Dumbness about Immigration

This morning's New York Times has a front-page story about how worried business supposedly is that immigration reform will cause them labor shortages. Neo-classical economic theory says that the way to cure a shortage of something is to pay more for it. So why aren't the conventional econ-heads at the Times and in corporate America saying well we should pay more for farm labor and drywallers and dishwashers and then more people will want those jobs?

The simple answer is because our leaders put our economy on the low road 30 years ago - the low-wage road where it has come to depend on rock-bottom wages to keep prices down to keep the crap raises of most Americans flowing into the stores. Things still aren't cheap enough for our crap wages: the US has had a negative savings rate since 2005, meaning we're floating our trips to Wal-Mart with credit cards, just like the country as a whole.

We could also have a virtuous cycle - remember John Maynard Keynes and Henry Ford? We could pay more wages, giving people more money to spend, causing more demand, allowing manufacturers and growers to actually raise their prices when they needed to. Supposedly that's all now impossible in the global economy. But that in turn is because we assume it's impossible.

The LA Times had a small piece on a conference about the trouble undocumented students face when they try to continue their studies. This goes under the rubric "middle classes of the world unite" - help a foreign-born kid finish school.

We should do two things at once: 1) demand living wages in all industries, with real accounting to show that in a rich country this is indeed possible; 2) offer full public services to people who work steadily and/or grow up in the U.S. If we do (1), meaning more vulnerable econ levels will be less vulnerable, it will be easier to get the public to do (2). And much economic theory says that the value created by better-educated workers will more than pay for the cost of educating them.