Issues, Symptoms, and Oreos

By Mike Cronin

Most of the issues in the presidential debates are not issues at all but symptoms. How so? Let’s take an example: illegal immigration.

The real problem isn’t that the United States is racist and doesn’t want so many people coming into our country. It’s that the flood of people coming into this country illegally is a signal that other things are broken.  The mass of immigrants perceive the United States to be a better place to live and work than wherever they are from. In other words, their incentives to come here are greater than their incentives to stay home. That has always been the case with immigration to the United States. What has changed is the nature of the incentives.

Through much of the 19th and 20th centuries, the incentive to immigrate to United States was the opportunity to be free to work hard, own property, and succeed.  From the latter part of the 20th century to the present, that incentive has been morphing. There is still an incentive to come here to be free and succeed, but another incentive has been steadily taking the place of that original one.

The new incentive is to come to the United States and take part in the bounty of government benefits and handouts that we bestow on a significant portion of our population. Free K-12 education. Subsidized housing.  Free or subsidized medical care. Relatively high paying jobs (even jobs that pay immigrants less than minimum wage under the table may be paying them more than they could get in their own country.) Low risk of being deported.   Even the possibility of voting. Why stay at home and live in absolute poverty, when you can come to America and upgrade to relative poverty and dependence on Uncle Sam?

A related symptom is corporate off-shoring and outsourcing. Even as immigrants are poring in to find a better life here, companies that send jobs or work outside the United States are vilified as unpatriotic. But why do they send these jobs outside the United States? Does it have anything to do with patriotism?

Could it instead be because government interference and manipulation have incentivized them to outsource, just as it has incentivized illegal immigration?

Image result for oreo to Mexico

Consider the Oreo case.  Donald Trump vowed last year not to eat Oreos ever again because of reports that Nabisco’s parent company moved 600 jobs from Chicago to Mexico in order to lower labor costs.  What the reports left out of the equation is that the marginal tax rate and a key product ingredient (sugar) are also cheaper in Mexico than in the US.  Think about that.  A company moved 600 jobs to Mexico because operating conditions are more conducive to profitability there than they are here, the original business-friendly nation!

So what is the disease?  Government interference in the market, namely via ham-handed manipulation of incentives.

Government tells companies who to hire (Affirmative Action), how much to pay them (minimum wage), charges payroll taxes, Social Security taxes, and corporate income taxes. Government requires businesses, and many professionals, to have licenses, and it regulates everything. It makes raw materials, parts, and other materials more expensive by applying the same kinds of interference to suppliers and other business partners.  The costs of all of this are either absorbed out of company profits, or passed on to the consumer, and it drives companies to go elsewhere to do business, which kills jobs here.

In effect, our own politicians  drive unskilled and low-skilled jobs out even as they lure unskilled  and low-skilled laborers in! This drives companies to move entire production lines out, or to hire illegal immigrants and pay them under the table.  It puts drag on the entire economy with excessive regulation, excessive taxes, and excessive interference – then the politicians call the companies unpatriotic for wanting to escape.

Might the politicians be a few cookies short of an Oreo?

The Minimum Wage Makes Minimum Sense

Cartoon from: http://tunnelwall.blogspot.com/2014/03/political-populism-not-economics-behind.html
Cartoon from: http://tunnelwall.blogspot.com/2014/03/political-populism-not-economics-behind.html

 

By Mike Cronin

Minimum wage laws, which are meant to reduce poverty, actually cause dysfunction and increase poverty and criminality. The political architects of such laws know this, or remain purposely blind to it, so that they can make promises, get votes, and gain or remain in office.

So how does a mandated minimum wage increase poverty?  While the person who has a minimum-wage job may or may not be defined as poor, it is the person who can’t get a job that suffers the worst effects of minimum wage laws. Since there is no corresponding minimum revenue laws, minimum wage laws dis-incentivize job creation.  Business owners, especially small business owners, have to make a certain amount of money in order to break even, that is, just to pay for their business loans, employees, suppliers, landlords, taxes, and whatnot. Yet there is no law forcing anyone to buy the offerings of a given business.  If a business doesn’t earn enough revenue, they can’t afford to pay even the minimum wage to their employees, so they either have to hire less people than they otherwise might have, they have let people go, or they have to go out of business. In any of those cases, jobs were either lost or not created, which makes it harder for unskilled people to find work, which leads to increased unemployment and poverty.

For example:  If you are old enough, you might remember the days when movie theaters had ushers.  It’s an extremely low-skill job; you could teach it to a high-school kid in an hour or two – and pay him or her correspondingly low wages. There was a match between worker skill level, worker responsibility level, and worker pay.  These days, no one is going to pay a kid $8.00 or $10.00 an hour just to usher, so the usher’s duties got blended into other jobs (assistant manager?) and the job all but disappeared.

