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Immigration And Economy

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LandJ posted on Thu, Aug 9 2012 11:26 AM

Hello everybody. I am new in this forum and I am recently introduced in libertarian ideas. Therefore, I have many questions. Also, I am 29 y/o and I live in Greece.

I would like to ask about immigration and jobs.

Here in Greece we have approx. 1,000,000 illegal immigrants from Asia and Africa (total Greek population 11,500,000)
These people do the hard jobs that Greeks refuse like in agriculture and construction industries.
Employers prefer those to hire because they consist of low cost labor. No insurance cost and low wages.
Greeks employees that accept to work there are still expensive. I mean that of course they want to more money which is normal, but the government demans from the employers a lot of insurance money for Greek employees. Therefore, employers prefer the illegals.
In my opinion, if the government wants to make Greeks who want to work there more competitive, it should stop demanding those money from the employers. But this, can be true only with the minimization of taxation and the minimization of public sector. (<----- Public sector is like a holy cow. Politicians do not touch it)
And it is important to state, that even if there is 23% unemployment Greeks do not wish to work there. But the fields must be cultivated, in order to avoid shortages in products..

 

What is your opinion about the same old anti-immigration argument: "They take our jobs, and we are unemployed!!"

Do you think that immigrants are necessary for the economy?

The refusal of the difficult jobs from natives is an international phenomenon? 

 

Thank you in advance...

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Bogart replied on Fri, Aug 10 2012 10:24 AM

Why treat a welfare state problem by regulating immigration?  If you get to the core problem which is the Greek Government giving away other peoples wealth then the immigration issue cease to exist.  On to your questions:

1. Of course immigrants take jobs SOME of which would have been taken by locals for higher salaries.  The issue is the jobs that would not be fufilled absent the immigrants SOME of which would be shipped out of the country.  But if you really look carefully at the pay rates of these jobs you will probably find that they are higher than poverty.  The reasons for this are many but the core issue is one of incentives.  Why would a person take a job when they can do nothing and get paid a pittance?  Or WORSE: take the job and lose non-cash income? Or WORSE: take the job and pay higher taxes while losing non-cash incoment?  And this is only amplified by the fact that the person can not take the official job and work in the black market (Economic activity directly contrary to the law) or grey markets (Economic activity most of which is lawful but done outside the law to escape taxes and regulations.) for extra cash.

Note that this is becoming a huge issue in the USA.  The USA unlike Greece, Russia, Argentina, etc does not have large grey markets and therefore will be much worse off than these places when government expands to squash unrest from economic collapse.

2. Immigrants are absolutely critical to an economy.  The consumers in the local economy get to enjoy the output of the immigrants versus the consumers in the places they came from.  Furthermore immigrants who are not heavily regulated by government tend to assimilate much faster than those who are heavily regulated by government.

3. Absolutely.  Since the beginning of civilization and the division of labor, local labor wants a monopoly on their services.  Immigrants provide competition that does drive down wages of locals.

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LandJ replied on Fri, Aug 10 2012 7:01 PM

Ηere in Greece, very few Greeks accept to do these jobs. And even they are still expensive. Not because they demand higher wage, but because government demands from their employers to pay  taxes, insurance contributions etc for their hiring. Therefore, illegal immigrants take these jobs and work in black market.

Τhe thing is that in Greece we have huge Public sector. A lot of public servants, public services offices etc. Therefore, the expenditure for the Public sector are enormous. (Approx 75% of the budget annually). Currently, unemployment rate is 23%, approx. 1.2 million - 1.5 million people. Studies have shown, that the preservation of 1 unecessary Public servant leads 3 employees of private sector to the unemployment. This is because, government in order to avoid minimize the Public sector & spending, demands from employers various taxes' payments etc.(welfare: Unemployed people are funded from government 350 euro for 1 year. Some political parties claim they expect to increase to 2 years, or increase the funding)

Ηοwever, people see immigrants that work and locals that do not work and they conclude that immigrants steal the jobs. Τhey can't realise that those that steal their jobs - by leading them to unemployemnt - are many unecessary public servants, the superflous Public sector and the huge public spendings. 

 

 

Νοw, suppose a scenario. The goverment deports all the immigrants (Golden Dawn, the new rising fascist-socialist party suggests it), in order to Greeks unemployed fulfil these jobs. Thus, employers' choice is only locals. This will reduce their profit margin (if taxation and insurance payments remain same).
Consequences:

1) Employers-Producers of the X product, in their attempt to preserve their profits, will use lower quality cheaper materials for the production of this product.

