Immigration and the Wage Race to the Bottom

The best remedy for reducing "income inequality" that the Left ignores.

The French philosopher Voltaire said, “Judge a man by his questions rather than by his answers.”

Today many people have what they believe are strong opinions but all too often have no fact-based reason for their opinions and beliefs.  Politicians and con artists (all too often politicians are con artists) know how to exploit the human weakness of people wanting to read into statements and promises made by politicians.

It is vital that Americans shoulder their responsibilities that their position of citizen requires. Nothing should ever be taken at face value.  Every statement, especially statements made by politicians must not be taken with the proverbial “grain of salt,” but with an entire salt mine.

Skepticism must give rise to focused questions. 

My parents raised me to believe that the only “dumb questions” are the questions we don’t ask.

When politicians promise to provide us with “wage equality” the corollary of “reducing wage inequality,” we must begin by asking with whom our wages will be made more equal.

On September 30, 2015 Newsmax published the report, “De Blasio Plans Presidential Income Inequality Forum in Iowa.”

Think of how many politicians, particularly Democrats who have taken to touting the goal of reducing wage inequality, generally preface their promises of providing wage equality by talking about mega-wealthy billionaires such as Bill Gates.  It is an interesting tactic, as we will soon see, that they invoke Mr. Gates.

Meanwhile, on February 13, 2014 the Clinton Foundation issued a press release, “Clinton Foundation And Gates Foundation Partner To Measure Global Progress For Women And Girls.”

Shouldn’t we be first and foremost concerned about the progress American “women and girls” are making?  

The push for globalism is about moving cheap labor around the world, not unlike chess pieces on the chessboard.  Again, we see where Hillary Clinton is working in close cooperation with Bill Gates.

Having invoked the names of America’s wealthiest entrepreneurs, these politicians then talk about the need to raise the minimum wage of America’s working poor.  The rallying point for the administration has been to push for a minimum wage of $10.10 per hour, which, incidentally, would work out to an annual wage of all of $21,008 for full-time workers.  

When was the last time you heard anyone question what raising the minimum wage to roughly $21,000 per year has to do with narrowing the gap in income between the poorest Americans with the wealthiest of our citizens?

Does anyone really think that raising the wages of the millions of America’s working poor will meaningfully narrow the gap between these workers and the billionaires?  

Furthermore, raising minimum wages will do nothing for the wages of American middle class workers.  

Yet this message plays well with many American voters, especially America’s working poor and increasingly among America’s beleaguered Middle Class.  Indeed, America’s middle class is on the verge of extinction and I would not be surprised to see an exhibit in the American Museum of Natural History showing a middle class family.  It would likely be installed next to the exhibits of mastodons, saber-toothed tigers and other species that have gone extinct.

Welcome to the world of “bait and switch.”  

Middle class workers and their families want to believe that reducing wage inequality will narrow the gap between the middle class and the mega-wealthy, and thus improve their financial situation.

However, have you ever heard any politician promise to narrow that gap?

Of course you have not.  

On June 18, 2015 FrontPage Magazine published my article, “Theft By Deception: The Immigration Con Game: How politicians are robbing citizens of access to the American Dream.”

Now the question is: what precisely do our politicians, who promise to reduce wage inequality, really have in mind? This should give rise to the next question: what wage gap will be reduced?

The latter question is whether or not this will be accomplished by increasing wages or actually decreasing wages.  

On April 30, 2009 Alan Greenspan, the former Chairman of the Federal Reserve Bank, testified before the Senate Immigration Subcommittee at a hearing chaired by Senator Chuck Schumer (one of the “Gang of Eight” that pushed for Comprehensive Immigration Reform).  The topic of the hearing was: “Comprehensive Immigration Reform in 2009: Can We Do It and How?

During his prepared testimony Greenspan talked about the need for undocumented immigrant (illegal alien) labor acknowledging how large numbers of such workers would “marginally suppress the wages of unskilled American workers” (so much for wage equality). He then addressed the issue of highly skilled workers, which, in the jargon of our immigration laws, refer to STEM (Science, Technology, Engineering and Mathematics) professionals, stating in part:

Some evidence suggests that unskilled illegal immigrants (almost all from Latin America) marginally suppress wage levels of native-born Americans without a high school diploma, and impose significant costs on some state and local governments. 

