Archive for the 'immigration' Category

Immigration and your job

Everyone always talks about whether the current immigration is good or bad for society. If you are wealthy, it seems to come out great. If you are poor and uneducated, once again, you are screwed.

When immigrants come to town they bring cheaper labor (as a whole- I know some are very educated). This reduces the cost to produce labor intensive goods, like fruits and vegetables. The first farmer that started using immigrants had the benefit of cheaper labor, and made more money. Within short order the other farmers adopt the same techniques, and, in efforts to sell more goods, reduce their prices. Competition allows the lowest cost highest quality goods to move through the chain. Eventually these reach us. The good news is products are much cheaper in stores. Who benefits from this effect? Those who buy the most. While you can only eat so many fruits and vegetables, other labor intensive services can be consumed extensively. Everyone benefits from the low cost labor, but the more wealthy benefit more because they can buy more.

Economically, lower classes bear a large portion of the difficulties. Generally, there is small mobility in a job slot you are already in. If you are the weed whacker operator doing the landscaping at Intel, you could get moved up to driving the riding lawn mower, but good luck on CEO. Engineers can become project managers, but you won’t find a lot of janitors becoming engineers. You don’t have to take massive steps from day laborer to drywall installer to owner of a drywall company. The costs involved are relatively small, the training necessary to start is very small (although improvement can be done constantly).

When cheap labor comes into town, the supply glut depresses wages in jobs requiring the least skills first. As the wages drop, more and more people decide they won’t work for those wages and look for a better paying job. A secondary supply glut (generally smaller then the 1st) hits the jobs that are slightly more difficult, lowering the wages their also. This continues up until the moat is to difficult to cross due to education, capital requirements, or networking requirements. As a result, the earning power of the lower economic classes are hit hardest by the effects of immigration.

The net effect is that, as a trend, those who benefit the least from lower cost goods are the ones who suffer the most from wage depreciation.

If we want to insulate ourselves from the negative effects of immigration, we must get a moat between us and and competitors. Twenty years ago, the moat of education was sufficient. Now an influx of Indians trained in math and science has started to bridge that moat. We are importing doctors from other countries as well. Specialization has helped some create a sphere in which they do not have massive competition. We need to work on other economic moats if we wish to protect our earning power. Accumulated capital, used wisely, can provide a massive business advantage.

My father, a PE, did landscaping for a change of pace about 13 years ago, mainly sprinkler systems. As illegal immigrants showed up, they started to depress the profit margin in the business. My father jumped to more specialized projects that required greater capital investment and drew more heavily on his engineering knowledge. He is still doing very well, and he recommends that before we get into a business, make sure that illegal immigrants can’t be competing with us 1 week after they cross the border.
I am now thinking about how to widen the economic moat around myself.  I need more skills (bo staff skills, mustache growing skills), more capital (no negative savings rate for me, thank you very much), and more business connections (soon I will have 2).  There are a ton of dollar bills out there looking for a good home, and I want to provide that.

Peace out, hombres.