Wednesday, June 30, 2010

The Cheap Cost of Cheating the Lowest Paid

New York Times editorial "The Cheap Cost of Cheating the Lowest Paid" (June 25th, 2010) makes a series of economic missteps in its analysis and diagnosis of wage injustice against immigrant workers.
Academic studies estimate that unscrupulous employers in New York City keep an extra billion dollars a year by defying New York State’s weak labor law and cheating timorous and ill-informed immigrant workers.
That doesn't mean they profited from it. Profit equals revenue minus cost. In a competitive market (which back-alley shops certainly are) producers make no profit--they compete it away. Even though employers may have saved a billion dollars in labor costs by cheating the law, more enforcement of the law would almost certainly just lead these employers to hire fewer immigrants. Most would agree that being paid $6 an hour leaves a worker better off than he would be without a job. If this many illegal workers are to be hired at all, they will be paid a low wage rate. Whether the net benefit to immigrants of an artificially higher wage is positive of negative remains an empirical question.

The article displays a general misunderstanding of what's good for immigrants. New immigrants will be attracted to a city in which they can find work, not to a city that already has a surplus of labor. So, if enforced, New York laws are not immigrant-friendly. A city without labor limits will attract the most new labor.

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