This post was first published on Patreon on 22 Jun 2018
I was just having an email exchange with Marshall Auerback and a hedge fund friend of ours about immigration. And I thought I would share some of my thoughts on this given what’s going on with immigrant family separation in the US. Marshall tells me he will have something to say at some point on this topic as well. I’m going to use Case Farms, a poultry processor, as the villain in this piece.
Skills-based immigration
My own long-held view is that the US should move away from family reunification as the driving force of immigration policy. I think this is a sometimes controversial view. I remember giving a presentation in 1993 in my State Department A-100 diplomatic training class with three other new diplomats who agreed on this. And the general reaction from the rest of the class was negative.
But my view then was that the US needed skilled labor a lot more than it needed unskilled labor. And so, it should formulate a coherent immigration policy around recruiting people with skill sets the US economy needs. That’s still my view today. And we see this policy framework now working in countries like Canada, which is also a country of immigrants. So I think the US can learn something on this score.
Moreover, it is easier and cheaper than ever in today’s world to see and visit relatives. And so the hardship of leaving brothers and sisters and parents when emigrating is ameliorated greatly by this. That makes family reunification less imperative as the basis of US immigration policy.
So that’s the big picture encapsulating my view on US immigration.
Case Farms and the desire for cheap labor
Having laid out the big picture view, I want to get into the nuances. A big factor driving the desire for immigrants is labor costs. Labor is often the largest component of expense for business. Therefore, from a profitability perspective, keeping labor costs down is imperative. And US businesses try anything they can including outsourcing, cutting benefits, and trimming headcount and centralizing functions to achieve economies of scale. And so importing lower-cost labor is a favored strategy as a result.
Look at this 2017 article about Case Farms in the poultry industry. Here’s the relevant part:
Case Farms has built its business by recruiting some of the world’s most vulnerable immigrants, who endure harsh and at times illegal conditions that few Americans would put up with. When these workers have fought for higher pay and better conditions, the company has used their immigration status to get rid of vocal workers, avoid paying for injuries, and quash dissent.
So Case understands that it can hire people for less money by exploiting the precarious legal position of the immigrant population. Would immigrants who came to the US legally via family reunification work under these conditions? It’s hard to believe they would. But let’s delve further into the undocumented worker case here.
Immigrants often work for less because of their legal status
Look at this lawsuit involving Case Farms from 1997, for example:
Case Farms operates a poultry processing plant in Morganton, North Carolina. Roughly eighty percent of the 514 plant employees who were eligible to vote in the representation election were Latino, and of the Latinos, ninety percent were Guatemalan. More than seventy percent of the eligible employees were aliens.
On May 15, 1995, approximately 200 employees at the Morganton plant began a work stoppage to protest wages and working conditions. The protesting employees “form[ed] in front of the plant,” where they remained for about an hour until they were asked to leave. Three of these employees were arrested, however, apparently at the instance of Case Farms. On that first day the employees presented the company with a petition outlining their grievances, which included claims that Case Farms was paying low wages, refusing sufficient bathroom breaks, speeding up the chicken (production) line, threatening employees who sought medical attention, charging employees for certain equipment, and firing employees who registered complaints. The protesting employees later obtained a parade permit and had a “demonstration parade in front of the plant” on the third day, May 17, 1995. The work stoppage ended on May 18.
This is exploitation.
More on the exploitation of immigrants
Look at how the 2017 New Yorker article describes Case Farms.
A Guatemalan immigrant, Osiel was just weeks past his seventeenth birthday, too young by law to work in a factory. A year earlier, after gang members shot his mother and tried to kidnap his sisters, he left his home, in the mountainous village of Tectitán, and sought asylum in the United States. He got the job at Case Farms with a driver’s license that said his name was Francisco Sepulveda, age twenty-eight. The photograph on the I.D. was of his older brother, who looked nothing like him, but nobody asked any questions.
Osiel sanitized the liver-giblet chiller, a tublike contraption that cools chicken innards… he did as a supervisor had shown him: he climbed up the machine, onto the edge of the tank, and reached for the valve. His foot slipped; the machine automatically kicked on. Its paddles grabbed his left leg, pulling and twisting until it snapped at the knee… Osiel was rushed to Mercy Medical Center, where surgeons amputated his lower leg.