However the estimated wage suppression and fiscal costs are relatively small, and economists generally view the overall economic benefits of this workforce as significantly outweighing the costs. Accordingly, I hope some temporary worker program can be crafted. The second policy issue that must be addressed by Congress is the even more compelling need to facilitate the inflow of skilled foreign workers. Our primary and secondary school systems are increasingly failing to produce the skilled workers needed to utilize fully our ever more sophisticated and complex stock of intellectual and physical capital. This capital stock has been the critical input for our rising productivity and standards of living and can be expected to continue to be essential for our future prosperity. The consequence of our educational shortfall is that a highly disproportionate number of our exceptionally skilled workers are foreign-born– two-fifths of the science PhDs in our workforce, for example, are foreign-born. Silicon Valley has a remarkably large number of foreign-born workers. 

The quantity of temporary H-1B visas issued each year is far too small to meet the need, especially in the near future as the economy copes with the forthcoming retirement wave of skilled baby boomers. As Bill Gates, the chairman of Microsoft, succinctly testified before Congress in March 2007, “America will find it infinitely more difficult to maintain its technological leadership if it shuts out the very people who are most able to help us compete.“ 

He added that we are “driving away the world’s best and brightest precisely when we need them most.“ 

Our skill shortage, I trust, will ultimately be resolved through reform of our primary and secondary education systems. But, at best, that will take many years. An accelerated influx of highly skilled immigrants would bridge that gap and, moreover, carry with it two significant bonuses. 

First, skilled workers and their families form new households. They will, of necessity, move into vacant housing units, the current glut of which is depressing prices of American homes. And, of course, house price declines are a major factor in mortgage foreclosures and the plunge in value of the vast quantity of U.S. mortgage-backed securities that has contributed substantially to the disabling of our banking system. The second bonus would address the increasing concentration of income in this country. Greatly expanding our quotas for the highly skilled would lower wage premiums of skilled over lesser skilled. Skill shortages in America exist because we are shielding our skilled labor force from world competition. Quotas have been substituted for the wage pricing mechanism. In the process, we have created a privileged elite whose incomes are being supported at noncompetitively high levels by immigration quotas on skilled professionals. Eliminating such restrictions would reduce at least some of our income inequality. 

If we are to continue to engage the world and enhance our standards of living, we will have to either markedly improve our elementary and secondary education or lower our barriers to skilled immigrants. In fact, progress on both fronts would confer important economic benefits. 

Immigration policy, of course, is influenced by far more than economics. Policy must confront the very difficult issue of the desire of a population to maintain the cultural roots that help tie a society together. Clearly a line must be drawn between, on the one hand, allowing the nation to be flooded with immigrants that could destabilize the necessary comity of a society and, on the other hand, allowing the nation to become static and bereft of competition, and as a consequence to lose its economic vitality. The United States has always been able eventually to absorb waves of immigration and maintain its fundamental character as a nation, particularly the individual rights and freedoms bestowed by our Founding Fathers. But it must be conceded that the transitions were always more difficult than hindsight might now make them appear. 

You will notice that Greenspan referenced Bill Gates and his call to open the floodgates to foreign high-tech workers in his prepared statement and talked about how so many of our STEM professionals are actually foreign workers.  What Greenspan did not state, however, is that the high percentage of foreign high-tech workers, which has become even greater in the years since that hearing more than six years ago, is attributable to qualified and experienced American professionals being fired record numbers, and being replaced by foreign workers.

The only thing “exceptional” about these foreign workers is that they will work for exceptionally low wages with exceptionally meager, if any, benefits. 

Greenspan even predicted the retirement of American STEM professionals, although today many workers cannot afford to retire.  

In case you missed seeing this paragraph in Greenspan’s testimony, here is the critically important paragraph again:

Greatly expanding our quotas for the highly skilled would lower wage premiums of skilled over lesser skilled. Skill shortages in America exist because we are shielding our skilled labor force from world competition. Quotas have been substituted for the wage pricing mechanism. In the process, we have created a privileged elite whose incomes are being supported at noncompetitively high levels by immigration quotas on skilled professionals. Eliminating such restrictions would reduce at least some of our income inequality. 

The purpose behind Greenspan’s call for taking the door off the hinges to permit hundreds of thousands of more foreign high-tech workers whether by increasing the number of H-1B workers or by providing other visas for these workers is made crystal clear in the above paragraph.  In the view of Greenspan and members of both political parties who are calling for “modernizing” our immigration system and providing a huge increase in the number of visas – both immigrant and nonimmigrant alike – is to reduce that “wage premium,” also known as a paycheck, to America’s “privileged elite” middle class by flooding the labor pool with foreign workers.

