Saturday, January 12, 2008

AZ Star and George Borjas keep sloppy accounts.

Is there anyone who can tell me how much Wal-Mart "loses" every year because Target is allowed to be its competitor?

According to the Arizona Daily Star, one George Borjas of Harvard University has not only determined the obvious: that the presence of illegal aliens lowers the employment rate and the wages of Arizonans, but even quantified the loss: $1.4 billion per anuum.

What neither he nor the Star have mentioned is that there is no net loss to the community. Considering that the lower wage is a savings to the entrepreneur and consumer, the net effect is at least $0. Take into account the dead-weight loss that 100% effective enforcement would bring by diverting more productive workers to the current less productive (and thus low-wage) occupations, and we have illegal immigration bringing a net benefit to the economy.

Go one step further, throwing in to the account the opportunity the presence of the illegals affords to the businessman, and the net benefit increases further. Now imagine what the benefit would be were illegal immigrants legalized!


GodlessZone said...

You forget other aspects of this. The immigrants, by lowering employer costs, increase capital available for investment in the workplace. Increased capitalization would lead to more jobs. In addition the immigrants themselves create demand for other jobs by their spending. There are often complimentary jobs. when people are available to do low skilled work they help create other positions for high skilled work. For instance if labor costs for gardening is lower due to an influx of low skilled workers more individuals may hire gardeners. This means more spending in the gardening sector in general. You might get a higher demand for skilled gardeners who appraise and advise while the lower paid workers do the manual labor.

Of course if I save money in one field I then have more money to spend in other fields which may be unrelated to field where I am saving. So money I save on gardening might be directed to expanding my computing abilities. I don't see immigrants as a break-even issue but as one of net benefits.

B. Kalafut said...

I didn't have a Julian Simon or Lant Pritchett style study in front of me to back those kind of claims at the time of the post, but yes, you're right. Thanks for saying it so I don't have to!