April 05, 2006

Immigration and Full Employment

I'd highly recommend this post by Mark Thoma, which discusses research suggesting that unskilled immigration doesn't necessarily depress wages for low-income native workers here in America. That seems counterintuitive—after all, an increase in the supply of labor should cause wages to drop, no?—but Alan Krueger and David Card apparently think that maybe, just maybe, all that immigration increases demand for goods and services, which in turn helps wages and employment.

Well, that would be nice, if true. My general take, which isn't very original, is that even if it isn't true, there are better ways to help low-wage workers than to shut down immigration, which in any case is extremely difficult and likely to be harmful to developing countries like Mexico. Mickey Kaus, in turn, thinks that aren't any better ways, and says that the usual suspects—more education, progressive tax brackets, the EITC, a higher minimum wage, and "public provision of services"--won't help those people who can't find jobs because immigrants are creating slack in the labor market.

Well, he's probably right on that narrow point (although not on others). But why stop there? Why can't the government pursue full employment policies to create a tight labor market? As Jared Bernstein argues in this old Prospect article—and as Kaus acknowledges—full employment is one of the best wage-boosting, anti-poverty programs that has ever been devised. And it doesn't seem like you have to restrict immigration (which shouldn't be any different from normal population growth) to achieve it: an expansionary monetary policy, federal spending, and massive public-sector employment should do the trick. Maybe we could revive the 1946 Employment Act, as it was originally conceived. Except that that would probably be considered "socialism," eh?
-- Brad Plumer 9:02 PM || ||