigration rules might just go down that same path. It would definitely have an economic impact on certain firms that are especially reliant on filling those positions with low-wage workers. But that impact might not be large enough to affect the broader sector. People might just end up having to pay a little more to get the percentage of legal workers in their restaurants from 90% to 95%, which might close down a few places at the margins and raise prices modestly - but not enough so that customers see an obvious impact that they can attribute to the impacts of immigration policy.
The big difference is that raising the minimum wage does not create a labor shortage. Removing the undocumented potentially can.
How much money would one have to pay an American citizen to put on a roof in the summer heat or wash dishes and clean restaurant toilets or hand harvest kale? It wouldn’t surprise me if the current lifestyle of American citizens makes it impossible to consistently fill those positions at a wage that a business can afford.
I am not advocating a particular position other than saying that I think most people are thinking about the issue very superficially. The undocumented provide a highly motivated and responsible work force that we Americans have benefitted from for a long time now. Have we taken advantage of this group? Absolutely. On the other hand, they benefitted from being able to leave a much worse home environment. Over time this relationship has developed into something that is synergistic, where the positives for both outweigh the negatives.
Until now I guess.
It’s anecdotal but I still recall a landscaper telling me that it was not possible for him to stay in business without immigrant labor. Americans will only pay so much for landscaping, there is a maximum price one can charge. If the cost of labor exceeds that price point, no more business. He claimed that without the undocumented, that labor cost threshold was reached several years ago. He can’t find enough American citizens willing to do that kind of work at a wage that would allow him to stay in business.
Right. That’s why I noticed the echoes of the minimum wage fight. Similar arguments were raised then - that certain businesses (like fast food restaurants) wouldn’t be able to function at a higher wage. Because customers will only pay so much for those products and services, those firms would end up closing, rather than raising prices and passing increases on to customers.
When the increases in minimum wages took effect, however, the impacts were small enough that economists on both sides continue to argue about whether there actually was an impact or not. Not one big enough to be noticeable by consumers, who aren’t engaged in multivariate statistical analysis of the subject.
Your anecdotal landscaper may very well be driven out of business. Others won’t. They’ll (collectively) have to raise their labor outlays, which means they’ll raise their prices to customers. That will have an impact, of course. Some customers - at the margins - will respond to price increases by cutting down on their consumption of third-party landscaping services. They’ll either do it themselves, or have them come less frequently. But landscaping, as a service, will not disappear. It will just be somewhat more expensive and a smaller.
There’s the rejoinder, again, that is sometimes used in these discussions - if your business involves a job that cannot be filled at a wage your business can afford, then your business model is broken. If you can’t farm kale in Texas (for example) without being able to pay undocumented workers to hand harvest it, then maybe you shouldn’t be farming kale in Texas. Maybe you should be farming other things that can be farmed economically with more machination, and people can import kale from countries that don’t have to draw their labor pool by offering a wage attractive to the “current lifestyle of American citizens.”
Certainly all that would have an impact on the price of kale - or whatever other good or service we’re talking about. But not necessarily a very large one.
This number is probably empirically true, but it doesn’t capture even a small amount of the argument on minimum wage. Because a few jobs can be offered at minimum wage, there is a tier just above that in which employers feel obligated to offer “a little better”, which helps them with turnover, or attract a better class of workers, or whatever.
So if the minimum wage is $15, maybe Kroger’s offers $16 for its cashiers or whatever because they’re “front line” with customers. Maybe $17. But if Kroger is offering $17, then The Gap (example) may want to offer $20 so they get bright young things who can talk fashion, and so on. Technically only the lowest tier is “minimum wage” but it affects many of those above it.
Now move the minimum wage up to $17, and suddenly the Kroger job doesn’t look any better, and they move to $18. Lather, rinse, repeat.
This is double-sided, of course. Higher wages can drive inflation, even through they’re a small part of the total COGS, and at the margin may produce more automation, a hunt for fewer jobs by employers, and even perversely lead to worse customer service (he says as he hunts for someone, anyone to help him in the aisles of Lowe’s.)
