Neglecting racial differences, immigration is just population growth. If immigration (or letting women work) made wages go down, wages would have become 0 a long time ago, since having babies would also make wages go down. Whatever it was when there was 1 person, it would now be 1/x of that wage, which would be basically 0.
Let's talk about an economy with exactly one person in it.
There is one guy. He makes one iphone a year. Using only his labour somehow, and neglecting profit and stuff since it's a superfluous complication. It costs $100.*
This guy gets a wife. Let's say she also gets a job making the iphone. Supply of labour doubles,** so price of labour halves. (Not really halves, but close enough.) Oh, but labour was the only input. Yes, he's paid only $50. But iphones now only cost $50. The supply of iphones also doubles, which means the price also halves.*** His wages go down and cost of living goes down in lock step.
In the real world this cancelling effect means the prices don't go anywhere. They're both paid $100. This means instead of $100 demanding iphones, there's $200 demanding iphones. The demand for iphones doubles with the supply of iphones, which means the price goes nowhere. She's paid $100 and buys his iphone, which pays him $100 so he buys her iphone.
Likewise in a real economy, you can do fantastically complicated calculations and find out that, yes, increasing the supply of labour increases the supply of product at the same time, or equivalently that increasing labour also increases demand, so demand and supply changes cancel out.
In the completely real world Mexican immigration actually makes Americans richer in the short term.**** Mexicans typically send their paycheque back to Mexico, meaning the supply stays in America but the demand goes back to Mexico. Meaning America has more raw stuff. Which means America is richer.
In the long term the increased demand in Mexico will cause imports from America, however. Exactly like the pressure of a gas dropping and sucking in neighbouring gas.
*(I guess he sells it to himself since nobody else has money, since nobody else exists.)
**(If she is really exactly as productive as he is, he's a loser and they're going to divorce when she clues into this, but never mind. Spherical cows.)
***(More precisely, whatever price factor you get for doubling supply will be exactly the same for both iphones and labour.)
****(Neglecting labour supply shocks. The economy can react only so fast, because people are stupid.)
Increasing the labour supply also increases the supply of goods that labour demands. If you copy-paste a country next to itself, they don't both suddenly become poor because the supply of labour doubled. If they could support themselves before they will be able to support themselves after.
Immigration isn't a stupid idea because it's bad for the labour market. It's a stupid idea exactly because it isn't bad for the labour market. Someone who is worthless in Mexico will remain worthless if they move to America. Fixes nothing. If they wanted to fix things they should have imported American managers and businessmen, rather than exporting labour. Improving your country is racist, though: it makes all the countries that don't improve super envious.
Primarily folk think increasing population decreases labour value because they lived under Malthusianism for like 200,000 years and they can't overcome their base instincts. As with any good, increasing the supply of food has decreasing marginal returns. Each calorie costs a little bit more than the previous calorie, meaning, if you increase population, the supply of stuff left over after having eaten is less per person. America is nowhere near its carrying capacity so this is wholly irrelevant in present times. Enjoy it while it lasts.
> If immigration (or letting women work) made wages go down, wages would have become 0 a long time ago, since having babies would also make wages go down.
ReplyDeleteWhen women "don't work", 50% of your babies are also women who have demand for products but don't "work".
If everyone is equally capable and willing to be equally productive your theory is 100% correct.
Like I said in my reply to your other economics thread, the real point of increasing the labour force is lowering the cost of exceptionally skilled labour.
If we had piece rates, or if pay was otherwise directly proportional to real productivity, you'd remove this effect. But as it stands, you get paid the same for being 1SD below and 1SD above average productivity. So.. why would you be MORE productive?
The problem with your 1/x calculation is that as you add more people to the labour force, your average labour productivity value goes down.
People moderate the quality and intensity of their labour based on what other people do. The thing that really causes this is hourly rates.
If you have a production facility with one employee who can produce 20 widgets per hour - how skilled is he relatively? You pay him based on what you can sell the widgets for.
But we're scaling the economy up.
If we have two factories each with 100 employees, with one having an average productivity of 25 widgets per hour, and the other at 15 per hour - your less productive facility naturally limits how much you can pay your most productive staff.
You're not going to tell the first factory to slow down since you're getting 25 an hour out of them, but when it comes time to increase pay you're going to say "average productivity is 20 per hour and we can't afford to increase it".
Communism, always redistributing the rewards of effort from the productive to the non productive.
With respect to women - we don't like yelling at women and telling them to work harder. They naturally drag the average productivity down by having special social privileges.
Consider womens sport and how it's *reasonable* for them to argue that they share the male prize money, despite the fact that they don't generate anywhere near the revenue.
That's gonna lower the average cost per elite male player, which is obviously the point of, for example, the US soccer management agreeing to it. It's not *possible* to pay the women the same salaries as the men because the womens team doesn't produce equal revenue.
If they "split" the money, naturally it means there is less money to offer the most elite and revenue generating players.
>Someone who is worthless in Mexico will remain worthless if they move to America. Fixes nothing.
Ah, no. They're worth something in America because their willingness to *be at work* for overall less money, despite their lack of productivity, drags down the average value of labour.
> If they wanted to fix things they should have imported American managers and businessmen, rather than exporting labour.
It does improve things, since you remove someone relatively useless from your labour pool; which increases the price of skilled labour.
If they imported American managers and businesses, they would have to pay at least as much relatively as they are paid in America; which would increase the value of labour.
There's upper limits to wealth gaps.
>America is nowhere near its carrying capacity so this is wholly irrelevant in present times
The thing about America is the automation of farm labour. It massively decreased food costs without adding demand for directly observable productivity. America is way beyond its carrying capacity; they hid it by printing money.