2) Εmployers - Producers of the X product, will recude their investments-> decline in the production of X * -> decline in the competition of X -> increase in the prices of the X product.

* a. The decrease of the production of the X product will lead to shortage of this product. Thus, black market and price increases in this product may occur.

* b. The decrease of the production of the X product will lead to the increase in unmployment. And this is because the X product is related to other jobs as well, like wholesale, distribution, inventory, retail sales. Minimization of the production of X, means lesser job for the rest related jobs. 

 

A. Do you agree or disagree with the consequences? If you disagree, why?

B. Are there any other negative consequences to add? (Or positive?)

--------------------------------------------------------------------------------------------------------

P.S. Bogart, thanks for your reply. You said: ".....  Immigrants provide competition that does drive down wages of locals."

Βut how can this lead to prosperity that one of its prerequisites is the increase of people's incomes?

 

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Βut how can this lead to prosperity that one of its prerequisites is the increase of people's incomes?

You seem to be saying that gains in overall prosperity can only exist when people's incomes increase. So, if we instantly doubled everyone's incomes, which will likely exactly double the price of everything, are people then richer? That is, say you normally get paid €50 per week, and you can buy 2 loaves of bread, 1 gallon of milk, 1 dozen eggs, and 1 pound of beef. If you get a raise next week to €100 per week, but you can still only buy 2 loaves of bread, 1 gallon of milk, 1 dozen eggs, and 1 pound of beef, are you any richer? Or let's say you see your wages drop to €40 per week, but now you can buy 3 loaves of bread, 1.5 gallons of milk, 2 dozen eggs, and 2 pounds of beef. Are you poorer in this situation?

The only one worth following is the one who leads... not the one who pulls; for it is not the direction that condemns the puller, it is the rope that he holds.

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Bogart replied on Mon, Aug 13 2012 10:50 AM

First, please examine the "Neo-Keynesian" (The newer versions of bad old Keynesian Economics) Economic Faith (I can not call it a theory as it does not hold up to logic.) that is wages or spending that makes an economy grow.  Smith, Say and later Mises destroyed this concept.  If you want the easiest read then try looking through the books by Murray Rothbard available on this website.

On to your questions:

Yes, but the real loss is in the lost output from the immigrants themselves.  It is not the fault of the immgrants that the government has mess up the division of labor in the economy nor is it the fault of the immigrants that people still desire products and services.

There are no positive consequences to using the law enforcement bureaucracy to kick people out of a country for the lack of paperwork.  This destroyes the output these people supply to society and unleashes powerful and difficult to get rid of legiions of bureaucrats that expect payoffs to keep from bothering the rest of the populace. 

Supplier competition INCREASES wealth of the populace of consumers of which ALL of us belong.  Jobs and wages are MEANS TO ENDS not ends in themselves.  It is what jobs create that matters not that there are jobs or how much those jobs pay matter. 

Think about economics in these terms:  The Chinese create a magic machine that is powered by the sun, creates anything you can dream up and costs nothing.  Am I wealthier if I own one or not?  Would the Chinese be wealthier not selling the machine?  But look at all the jobs that would be destroyed, is the use of this machine worth the cost? 

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gotlucky replied on Mon, Aug 13 2012 10:59 AM

Bogart:

Think about economics in these terms:  The Chinese create a magic machine that is powered by the sun, creates anything you can dream up and costs nothing.  Am I wealthier if I own one or not?  Would the Chinese be wealthier not selling the machine?  But look at all the jobs that would be destroyed, is the use of this machine worth the cost? 

I dunno if I agree with this. I think we should still be using the good olde horse and buggy instead of cars, and we really should do away with refrigerators and have our milk delivered again. After all, just think of all the milkmen that are out of jobs. Shame on us all. Amirite?

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Cheaper labor is good, it provides services at a low cost. It benefits the immigrants who want to work at X rate and it benefits the consumer who gets the service.

Immigrants are competing against the citizens for jobs, but as you said the government makes it hard to do so.

Im sure a lot of unemployed greeks would take some of the jobs you describe.

Also note, that the welfare state attracts even more immigrants since they know it will be rewarding for them to get free X service at the cost of the tax payer, since the illegal immigrant does not have to pay taxes.

Cut off the welfare state and all the public sector jobs that are lost will flow back into private industries. Resulting in less taxation and more competition between services that was provided by the government; now you will have multiple companies competing to provide best services for low cost.