The trick is keeping wages at a level where it supports a working person reasonably, but not so far and so fast as to encourage those bad outcomes.
But the one dissimilar factor is a significant one, increasing the minimum wage does not reduce the workforce while removing the undocumented does. In periods of labor scarcity, as today, the latter is likely to have a much greater effect than the former.
In a tight labor market, increasing minimum wage by 10% will probably not significantly impact the number of viable businesses. Reducing the already scarce labor force by 10% by removing the undocumented almost certainly will.
Hard to imagine that the impact won’t be large. Consider businesses like elder care and child care. We have a growing need for such services, particularly among the lower economic classes. Removing the undocumented and thereby tightening the labor market will likely have a significant negative impact on the viability and affordability of these providers.
The Cheesecake Factory can probably afford to compete for the dwindling supply of restaurant workers, but can the local Wok-In Chinese take out place?
To put it another way, I suspect that the elimination of the undocumented will so tighten the labor market that the wages needed to attract workers for the unpopular jobs previously done by the undocumented will be much greater than the current minimum wage. Therefore the impact in these sectors will be much larger than the increase in the minimum wage.
That’s entirely possible. But again, that’s what happened with the last round of the minimum wage increases in several communities. Firms ended up increasing the required pay for low-skilled workers to a level well above the then-minimum. The impact on customers and firms was small enough, though, as to be mostly invisible to voters.
Cutting down on the number of undocumented workers (but nowhere near 10% of the labor supply) does marginally reduce the labor force. Employers will need to increase wages at the lower end to attract non-workers to enter the labor pool. That will increase the cost of labor for such firms.
Yes, the local Wok-In Chinese take-out place might be put in a bit of a bind.^^ They will have to raise prices somewhat. Not a huge amount, of course - labor is only a portion of their overall cost structure, and only a portion of their workers will be affected. The higher prices might reduce the overall demand for casual neighborhood Chinese take-out, and some of them might close. There’s emerging economic studies that show that this happened a little bit with some of the minimum wage increases.
But I suspect it won’t be a large enough impact for voters to notice. As noted above, we’re not talking about 10% of the labor force. As with the minimum wage, you’re talking about fewer than 5% of workers. And since these provisions are never 100% effective, you’re probably looking at an impact on the labor supply that’s of the same magnitude as “ordinary” ebbs and flows of macroeconomic factors.
^^Because the most stringent penalties are reserved for firms that employ more than 25 people, the small Wok-In Chinese restaurant might actually benefit from the policy - as larger firms that used to employ undocumented workers have to discharge them, increasing the pool of the undocumented available for the Wok-In to hire. But that’s a minor quibble.
Sure. There was lots of conversation about dealing with pay compression within firms and among firms as part of the debate over minimum wage. And again, those impacts certainly showed up in the data when the increases to minimum wage were adopted in various communities.
But showing up in econometricians’ data is very different than being a large enough impact to be noticeable to the average voter/customer. Raising the minimum wage did end up changing firm and worker behavior at the margins. But it didn’t result in changes of sufficient magnitude that you would observe them if you weren’t really trying to analyze them.
What is important is the labor force for a particular business sector. It will probably be 10% of the labor pool for construction, restaurants, agriculture in a number of states, including some considered swing states. It may also be that high or higher for many voting districts.
As for the effectiveness of the policy that depends on the perception of how vigorously it is enforced. Imagine if you will a state with a governor running to be the GOP presidential candidate and is desperate to get the support of die-hard MAGAA voters. He/she might want some high profile punishments to confirm his/her conservative bona fides. The undocumented worker is almost by definition mobile. Why go to a state that is trying so hard to get rid of them?
While the national impact of restricting undocumented workers may be small, the impact on specific states or voting districts could be quite large. And since we live in an era when the presidency and the control of either house of congress often depends on a few thousand votes in the right places, I don’t think you should be so quick discount the potential political impact of these policies.
The pressure on wages is very important for another reason.
In the US over the last four decades tax revenue from the bottom have of earners has dropped off. Upping their pay not only cuts welfare spending the correct way but funds the government the correct way. The ramifications are huge.
