The other day I bought some groceries at a local store. Later that night, I saw my grocer eating at the same restaurant I was at. The next morning, I was teaching my grocer’s child in class. The point is that my spending became income to the grocer. The grocer spent his income on my salary. Somewhere along the line, our spending created more jobs for waiters, cashiers, and textbook makers. So the grocer’s income was spent. Spending creates income and creates jobs. When 11 million immigrants come into the United States and earn income, they also spend income to and create jobs. In macroeconomics, this is called the multiplier. Economics professors Campbell McConnell and Stanley Brue estimate the multiplier to be about 2.5. That means that when you or an immigrant earns income that income will get spent 2.5 times. At last count, there are 11 million illegal immigrants in the United States. Let’s assume that each worker earns $2,000 a year. That translates into 550 billion of spending, income, and job creation. To put this number into perspective, 550 billion is 1.76 more than Wal-Mart made in sales last year. Apparently, the fact that immigrants spend money is good for the U. S. economy. This fact was pointed out by Senator John McCain in a speech made at the Iowans for Tax Relief on Thursday, April 6, 2006.
I’m going to be outrageous now with a hypothetical story. Last Friday, my finance and I went out to eat at Shogun restaurant. Half of the time we eat at Three Samurai which is right across the street, but we enjoy cultural diversity and the differences in the meals. So tonight we flipped a coin at found ourselves seated at Shogun among ornate brush paintings. Our oriental waitress was working very hard often carrying four plates with one arm. She served our drinks in a flash and was off to wait on another table. I remarked to my date that I thought she was the hardest working waitress in the restaurant. I noted that she had the biggest tables too. When she brought our check, I asked her, "Didn’t you used to work at Three Samurai?"
Jing smiled and nodded. "I get paid more at Shogun."
Apparently, high wages attract the best labor. "Now that there’s more waitresses working here, did some of the other waitresses get upset because their hours were cut?" I asked.
"We actually can serve more customers. My boss is happy. Everyone is happy," our waitress said.
Apparently, workers want to work for employers who value their productivity.
Our waitress’ situation is no different than the one I face at work. I think I work hard and prepare students. When I hear that teachers in other states get paid more than teachers in Iowa, I entertain moving. In the last two years, several of my colleagues have made that choice. Economic theory predicts that labor will move where the wage they received for their labor is equal to what they are worth.
So when I hear the argument made that wages will decrease when immigrants enter the labor market, I say this is only half of the argument--the supply side. It’s true that when the supply increases, the product gets cheaper. But, immigrants also produce. If the immigrants are productive, they also affect the demand for labor too. The net effect is that both demand and supply will change. The effect on wages demands on which factor increases more. Research by economists David Card, Cordelia Reimers, Kristin Butcher, and George Borjas have found that immigration has little overall impact on wage rates except on domestic workers who have not completed high school.
Even if immigration lowered wages, then the prices we pay for goods would also decrease. When making an argument for or against immigration, one should weight the benefits from low prices to the costs of low-wage laborers. Apparently, low prices are important if the success of Wal-Mart, Dollar General, and Ebay are any indication of consumer preference. For the fiscal year ended, the combined total revenue for these three stores was 325 billion. If this isn’t convincing to you, do you prefer to pay higher prices for your groceries or lower?
Suppose you just moved to Muscatine. You are deciding whether to send your child to Muscatine High or West Liberty. You’ve heard good things about each school so it’s a toss up as far as quality of education. Now it’s five miles to MHS and 30 miles to WLHS. If you send your child to WLHS it will be relatively more costly because you could have sent you child to MHS six times for the cost of one time to WLHS. Wages and prices are also relative. Now, let’s change the scenario. Suppose you could make $5 here and $30 there. What’s the cost of staying here? The cost is six times what you could be making there. If you make nothing living in South America but could make $6 hour working in the North American states, what would you do? Faced with the choice of living in poverty or living in the land of opportunity, millions choose to immigrate to the states.
She stays behind to work on her studies as her classmates leave for lunch. She can hear the laughter echo down the hall. She sacrifices her lunch knowing full well the cost of returning to her native land. In her hometown, young boys rummage through heaps of garbage to scrape up any food. The boys will eat a rotten apple core. The boys who might be eight or nine will wipe the bugs off a banana peel to each the rotten fruit. She knows the high cost of returning to her village. The costs of famine, illness, and death wait for her there. She would choose staying in the USA illegally than to return home and look through garbage heaps for morsels of hotdogs covered with flies.