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Saturday, June 19, 2010

Free immigration is not a threat

The racists and the labor unions are both wrong. Free immigration is not a threat to our full employment or to our real wages. And since it is immoral for the government to assume the right to decide where individuals are to be permitted to live and/or to work, every country should institute free immigration.

Let us examine the first of these issues, in order to see if free immigration would be "practical". There is an unlimited need for production. Men´s needs and tastes for goods and services are, in principle, infinite. When men get sufficient food, they soon want to buy more clothing. When they get enough clothing, they soon wish to have larger and better homes. And then they want refrigerators, cars, TVs, personal computers, cell phones, education, health care, household services and so forth. And if any individual perchance should feel that he had enough of “material things” - well, then he could always desire more leisure - that is to say, a shorter workday.

But while men´s needs are infinite, the employers´ ability to pay wages is not. At every given point in time the country´s employers have a certain, finite amount of money which they can use to pay wages. How many employees that money suffices to employ depends on how much each individual employee costs. If America´s employers have, for example, 10 trillion dollars that they can pay wages with during one year - and each employee demands to be paid 100.000 dollars per year, then the employers can employ a total of 100 million employees during that year. If the employees instead demand to be paid 110.000 dollars per year, the employers can only employ roughly 90 million employees. If the employees content themselves with, say, 75.000 dollars per year, then the employers can employ as many as 133 million of them. And so forth.

So if immigrants come to America and seek work there will always be enough jobs. All that is necessary is that the wages be adjusted to the market. If a great many immigrants come, then all that is necessary for full employment is that the wage-workers accept very large cuts in their wages, counted in dollars and cents.

But if the latter happens, does not that mean that the real wages and the living standards of the Americans will fall? No, if a lot of immigrants come to America, and they are permitted to work instead of being compelled to live on handouts, then production in America will increase correspondingly much. After all, if more people are working in the country, then more goods and services will be produced in the country. And if the production increases in the same proportion as the increase in the total population which the mass immigration brings about - then of course that which is produced will suffice to produce the same high living standard, per capita, that existed before the mass immigration began.

But - if the labor unions or minimum wage laws prevent the nominal wages from falling, then the real wages and the living standard will fall. Because then the immigrants will become unemployed, and then those Americans who still have jobs will fall victim to the burden of supporting an army of unemployed. And also, there will now not be more goods and services produced in the country than before, since the number of people working was not permitted to increase at the same time the number of people in the country who are to “share” that production pie had increased, due to the mass immigration.

That one only can "save" the real wages by means of lowering the wages in terms of dollars and cents may seem “weird” at first glance. But think. Say that initially 100 million persons are working in America. Then free immigration is instituted and 100 million poor persons, the children and the elderly not counted, immigrate to America from the Third World. Since twice as many persons now will want to work, the wages (reckoned in dollars and cents) will have to be cut in half - if everyone is to be able to get a job (assuming that the government does not inflate the money supply, that is to say, assuming that the government does not engage in welfare-destroying inflation). Then every American will get half as many dollars and cents to purchase things with. But at the same time the total production will be roughly doubled! So now there are twice as many people in the country who are working and producing things in the country. When the country´s businesses try to sell twice as many goods and services to the country´s inhabitants, but the quantity of money in the country has not increased - then the businesses must cut their prices in half in order for the money to suffice to buy all those goods and services. The increased supply forces down the prices.

But won´t the businesses go bankrupt then, when they cut their prices with 50%!? No, not at all. Remember that the businesses have cut the wages they pay with 50% also - so their profits will be roughly the same.

So the final result of the mass immigration, in this extreme concrete example, is that the number of citizens needing goods and services is doubled and that the total production is doubled also. So the mean living standard for the Americans will be roughly the same as before. Or to express it in a different way, each worker´s wage (counted in dollars and cents) has been cut in half. But prices have been cut in half also. So each worker can buy just as much as before - even though now there are twice as many workers in the country, thanks to the free immigration.

But if twice as many cars, TVs, shoes etc. are produced in the country as before - then how will the business firms be able to sell them all? That´s simple. Remember that now there are twice as many people in the country, thanks to the mass immigration - twice as many people who desire cars, TVs, shoes etc. And they can afford to buy these things also - since they have been permitted to work for half the wages that were extant in the country formerly, and prices have also been cut in half.

So isn´t the world a wonderful place - a place where everyone can profit, and no one needs to lose?

Just about all that is necessary to get a society in which everybody benefits each other instead of harming each other, is that freedom is instituted in the country. And in order to apply with full consistency, freedom must include free immigration and free wage formation. “The labor unions are standing in the way” as a famous Swedish labor unionist, I forget which one, expressed it.

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