Similar entry-level jobs are hard to find anywhere, which makes it harder for high school kids to find work and establish an employment track record.  Instead, such kids either remain with their parents longer, causing the parents to have to support a child longer than they had planned, reducing the parents’ own wealth; or the kid lives on the streets, greatly increasing the likelihood he or she will resort to criminal conduct to survive.

There is a another way some employers skirt the minimum wage laws and pay cheap rates for low-skill labor: They pay illegal immigrants illegally low wages in cash under the table.  This incentivizes illegal immigration, which, in effect, imports more poverty. The illegal immigration “infrastructure” is an underworld, and it attracts other crime: tax evasion, prostitution and other forms of human trafficking, narcotics, gunrunning, gambling (esp. on illegal dog and cock fights), ID forgery, and so on.

To be sure, the minimum wage laws aren’t solely responsible for poverty, illegal immigration, and vice.  Rather, they are a large and obvious contributor to those maladies, even as they fail to produce the promised positive effect.  But they sure sound good.

Thoughts on Illegal Immigration

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By Mike Cronin

The topic of amnesty and “a path to citizenship” for those illegally present in the US has been making the news lately.  Illegal immigration is a complicated issue; perhaps we can unravel it a bit.

Illegal immigration occurs for a variety of reasons (economic opportunity, drug smuggling, social benefits, joining family, human trafficking, etc.) but only one principle applies: Incentive. People come here (or are brought here) illegally because they (or their abductors) perceive a benefit that outweighs the risk.

There are about 11-12 million people present in the US illegally.

Illegal immigration is not a felony, such as robbing a bank. It is a civil offense that comes in several forms: illegal entry and overstaying a visa are two. These violations carry relatively minor penalties. Nonetheless, illegal immigration is a violation of federal law.

PC police would have us believe the terms “illegal immigrant” and “illegal alien” are racist.  The reasoning goes that the terms should be treated as slurs because most (about 70-75%) of those to whom they apply are Hispanic and hale from Mexico and Central America, or because no person is illegal, only acts are. “Undocumented” is the preferred substitute. No doubt, there are racists who use one or other of the terms as code for those of Hispanic descent.  That does not mean everyone who uses the terms is making a slur. If I drive faster than the speed limit, I am a speeder.  If I steal candy from a convenience store, I am a shoplifter. People who commit such minor offenses and misdemeanors earn themselves appropriate sobriquets, which do not brand them for life. Likewise, people who are illegally present in the US, especially those who remain so of their own free will, have earned a descriptive moniker; “illegal immigrant” is factual, fit for polite company, just like “speeder” or “shoplifter,” and it can be overcome.  It certainly has a more benign connotation than many other terms one can think of.

Amnesty has been granted at least once before: By Ronald Reagan. Whatever their opinion or stance on amnesty, Republican politicians are generally not in favor of providing a path to citizenship, because, as has been mentioned, the vast majority of those who would benefit from such a path are Hispanic, and Hispanics, as a demographic, tend to vote for Democrats. By the same token, whatever their stated rationale may be for supporting a path to citizenship, Democratic politicians are aware of the huge voting bloc that would accrue to them if “path to citizenship” legislation came to pass.

In my opinion, this entire problem can be greatly reduced in the following ways:

  1. Legal immigration is a nightmare unless you are related to a citizen, rich, or eminent. We need to bring back the “Ellis Island” style of immigration: One shows up at the port of entry, gets documented, enters legally, and works towards citizenship. No quotas.
  2. We need to eliminate the incentives for immigration that stem from dysfunctional governance, such as minimum wage laws that incentivize paying paltry wages under the table to migrant workers, draconian drug laws that ensure the street prices attract the most ruthless minds to the narcotics trade, and “in-state” tuition rates at colleges and universities.
  3. Any “amnesty” or “path to citizenship” for those already here illegally must include paying the routine fine for the applicable original offense(s). Amnesty should only be from deportation, not from being cited and fined for the original immigration offense. Exemptions should be given for those who were brought here as minors or demonstrably against their will. Any “path to citizenship” should not be rewarded to those already here illegally simply because they are here illegally. It should include being placed last on current applicant lists – in other words, people who have followed the law and are waiting to gain entry, legal residency, and/or citizenship should be ahead of “path” applicants for citizenship consideration. Public or military service for qualified candidates could serve as an alternative mechanism, provided the same opportunity is given to standard applicants.
  4. We need to secure our borders.