Humans Grow Hair

A very brief take of Yglesias’ Immigrants Create Jobs post.

It’s very Thomas Friedman-like; a little ordinary observation expanded into major policy implications.  In this case the policy implication is one of the various gentrification strategies to take back the ghettos so decent people can live in the cities again.  Here’s six of Foseti’s many posts on the subject in chronological order: (1, 2, 3, 4, 5, 6)

One of the latest proposed tactics is inviting immigrants to follow the District’s ‘The Plan‘ and ‘race-replace‘ the populations of dying rust-belt cities, just like Bloomberg recommends for Detroit.  To paraphrase James Baldwin, and his criticism of the concept’s hidden pretexts and undertones from half a century ago ‘Urban renewal is Negro Removal‘.

How we’re supposed to ‘assign’ immigrants to particular ghettos and keep them there is a bit of an unspecified mystery.  Is the federal government going to deport them and their kids if they decide to move?  Of course not.  But we suspect immigrants will tend to ‘flood the zone‘ (see the bit about Whitney) and recreate micro-neighborhoods and schools they won’t feel the need to flee from.  Maybe then the family-forming whites will move back in too; wouldn’t that be something!

So Yglesias went to Cleveland and enjoyed a good meal at a Chinese restaurant.  He’s right, I’m pretty disappointed with DC’s restaurant food quality as well, ethnic or otherwise.  I’ve found better, at a better value, in the Midwest and Northwest, and it doesn’t hold a candle to NYC.  District restaurants must tend to be competing on the basis of social-scene trendiness instead of food quality, which is why Tyler Cowen will tell you to drive into the least trendy locales to find those kinds of market conditions, and even then their food still isn’t all that good.

But getting back to the story, Yglesias notices the remarkable fact that there are Chinese individuals employed making the tasty Chinese food, and he says immigrants create jobs as if that’s a major point of contention in empirical economics and political science.

Strawman:

A straw man or straw person, also known in the UK as an Aunt Sally,^[1][2] is a common type of argument and is an informal fallacy based on misrepresentation of an opponent’s position.^[3] To “attack a straw man” is to create the illusion of having refuted a proposition by replacing it with a superficially similar yet unequivalent proposition (the “straw man”), and to refute it, without ever having actually refuted the original position

So, we could play a little game of ‘exactly what is being refuted?’.  Fortunately, he helps us, ‘To think of the city as having a fixed sum of jobs that are either “taken” by immigrants or else “left” for natives is very misleading.’

It certainly is misleading.  Which is why no one is thinking that way.  Instead, the argument is a very simple one of supply and demand, both in the labor and consumption markets.  Of course immigrants will try and get jobs and make money, we’re talking about the impact on the broader host society markets.

What people are thinking is that immigrants tend to depress wages in the sectors in which they work vs. the counterfactual scenario.  This is the opposite of the theory of unions or rent-seeking licensed professions (against which Yglesias frequently argues) which try to restrict entry of labor into a profession to keep wages high.  If the unions/licensing strategies work (they do), then doing the reverse by any means, including immigration, should have the opposite effect.

Let’s split these supplies and demands apart.

First, immigrants are human beings.  That means they crave things like food and shelter and security and toilet paper and real estate and yes, even haircuts.  Somebody’s got to provide those goods and services in the new country, and stop providing them in the old country.  If it helps the US economy, does it not hurt the emigrant country’s economy?

To the extent that immigrants prefer their native cuisine and those practiced in producing it, as well as barbers more familiar with the follicular tendencies of their heritage, then yes, the new demand is met with new suppliers.  Natives can perceive this new supply as a ‘market completion’ and reallocate their consumption choices towards it and away from the pre-existing substitute alternatives.

But again, to the extent this can ‘generate complementary employment’, it can just as easily destroy the complementary employment associated with the substitutes that had their consumer allocation reduced.  For example, I used to enjoy many fine meals at some Italian, Jewish, and Irish eateries that didn’t move out of old town to the suburbs with their clientele.  The proprietor’s kids usually didn’t take over or move the business either.  The ghetto tended to form around them and the customers tended to stay away or take their chances and dash in and out no matter how awesomely good their corned beef was.  Most of these places have simply gone out of existence, so, yeah, there’s sushi and Thai now, but the legit shepherd’s pie, hearty lamb stew, and cheap but soul-brightening colcannon are gone, along with Mrs. O’Bannon, RIP.

Nowadays we only have cheap imitations, if we have them at all.  Replacement is not expansion.  And it’s by no means obvious that there is a significant net per-capita improvement when this happens beyond ‘more choice is better’ even where, in fact, there is more choice.

But not every low-skill immigrant is employed in the choice-expansion / ethnic-preference / enclave human-function self-sufficiency labor market.   To the extent they compete with other native low-skill workers for low-skill jobs, the wage level will be depressed.

Here’s how it works.  Competitive firms expand output until marginal cost equals marginal revenue.  Since not every worker in an economy works for one firm, the marginal productivity of a worker is far in excess of the specific demand for any good he produces.  Unless the set of immigrants present consumption demands exactly proportionate to the profile of consumption in the country at large, they will tend to collectively produce more of the low-skill labor output than they collectively consume.

So for production of this class of output to expand profitably relative to demand, input factor prices must fall.  The other input prices tend to be constant, or rise with a domestic population made larger via immigration (like rent), so the factor price which has to fall is wages.  If low-skill immigrants and natives have to hussle for jobs to survive, they’ll accept these lower wages because they have little choice, and increased employment leads to less pay than the natives would otherwise receive.  Consumers and Producers of this output will, of course, benefit from lower prices and thus higher surplus.  No one is denying that.  We are denying that it doesn’t hurt native low-skill workers.  It’s a trade-off, maybe not a ‘zero-sum’, but also not a win-win.

In addition, unlike labor services like food preparation in an environment with plenty of underemployment, some things are scarce and hard to expand, like capital and land and public commons.   When immigrants desire these things, they drive up the price.  Also national parks and air quality.  The more people, the more crowding, and the more pollution.

If you’re positioned at the wholesale part of the low-income personal-consumption-expenditures part of the economy (like farmers and Walmart), and/or at the low-skilled labor-hiring part of the economy (like farmers and Walmart), then of course you want more immigration.  If you’re on the other side of those markets, then you don’t.  If you’re progressive and you think those immigrants will vote for progressives, then you favor more immigration (and less voter id laws).  If not, then not.  It’s that simple.