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The Wall Street Journal is distorting the truth about immigration
Gerard Jackson
For some weird reason the Wall Street Journal has become obsessed with defending the alleged benefits of increased immigration: even to the point of wilfully ignoring historical and economic evidence to the contrary. It is doing what it has rightly condemned the left for doing — and that is treating the truth with contempt.
Without a shred of evidence to support its stance the paper asserts that more immigrants means a bigger per capita economy. This is just another version of the crude population-drives-growth fallacy. Let me draw on three vivid historical examples that completely refutes the paper’s pro-immigration argument.
After the Black Death struck England in 1348 the population was reduced by about a third. The result was a rapid rise in real wage rates. So swift was this rise that in 1351 the crown felt impelled to pass maximum wage laws based on the average wage for the period 1325-1331. It did this in the belief that there was something unnatural and unjust about rapidly rising wages, even though it was brought about by a sudden reduction in the size of the workforce.
Any economist would simply state that the sudden rise in real wages was caused by a rapid increase in the ratio of land and capital to labour. (This process was detailed in Paul A. Samuelson’s Economics, tenth edition, McGraw-Hill). It follows that lowering the ratio of land and capital to the population would also lower living standards. And this is what eventually happened as the population expanded.
Let us now leap forward by five centuries. The benefits of the industrial revolution were not evenly spread geographically, with most of the industrial investment taking place to the north of London. As our example of fourteenth century England showed, those areas in which industrialisation took place would bring about an increase in agricultural wages as the ratio of capital to labour rose.
From this we can deduce that in those areas where population increased but industrial development remained absent real wages stagnated. This is precisely what Sir James Caird discovered. He estimated that even as late as 1851 the average weekly agricultural wages in 20 southern counties were 8s 5d compared with 11s 6d for 12 northern counties. In parts of some counties they had not risen in 80 years.
This brings me to New York maidservants, one of my favourite examples of how capital accumulation raises the real wages of even the least skilled among us. In 1914 these girls’ weekly wage averaged $3.50 (living expenses were provided by employers); by 1922 they had jumped to about $14. Given that the consumer price index had risen from 30 to 50 this meant that their real wage rates had risen by more than 140 per cent.1
What is particularly interesting about this example is that it bears a striking resemblance to the current debate about the impact that illegal immigrants have on wage rates. Before the war a constant stream of young girls from Ireland, Germany and the South prevented wage rates for maidservants from rising. The war cut off the foreign supply of girls and raised the demand for female labour thus raising the real wages of maidservants by cutting the supply.
Because the US has accumulated an enormous amount of capital from 1914-1918, a process that continued for some years afterwards, the favourable change in the capital-labour ratio maintained the maidservants’ wage rates, a process that was further strengthened by strict immigration controls.
In other words, the supply curve for maidservants moved significantly to the left, meaning that fewer girls were employed but at much higher wage rates. Those families who now found domestic help too expensive were forced to do without. No one claimed that this situation damaged the US economy. If anyone at the time had asserted that the US should open up its borders in order to lower the price of maidservants they would have been laughed out of the country. Yet that is what, with the help of the Wall Street Journal, some firms and farmers are in fact arguing today.
Although the physical productivity of waiters is no higher than it was 100 years the value of their productivity has greatly increased. Why? Because of the massive increase in per capita accumulation. To argue that foreign workers should be imported to lower the wage rates of waiters is the same as arguing that the beneficial effects of capital accumulation on wage rates must be offset by increasing the labour supply.
By its very nature capital accumulation (economic growth) makes some lines of labour intensive production unprofitable because it makes labour more valuable in other lines of production. This is what makes the US an advanced economy. In other words, the Wall Street Journal and its supporters are basically arguing against higher wages — and they don’t even know it.
It takes little thought to realise that importing, legal or otherwise, huge amounts of unskilled labour will have a disproportionate effect on the wage rates of minorities and the poor. It is my bet that members of these groups, regardless of their ethnic origins would vote overwhelmingly for stricter immigration controls, particularly on the border. It is also my opinion that when it comes to predicting the effects of large-scale immigration on the wages of the unskilled these people are better economists than the editorial writers at the Wall Street Journal.
BrookesNews.Com
Monday 3 April 2006
 The thing to note about the chart is that it shows there is no correlation between wages and union membership. The seconod thing is that it shows annual real wage growth was slashed from the 1.27 per cent rate that prevailed from 1855-1895 to 0.55 per cent for 1896-1916. This is 57 per cent drop and was evidently caused by what is called “the great Ellis Island influx in the first two decades of the 20th century”.2
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The recent demonstrations against border controls have revealed the political aspects of the illegal immigration problem. These demonstrations were marked by the number of Mexican flags, anti-American slogans and outrageous revanchist claims.
Ludwig von Mises once observed that it did not matter if Australia was inhabited by both Japanese and Englishmen so long as they shared the same classical liberal values. There was nothing liberal in the classical sense about these demonstrations. They revealed contempt for American values and history. Moreover, the demonstrators’ claim that they are “the economic backbone of the country” is palpably false. Cheap labour has never been part of America’s economic backbone. As I have tried to show, importing so-called cheap labour can have a very high price indeed.
It is argued that deporting illegals will destabilise their countries of origin, mainly Mexico. But their disgraceful behaviour shows that they are a destabilising political element in the host country that will not hesitate to overwhelm American streets and police departments with Latin American-style politics.3 Is that what Americans want? I doubt it, even though the treasonous America-hating left welcomes the thought.
Australia does not allow itself to be flooded with illegal immigrants and neither should the US. Nor should she allow Mexico to foist the sour fruits of its own political and economic failures on the American people. Every country has a right to maintain the integrity of its borders — and America is no exception.
11967 =100, Handbook of Labor Statistics, US Department of Labor Bureau of Labor Statistics.
2The Tucker series converted to hourly rates and adjusted to the cost of living, Employment and Wages in the United States by W. S. Woytinsky and Associates (New York: The Twentieth Century Fund, 1953)
3I do not mean to suggest that all Hispanic illegal immigrants are of the same mind, only that when so many take to the streets to openly defy US law and flaunt their loyalty to another country it is time to take notice.
Note: I see that Paul Krugman has made some sane economic comments on the consequences of importing cheap labour (North of the Border, New York Times, 27 March 2006).
Gerard Jackson is Brookes’ economics editor