Economic Self Interest

TCS daily has posted an article entitled Criminalizing Economic Self Interest in which Lee Harris supposes that government legislation to curb illegal immigration by punishing business is a waste of time because:

Similarly, the attempt to raise the wages for American labor by passing laws criminalizing the hiring of illegal laborers will end not in higher wages for Americans, but in lower wages for illegals, thereby creating a bigger gap between what the wages at which illegals are willing to work and the wages at which Americans are willing to work.

Here at Garvey's Ghost my position is on record as being opposed to illegal immigration mainly because of the impact on working class black folk. In a larger extent I oppose illegal immigration and even legal immigration to "first world" nations by skilled persons from "third world" or "developing" nations due to our concern with brain drain. I are also opposed to the rank "nativist" and "racist" attitude of those who would felonize a civil offense or the persons who provide humanitarian aid to those already here. I also believe that if existing laws against the hiring of illegal immigrants were enforced as well as an immediate repeal of among other things, CAFTA and NAFTA, the illegal immigration problem would "solve itself." The reader must understand that it is the interest of big business to encourage illegal immigration because it lowers their cost of labor. But let's focus on the article at hand, Mr Harris gives this example:

Around 1991, the State of Georgia passed a law that made it illegal to have window tint on your vehicle if the tint was too dark -- light tint was fine and legal, but the black tint was illegal. Unfortunately, many of the people who wish to have their cars tinted preferred to have the dark tint on them. Thus, window tinting companies were placed in a bind: They could either obey the new Georgia law and lose customers, or disobey the law and keep the customers who wanted the illegal tint...

But because the enforcement of the law was on a fairly hit-or-miss basis, and since it was aimed primarily at the drivers of the illegally tinted vehicles, the economic effect of the law on the window-tinting businesses themselves was utterly perverse. Those companies that obeyed the law to the letter were economically penalized by their very respect for the law, while those companies that flouted the law were economically rewarded by their lack of respect for the law.

First I want to point out that the author does not see fit to at least discuss the problem of businesses flouting the law. Indeed it is my opinion that the issue of business (and government) flouting various laws which is the problem. Having said that, we can move on to critique how Georgia enforced the law. Now personally, unless there is some safety issue for the driver, I don't think the state should be dictating what people cannot do to their property. I understand the law being an issue of police safety from those who may be armed inside a blacked out vehicle but I think there are other ways to deal with that.

The problem with Georgia's enforcement of the tint law and ultimately the immigration laws is the punishment. Why do most people pay their taxes? Most people pay their taxes because they are afraid of what the IRS will do to them if they do not. Simply put, the fear of having all your identifiable and accessible assets frozen as well as possible jail time keeps most tax-payers in line. In the case of the Georgia tint law, enforcement could have been as such:

1) Police identify a vehicle with "excessive" tint and ticket the vehicle with 30 days to have tint removed.
2) If the vehicle is caught a second time, a $1,000 fine would be levied. Now for most people that will be enough incentive to have the tint removed.
3) On the third offense, the vehicle is ticketed, towed and brought to a "de-tinting: facility where the windows are de-tinted (or replaced). the owner pays to have the vehicle returned and must pay all fees for the "de-tinting" of the window. The state may garnish wages to satisfy charges.

Such enforcement would dry up the pool of people who would "seek out" companies that flout the law because as Mr. Harris pointed out, the penalized customer would not be happy with thousands of dollars in fines over some tint. The risk far outweighs the benefit. However, Mr. Harris' argument is also based on the idea that punishing the "customer" or "immigrant" only makes life hard for the customer or immigrant and that business will continue to shirk the law so long as there is an economic incentive to do so. I agree. The proper "enforcement" of Georgia law would no doubt shrink the "illegal tinting" business because the customer would have a financial disincentive to "go illegal." In the case of immigration, the rewards of illegal immigration far outweigh the risk of doing so. Therefore it would be bad policy to simply pursue the "customer."

Let's go back to Harris' argument:

what prospect is there that it will be willing or able to enforce a law that applies to the vast multitude of small businesses that hire illegals: restaurants, construction firms, landscaping companies, just to name a few? Yes, examples can be made of a few big companies, but it defies credibility to suppose that the law will be rigorously applied to the thousand smaller businesses that hire illegal aliens -- and these businesses are perfectly aware of this fact. Their very smallness protects them...

As long as the final customers behave as economic actors, preferring to pay less than more for the same quality of service or product, there will be a market for those laborers who are willing to work for less, provided that they work as hard and as well as those who demand a higher wage. Pass all the laws you want; make as many examples as you please -- neither of these policies can hope to do more than to drive up the cost of those businesses that obey the law, while rewarding those that are willing to take the risk of disobeying it. In short, the end result will not be more Americans working at higher wages, but a flight of illegal immigrants from larger and more stable companies to smaller and less stable ones -- or, to put this another way, a flight from higher to lower wages.

We should note that Mr. Harris has now shifted the blame for the presence of Illegal immigrants on the American consumer. The citizen is at fault because he or she wishes to pay less for something. Therefore we have this 'race to the bottom" that many commentators discuss. Business have to cut costs here there and everywhere in order to "compete." Instead of increasing the ability of people to pay for various things the "market" has decided to simply drop the bottom out of prices. But let me get back to the "enforcement" argument. In the case of landscaping, why doesn't it ring a bell at the IRS if a landscaping company is taking in money that would take 6 people to earn, but only reports a single employee? News has it that the IRS is in fact looking more closely at small businesses because it appears that it is small businesses that account for a large percentage of tax fraud. I would ask a similar question regarding construction work. Perhaps there needs to be a big hiring push for forensic accountants. You simply cannot hide income like that in this day and age without someone knowing about it. Of course someone in the Social Security administration knows about it. They get fake SS withholdings all the time from various businesses.

Lets be straight here, if the government was serious about the law it would act that way. Like my example of how the state of Georgia could have really enforced it's window tinting rules, the government could do any number of things to businesses. I suggest that businesses caught hiring illegal immigrants be fined 1/2 the gross income of the company from the preceding tax year. On the second offense the business is simply shut down and it's owners face jail time. As Harris suggests, it would be impossible to check every business, but by making the consequences of being caught high enough the incentive is reduced.

Of course this very draconian policy can be applied to anything such as software piracy and P2P file sharing (which I suspect would piss off a lot of people). Having said that, we need to come to the understanding that profit is not everything. It is ultimately the dollar chasing and worshipping of the business class that has brought us this problem. If workers wages are rising then they can afford higher prices for certain goods, if such raises are justified. If does not cost as much in terms of machines and man hours to produce fruit then why shaft the worker? Because the "shareholder" must be fed his pound of flesh? If a Nike sneaker cost $2 to produce and maybe $5 to ship and sells for $200 then what exactly is the problem with paying the factory worker more? No, you don't make as much profit but money doesn't live, breath, eat, laugh, cry and take care of children. Money is only as good as the purpose for which it is used.

So what is our economic self interest? It is to deny global and small business cheap labor. It is to have real "free trade" that does not dump US goods onto the markets of "developing' countries thereby depressing local industry. It is the realization that our demand for "Walmart prices" creates Walmart wages for many millions of people around the world which ultimately leads to Walmart wages for everyone else (except Chelsea Clinton who apparently was deserving of a 6 figure salary right out of Oxford and who's previous job description was "first daughter").

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