“Since people are concerned that ‘X’ will not be provided, ‘X’ will naturally be provided by those who are concerned by its absence."
"The sweetest of minds can harbor the harshest of men.”

http://voluntaryistreader.wordpress.org

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Greece is not that only country having illegal immigrants... yet its economy is suffering more severely than any other economy in the world...

 

The problem is not the emmigrants, try to take them away and watch this happen:

  • inflation rises madly over every product in Greece
  • GDP ppp of the country remains the same... as the act of removing the emmigrants, didn't actually contribute to the development of the business environment of Greece...
  • Industry will suffer severly, as products will be more expensive and less competitive in the global market

The solution is the following:

How does this help? by having more businesses running in the country, GDP increases, GDP per capita increases, more jobs, less unemployment...

 

about your questions

1- Anti- Immigrant arguement is a destructive phenomena in human beings where one fails to identify their mistakes and blame it on others

2- absolutely... no immigrants = inflation + less exports + worse economy

3- yes it is an international phenomenon... especially in middle and higher income countries

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.500NE replied on Tue, Aug 14 2012 12:09 PM

I have found Hoppe's ideas on immigration in reguards to the modern nation state to be most enlightening:

http://www.mises.org/journals/jls/16_1/16_1_5.pdf

For libertarians in the context of a modern nation state, the immigration = universally good for the economy, does not hold true.

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LandJ replied on Wed, Aug 15 2012 3:38 PM

Justme335, you said:The problem is not the emmigrants, try to take them away and watch this happen:

A. inflation rises madly over every product in Greece

B. GDP ppp of the country remains the same... as the act of removing the emmigrants, didn't actually contribute to the development of the business environment of Greece...   "

i) With regards to A, can you explain me how inflation rises when there are no immigrants?

ii) Also, regarding B, you mean that the truth is: cheap labor ->increased production ->increased GDP ->increased Income per capita -> increased jop openings -> decreased unemployment. Is that what you mean?

 

-----------------------------

In Greece, cheap labor immigrants take jobs in:

a. Agriculture. Greeks do not do these jobs. Even during the recession, a very small number of Greeks do jobs like these. 

Q a: Does this mean that government should prevent a X number of immigrants to work there in order the exact X number of Greeks should take the job? 

b. Construction Industry. Same again, Greeks do not do these jobs. However, the extreme right wing fascist-nationalsocialist-racist party claims that big Greek construction companies, support the existence of immigrants to benefit from their cheap labor. And that's why Greeks are unemployed.

Q b: Considering that the crisis led some Greeks to desire even these jobs, what is your opinion about that? Do you agree with the extreme Greek party?

c. Other jobs. There are some other jobs that immigrants do. Gas stations, Car washings, plumper or electrician assistants and some more. But Greeks certainly do not refuse these jobs.  Greeks did these jobs before crisis, and they wish to do them and now, during the crisis. 

Q c: Ok, it is easy to say that immigrants are necessary for certain kinds of jobs that locals refuse to do. But what about the jobs that locals want to do - and with much more desire due to the crisis?

 

**(P.S. All my questions are based on my ignorance in Economics. I do not intend to oppose to anyone.)

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David B replied on Wed, Aug 15 2012 11:42 PM

 

LandJ:

can you explain me how inflation rises when there are no immigrants?

This isn't actually true, but is in a way.  Every service that requires a greek citizen (and the accompanying overhead from government regulation and taxes) will cost more OR the company will go out of business due to losses.  Inflation is an increase in money supply.  Price inflation is what you are referring to, and is caused in the description by higher production costs, not a larger supply of money.

LandJ:

ii)  cheap labor ->increased production ->increased GDP ->increased Income per capita -> increased jop openings -> decreased unemployment. Is that what you mean?

Any reduction in the cost of a factor of production will result in a lower the costs to a business.  Businesses which use cheaper labor (immigants the government isn't taxing) will be able to provide their product at a lower price, while still generating a profit.   These cheaper goods and services will benefit consumers.  Because consumers have more money in their pockets from lower costs, they will be able to afford to purchase more goods and services than they would have been able to if those costs were higher.  The demand for additional goods and services will raise prices in those industries  and those increased prices will result in new capital investment in order to produce more goods and services which can now be sold for a profit.  These new goods and services create new wealth inside the economy of Greece.  Investment in the production of new goods and services means a higher demand for labor -> new jobs -> less unemployment.  Cheaper goods and services, don't raise "Income per capita" or "GDP",  those aren't relevant.  What's relevant is the quantity and quality of the goods and services a specific income can purchase.  Even if income is dropping, meaning labor is getting cheaper, salaries and wages are decreasing, if the prices of goods and services drops faster then the wealth of every person is increasing.   The quantity of money a person has is  NOT wealth.  It's a store of wealth, but it maintains it's value ONLY if the money supply is stable.   

cheap labor -> cheaper products -> increased profits  and increase in standard of living -> increased investment in production -> increased labor demand (jobs) -> decreased unemployment.  