Back at the plant, Osiel’s supervisors hurriedly demanded workers’ identification papers. Technically, Osiel worked for Case Farms’ closely affiliated sanitation contractor, and suddenly the bosses seemed to care about immigration status. Within days, Osiel and several others—all underage and undocumented—were fired.
Again, this is exploitation.
But what about worker displacement?
The New Yorker article says:
David Michaels, the former head of the Occupational Safety and Health Administration (OSHA), called Case Farms “an outrageously dangerous place to work.”…
Case Farms has built its business by recruiting some of the world’s most vulnerable immigrants, who endure harsh and at times illegal conditions that few Americans would put up with.
That’s the right argument. It’s not that Americans wouldn’t do the work. They would. And they will. It’s that they won’t do it at the pay scale and under the dangerous conditions on offer. So Case Farms has turned to exploiting an often undocumented labor force to fill in the gaps. And all of this goes unchecked, with the government looking the other way.
In fact, if you look at the immigrant discussion as it’s presented now, it’s about illegals entering the US rather than US companies hiring undocumented workers and exploiting them. I think the real issue is exploitation because that’s one root cause of the immigration. You sufficiently penalize employers and the number of undocumented economic migrants will diminish significantly.
So, unskilled workers based in the US are indeed being replaced by immigrants willing to work for less and in more dangerous conditions. And the US-based workers’ lack of employment opportunities is fuelling political radicalization.
A lot of this is driven by asylum seekers and economic migrants who lack legal authorization to work in the US. But even unskilled immigrants from lower-income countries with legal authorization to work in the US would be willing to work in less favorable work conditions for less pay if that pay is greater than in their native country.
The case of EU expansion, migration and Brexit
Here’s my view of the expansion eastward in the EU.
The reason the Germans, in particular, were so eager to expand to the east is threefold. First, the Germans were sick of being on the edge of the Iron Curtain, with a quarter of the country actually living on the other side of the curtain for 40 years. Offering Eastern European countries quick entry into the EU would create a buffer between Germany and Russia of German-allied countries.
Second, the reunification of Germany created also sorts of angst in the EU. So, EU expansion lessened the fear that Germany would ‘dominate’ Europe in its new expanded form.
But, third and most importantly here, EU expansion eastward gave the Germans a cadre of lower-income countries from which to draw labor. And they could use this as a cudgel to wield against their own workforce. The interesting bit is that the Germans and other continental Europeans were crafty in limiting the migration numbers, where the UK allowed unlimited immigration early on. The result was that the UK was flooded with Eastern European migrants and ended up voting to leave the EU as a result. See the discussion here from late 2016 after the Brexit vote.
Immigration was a defining issue in Great Britain’s vote to leave the EU. Some studies have concluded that immigration has had no impact on native-born work opportunities. For example, see Jonathan Portes here. So the macro story is inconclusive. At a micro level, at a political level, though, the migration wave into the UK has been disastrous.
Skilled labor preference is the answer
A coherent immigration policy is important. On the economics, countries can increase the number of skilled workers employed and boost productivity. On the politics, having a coherent immigration policy can blunt some of the legitimate concerns about worker displacement and the pace of cultural change.
I believe any coherent immigration policy has to prioritize skilled immigration over unskilled and over family reunification. But I also believe that a coherent immigration policy would target industries with shortages like (nurses in) healthcare and (truck drivers in) transportation.
And\ there are always people who are displaced by new workers. It’s simply wishful thinking to assume that displaced workers can move into better jobs and all will be well. Often, the opposite is true. And when those workers vote, they voice their displeasure. These people need to be compensated in some fashion. Laissez-faire “the markets will do it for us” thinking won’t work.
Finally, it’s undeniably true that many asylum seekers are economic migrants trying to use the asylum process to gain access to a more lucrative market through the back door. Dealing with this by putting the burden on the migrants and separating them from their children as Trump has done is not just heartless, it’s misplaced. The employers are the ones benefitting from cheap labor. And that’s where the sanctions and penalties should go.