6/20/2004

NRO's economic fallacy

Mark Krikorian, from National Review online, made the following statement:

Kerry's call Friday for increasing the federal minimum wage to $7 brought to mind last week's Pew Hispanic Center's report, which found that nearly three in 10 new jobs have gone to non-citizens. Conservatives have always objected to minimum wage hikes, raising the specter of widespread unemployment of low-skill workers who aren't productive enough to make it worth paying them the higher wage. But many of the same opponents of the minimum wage also tell us that we need to have immigrants because the economy is creating low-wage jobs that Americans don't want. The logic is circular -- we mustn't eliminate low-skill jobs by raising the minimum wage, but we have to import foreign labor to fill the low-wage jobs that the economy is creating.

This statement is wrong. Lets get to the heart of the matter

1) The minimum wage laws will increase unemployment among unskilled workers...good
2) Lower wage jobs tend to go to more immigrants because they cannot command high wage jobs in the economy...good
3)Therefore, we should clamp down on immigration because it would increase the price of non-skilled jobs...ummmmm no

That's nonsense pure and simple!

If you clamp down on immigration and the wage rates of unskilled labor raises, you are increasing the opportunity cost of keeping your business here relative to moving it offshore. Eventually, businesses which employ low skilled workers will outsource these jobs, creating the same unemployment that the minimum wage law would do.

This is a fairly simple and elementary mistake to make.