LandJ:

-----------------------------

In Greece, cheap labor immigrants take jobs in:

a. Agriculture. Greeks do not do these jobs. Even during the recession, a very small number of Greeks do jobs like these. 

Q a: Does this mean that government should prevent a X number of immigrants to work there in order the exact X number of Greeks should take the job? 

That's a shame.  The issue here is that if the labor costs to produce food costs, drive the production costs of Greek farmers above the global market prices of the same goods, then they will lose money, they cannot compete.  Greek citizens will not purchase Greek grown food, they will purchase food imported into the country instead.  There's no shame in growing food.  The issue is that Greek farmers are not able to compete with farmers producing food in other countries.

In response to your question, the problem is NOT about preventing immigrants from taking these jobs, it's in reducing the employment overhead for the greek citizens.  Also, if you have unemployment and health benefits which do not have to be paid for directly by the citizens, then the job must provide a salary that exceeds the unemployment benefits.  Trust me if unemployment benefits are 0, and the greek citizen has less overhead and can compete with the immigrant workers, he will take a farming job to feed himself and his family.

LandJ:
 

b. Construction Industry. Same again, Greeks do not do these jobs. However, the extreme right wing fascist-nationalsocialist-racist party claims that big Greek construction companies, support the existence of immigrants to benefit from their cheap labor. And that's why Greeks are unemployed.

Q b: Considering that the crisis led some Greeks to desire even these jobs, what is your opinion about that? Do you agree with the extreme Greek party?

I agree that construction companies (all companies) want to reduce any and all of their production costs, including labor.  Therefore of course they want to benefit from cheap labor.  The issue is that the money the immigrants get here is better than other available options to them.  The unemployement issue for the Greek citizen is that his labor costs are X (from taxation) before he even gets paid!  If X + salary/wages > immigrants salary/wages, of course he can't get a job.  The unemployment isn't caused by the willingness of the immigrant to get paid.  It's that the construction company can't build a house and sell it using the Greek citizens labor.  His costs would be too high and  he would lose money.  No business can run at a loss. 

LandJ:

c. Other jobs. There are some other jobs that immigrants do. Gas stations, Car washings, plumper or electrician assistants and some more. But Greeks certainly do not refuse these jobs.  Greeks did these jobs before crisis, and they wish to do them and now, during the crisis. 

Q c: Ok, it is easy to say that immigrants are necessary for certain kinds of jobs that locals refuse to do. But what about the jobs that locals want to do - and with much more desire due to the crisis?

Same problems.  What you have is an expanding gray market.   Government taxation is killing the individuals when they seek employment and is destroying businesses when they seek a profit.  Without profits they can't reinvest, and the owners can't make money.  They will move their money elsewhere.   But if citizens can't work, and businesses can't make money, everyone becomes unemployed and no business can continue to operate.  Guess how much tax revenue the government will collect then?  None.  Well in the meantime the government goes broke trying to pay the government workers, but they can't find any goods or services because the private businesses have stopped creating any goods and services.   The only solution is to either reduce spending, and reduce taxation, or take a loan.  Well that's what just happened, the other European Union countries just loaned Greece money.  Guess what happens when Greece still can't pay it back, because nothing's changed fundamentally to improve the economy?  Greece will default, and the European countries that can't get paid back, the citizens in Germany for example, will get angry.  They need that money back, the default on Greece's debt, will impact the taxes and government programs in Germany.  The banks that provided the money will probably fail, and either Euros get created out of thin air (inflation -> hyper-inflation) or the german citizens get mad and ask their government to "Go get their money!" I believe the debt crisis in Europe has the potential to create another great European war.  Hopefully not, after all, know one has enough money to pay soldiers, once defaults start happening.

The gray market activity you keep mentioning is an attempt for the citizens themselves to figure out a way to still survive by finding cheaper food, housing, power, communications, entertainment.  But even these will go away when no one has any jobs.

