Bloomberg reports on Alabama’s recent immigration crackdown:
When Tuscaloosa, Alabama, begins rebuilding more than 7,200 homes and businesses leveled by an April 27 tornado, it may find itself missing a workforce capable of putting the city together again… Tuscaloosa County’s 6,000-strong Hispanic population –including roofers, Sheetrockers, concrete pourers, framers, landscapers and laborers — is disappearing, he said, before a law cracking down on illegal immigrants takes effect.
The obvious question to ask is whether there be others who step in to take the jobs these immigrants would have taken at the wage that will be offered. This question, which I go into detail on here, does ignore one crucial aspect of the problem. The cost to employers is not simply higher wages per hour, but higher unit labor costs. That is, for a given unit of value-added output, what happens to the total cost of labor? Wages may only need to go up by 10% in order to find workers willing to replace illegal immigrants, but if the quality of work goes down -if the workers are slower, sloppier, etc.- then unit labor costs may double or more.
You can see this implied in the Bloomsberg article where a contractor says “It’s not the pay rate. It’s the fact that they work harder than anyone. It’s the work ethic.”
The lesson can be seen in Georgia’s attempt to replace illegal immigrants with probationers:
For more than a week, the state’s probation officers have encouraged their unemployed offenders to consider taking field jobs. While most offenders are required to work while on probation, statistics show they have a hard time finding jobs. Georgia’s unemployment rate is nearly 10 percent, but correction officials say among the state’s 103,000 probationers, it’s about 15 percent. Still, offenders can turn down jobs they consider unsuitable, and harvesting is physically demanding.
The first batch of probationers started work last week at a farm owned by Dick Minor, president of the Georgia Fruit and Vegetable Growers Association. In the coming days, more farmers could join the program.
So far, the experiment at Minor’s farm is yielding mixed results. On the first two days, all the probationers quit by mid-afternoon, said Mendez, one of two crew leaders at Minor’s farm.
“Those guys out here weren’t out there 30 minutes and they got the bucket and just threw them in the air and say, ‘Bonk this, I ain’t with this, I can’t do this,'” said Jermond Powell, a 33-year-old probationer. “They just left, took off across the field walking.”
Mendez put the probationers to the test last Wednesday, assigning them to fill one truck and a Latino crew to a second truck. The Latinos picked six truckloads of cucumbers compared to one truckload and four bins for the probationers.
This isn’t a knock on the probationers. Despite being labeled “unskilled” work, this is clearly an extremely difficult job that even healthy, able-bodied adults can’t just pick up and do. Yes, for a high enough price the probationers can probably be induced to stay out in the fields all day. But with wages moving up at the same time productivity is moving downward, it’s not hard to see how employers of illegal immigration might be forced to close up shop as business becomes unprofitable.
So remember this when you read about low-paying jobs illegal immigrants are doing and people tell you that high school students or the unemployed would do them for a couple dollars an hour more: it is not hourly wages that matter, it’s wages per value added output.