As was true of the minimum wage impacts. Again, only a few percentage points of the overall labor force - but highly concentrated in a few select sectors of the economy (like fast food). Hence, the predictions by some that raising the minimum wage materially would translate into a material impact on the labor costs of firms in those sectors - and thus would translate into significant impacts on their consumers.
But again, that didn’t really happen. At the margins, some firms were affected - but overall, the impacts to even the sectors that were most highly concentrated with minimum wage workers weren’t affected enough to result in obvious changes to consumers.
Again, a marginal impact. Most of the undocumented workers who would be in Florida during the upcoming Presidential election absent this law are already present in the state. A reduction in new arrivals - even if new arrivals stopped altogether - would have only the tiniest effect on the economy.
Florida’s one of the biggest states in the union - so just as the national impact of restricting undocumented workers is likely to be small, our state-wide impact is likely to be small. Yes, there might be greater impact in a particular Congressional district that had a significantly higher-than-average proportion of undocumented workers. Even so, that’s unlikely to have an impact large enough to capture the attention of voters - and, quite frankly, given political alignments and the realities of how districting is done that district is probably already represented by a Democrat rather than a Republican.
So it’s pretty unlikely that the Republicans generally (or De Santis particularly) will see a “rue the day” kind of economic impact that causes them to suffer politically from the consequences of this law.
Back in 1994, California had a republican governor and was not the all blue state it is today. That year was notable because Proposition 187 was supported by republicans and passed in the state election. Proposition 187 prohibited undocumented immigrants from receiving health care, public education and other services.
It mobilized California Latinos and severely damage the republican party. We still see the effects today.
…The other theory is that Republican support for anti‐immigrant ballot initiatives and candidates ruined the GOP brand in the eyes of immigrants, their children, and whites who were turned off by the nativist appeals – driving all of them into the arms of the Democrats who were pro‐immigration. More evidence supports the second theory than the first. https://www.cato.org/blog/proposition-187-turned-california-blue
True. And it’s always worth remembering that Prop 187 passed in a landslide, close to 60-40 - it wasn’t just Republicans who supported it, even though it was (mostly) Republicans who got crushed by the backlash.
But that’s likely why measures like Florida’s recent bill are typically much more tailored than Prop 187, aiming at issues where even folks who are sympathetic to undocumented residents are also in favor of some stricter enforcement (like workplace enforcement).
Yet you said in the previous paragraph that Prop 187 won in a landslide. It was clearly just as tailored to the general electorate of the time as the FL immigration bill is today. Do you seriously believe the FL bill that penalizes American businesses is more popular that Prop 187 that prevented illegal immigrants from using services paid for by American taxpayers?
There are interesting parallels between 1994 CA and 2023 FL. Both had republican governors with presidential ambitions who became the face of each respective immigration bill. Both lived in states where Latinos would have been the most negatively affected by the bill and were one of the fastest growing segments of the population.
Yes - or at least, this part of it. People across the political spectrum favor penalizing American businesses that use undocumented workers. Obviously Fool 1.0 is dead, but if we could resurrect it you’d find lots of thoughtful progressives noting that increased enforcement against the corporate entities that exploit undocumented labor for their own benefit should be an important part of immigration reform.
No. Going into the 1994 election, Democrats controlled the state General Assembly and had a 10 point edge in voter registration in California - an edge that had been growing for several election cycles. It was very much a purple state that was already trending blue.
Florida is the exact opposite. We are a red state trending redder. More voters are registered Republican than Democrat, continuing a trend towards greater GOP registration over the last several cycles. The Democrats haven’t had a majority in either chamber of the state legislature since 1996. They haven’t won a gubernatorial election since 1994. They’ve won exactly five elections for any statewide office (including U.S. Senate) since 1998 - and none in the last election cycle.
For good or bad, our Latino population is also very different from California’s. The overwhelming majority of our Latino population is either Cuban or Puerto Rican, which do not share the same immigration characteristics of Latinos from other parts of the world. Puerto Ricans are obviously US citizens; and Cubans have been covered by the Cuban Adjustment Act, which allowed them to avoid nearly all of the immigration problems that have plagued migrants from other Latin countries.