Incredibly Greenspan referred to foreign high-tech workers as “the world’s best and brightest.”

Most of the Republican candidates have also bought into this lunacy to justify their calls for greatly increasing the number of H-1B visas for STEM professionals, even as they tout the concept of “American Exceptionalism.”

If you accept American Exceptionalism, then you must believe that Americans are the world’s best and brightest!

In December 2011 “Dan Rather Reports” aired a disconcerting hour-long report on how highly educated and experienced American computer programmers are being replaced by programmers from India. The report was titled, “Rather Reports: No thanks for everything” and included this description in its posting on YouTube:

With the unemployment rate over nine percent, why are lawmakers, lobbyists and pundits across the political spectrum clamoring to increase the flow of high-skilled guest workers from overseas? Business advocates say U.S. companies need the world’s “best and the brightest” in order to out-innovate global competitors and to create new jobs. Critics claim the federal guest worker visa programs are rife with abusive practices and that there’s no shortage of the best and brightest talent right here – especially now with more than 20 million Americans jobless or underemployed.

On September 9, 2015 Fortune Magazine published the article, “Economic inequality and stagnant middle-class incomes are top concerns for America’s business elite.

Here is an excerpt from the article:

For years, conservative outlets tried to downplay the trend of rising income inequality. As late as 2012, National Review was calling the trend a “myth.” But as evidence of growing wealth and income disparities has continued to mount, those in favor of a less activist government have changed their tune. The 2015 Survey on U.S. Competitiveness, a poll of more than 2,700 Harvard Business School alumni on the U.S. economy and American firms’ competitiveness, represents the latest sign of this shift in attitudes.

Harvard Professors Jan Rivkin and Michael Porter, and Harvard Business School Senior Fellow Karen Mills titled their report on the survey’s findings, “The Challenge of Shared Prosperity,” underscoring the surprising finding that the American and global business elite are starting to believe that income inequality is a serious threat to the country and to their businesses. They find that, “respondents remain pessimistic on balance about the likelihood that firms will lift American living standards by paying higher wages and benefits in the near term. Shared prosperity is not around the corner.”

The article concluded with this sentence:

But the Harvard survey shows that even America’s business elite recognize that wealth and income inequality is a problem for society and their businesses.

Finally a bit of sanity appears to have percolated to the surface of the debate at Harvard Business School about wages and what is in the best interests of America and Americans.

Although the Fortune article sounded a pessimistic note about the likelihood of providing appropriate wages for America’s highly educated and skilled workers, the point is that simply stated, our nation cannot afford cheap labor – especially when we are considering the wages of American high-tech workers.  It is vital for Americans to get their elected representatives and make their concerns as clear as possible.

People cannot make purchases when they have no disposable income. Our nation’s economy is also suffering under the looting of our economy by foreign workers who send much of their earnings to their home countries.  I don’t blame them; they are operating in their best interests.  I blame our leaders for allowing and, indeed, encouraging this and certainly not doing what is in the best interests of America or Americans.

It has been estimated that upwards of $200 billion per year are wired out of the United States by foreign workers both legally and illegally working in the United States.  When the multiplier effect is taken into account, this massive amount of money more than equals the annual increase in the U.S. national debt.  

When you add the additional costs that importing huge numbers of foreign workers imposes on our country, it is clear that the United States cannot afford to have this continue.

Wage suppression of American workers reduce tax revenue and eliminates the disposable income that in years past drove the U.S. economy.  Unemployed and underemployed Americans are not good consumers.  They may want to make purchases and go on vacations, but they are hobbled by a lack of disposable income.

Additionally, it is costly to educate and provide health care for the children and families of foreign workers.

Today we find ourselves in a race to the bottom and, in the long term, even the wealthiest will suffer as their companies are unable to sell their wares.

The Winter 2015 edition of The Social Contract included my article, “Human Capital - America’s most fundamental and significant resource.”

It is essential that our political leaders, especially those who aspire to the presidency, recognize the value of America’s workers and come to understand that, as the title for my January 23, 2015 commentary for CAPS (Californians for Population Stabilization) noted, “For America to Do Well, Americans Must Do Well.”