LandJ:

**(P.S. All my questions are based on my ignorance in Economics. I do not intend to oppose to anyone.)

I heard a statement from a mentor of mine long ago, "When the student is ready, the teacher appears."  I'm just grateful for a theory of economics that can be understood by the average human being.  The Mises Institute has the resources to put that information in the hands of the people who need it.  All "First-world" modern social democracies need this information. The citizens need to understand what excessive government interference and in particular fiat currencies are doing to us.

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Funnily enough, I wrote an article on this very issue a few months back on my (very irregularly updated) blog, that analyses the empirical data behind immigration and unemployment. You can find it here: "Are Immigrants Really Taking Our Jobs?". It doesn't come from an Austrian perspective, although to some degree it is probably compatible with that position. The answer by the way is no; immigrants are not stealing anyone's jobs.

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LandJ replied on Thu, Aug 16 2012 8:43 AM

David B, I agree with you. In Greece, we are not aware of Economics and the most of us are Socialists. Libertarian ideas are very unpopular here, that's why the did not get elected to be in the Parliament. However, these ideas came now to publicity and some people are interested in them, like me.

The thing is that due to the crisis, illegal immigrants contribute highly in the increased criminality. So, this is another factor that leads Greeks to demand  their deportation. The other factor is Greeks' ignorance on Economics.

I just read an article, stating that government will start closing businesses that operate using black labor. And the thing is that citizens, support government in this policy!! Probably, because these businesses employ immigrants and not Greeks.

BUT another argument they use is: " Immigrants workers send money out of our country to their families, whereas a Greek worker spends his money here in the Greek market!"

What do you think about this?

 

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Answered (Not Verified) David B replied on Thu, Aug 16 2012 11:16 AM
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LandJ:

David B, I agree with you. In Greece, we are not aware of Economics and the most of us are Socialists. Libertarian ideas are very unpopular here, that's why the did not get elected to be in the Parliament. However, these ideas came now to publicity and some people are interested in them, like me.

The thing is that due to the crisis, illegal immigrants contribute highly in the increased criminality. So, this is another factor that leads Greeks to demand  their deportation. The other factor is Greeks' ignorance on Economics.

I just read an article, stating that government will start closing businesses that operate using black labor. And the thing is that citizens, support government in this policy!! Probably, because these businesses employ immigrants and not Greeks.

BUT another argument they use is: " Immigrants workers send money out of our country to their families, whereas a Greek worker spends his money here in the Greek market!"

What do you think about this?

I'd watch very carefully how the argument crime argument is framed and who's making the argument, and who's offering to "solve" the problem.  Follow the money.

On the other point, on top of Mt. Everest, the air is so thin humans can't survive there.  I can't pass a law that makes the air contain more oxygen.  Well, think of the social programs and redistribution of wealth, the taxation on individuals and businesses in the same way.  Those policies are the equivalent of "making the air thinner".  Passing new laws, to prevent the money from moving doesn't change the fact that the air is too thin for corporations to succeed.  Immigrant labor and the transfer of their wages to their home countries is the symptom.  BTW, the immigrant still has to eat, sleep, commute to work, etc.  He's spending money on those things in the local economy.  He's just willing to consume less than a greek citizen is, and after he does so, he decides to send that money elsewhere, rather than keeping it in the Greek Economy.  When Greek citizen's are willing to consume less and save more, then the situation will improve.  But the public unions, the government workers, and the taxes and regulations on businesses and citizens are the interference.  They are killing investment and savings and thus production and wealth creation.

The sad thing is that most immigrants are moving money to countries that are politically corrupt.  The money can't be saved and invested there either, otherwise those countries would already be well on their way to becoming wealthy nations, as examples think of Singapore and Malaysia.

I hope that makes sense.  Last point IF trade is free, if taxation and regulation are reduced, then the movement of money out of the country is irrelevant, because it comes back as either new products that are sold more cheaply in your local economy, OR it comes back as demand for the products of the Greek economy.  For example, if you make chairs in Greece, and someone makes chairs in Nigeria, then a rise in the demand for chairs anywhere in the world, will raise the price in both places.  

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LandJ replied on Thu, Aug 16 2012 12:57 PM

When we say that immigrants are necessary for an economy, do we have to determine a certain number/percentage of them ? If yes, with what way?

And who is this wise person that will correctly decide with accuracy the appropriate number of immigrants? Others say X immigrants, others say Z immigrants and etc.

 

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