Saturday, February 25, 2017

The Lake of Labor

The Allen River enters Lake Chauekuktuli in Southwest Alaska. Photo by Robert Glenn Ketchum, via Bristol Bay Land Trust.

Verbatim David Brooks, "The National Death Wish", February 25 2017, offering a novel version of the "lump of labor" fallacy, to explain why immigration does not lower wages:

Cotton and Perdue’s position, which is now the mainstream Republican position, is based on the unconscious supposition that American society is like a lake, with a relatively fixed boundary. If you cut the supply of fish coming from outside, there will be more food for the ones born here.
The problem is that American society is actually more like a river. Sometimes the river is running high, with a lot of volume and flow, with lots of good stuff for everybody, and sometimes it’s running low.
This has to be one of the worst analogies in literary history, especially insofar as the point he'd like to be making, if only he knew how, is a valid one.

A healthy lake actually provides an analogy for how a society prospers with a steady flow of immigration; lakes are fed by rivers bringing them oxygen, nutrients, and, yes, more fish, some of which are food for fish that live there. Ecologically rivers and lakes form integrated systems; a lake that isn't getting fed is the aptly named Dead Sea.

Meanwhile, as you know, there certainly are cases where immigration is associated with severe downward pressure on wages, though I never understand why that's blamed on the immigrants rather than the capitalists who take advantage of them to lower their labor costs—preferably the undocumented, because they're more defenseless against abuse, as Donald J. Trump well understood as a builder, from Trump Tower in 1980 and the "Polish brigade" working 12-hour shifts for $4 or $5 an hour and no overtime and in many cases no pay and a lawsuit from the union cheated thereby that Trump managed to drag out till 1998 before he finally settled, right through the undocumented Latino workers at the Old Post Office hotel site in Washington just last year who told the Washington Post how disturbed they were by the presidential campaign. But I digress.

David Brooks has all the data he needs to understand this stuff, but his skill at not understanding it anyway is just extraordinary.

1. Construction wages don't go up (as they should, according to he laws of classical economics) because America is complex, like a river:

Nationwide, there are now about 200,000 unfilled construction jobs, according to the National Association of Home Builders. If America were as simple as a lake, builders would just raise wages, incomes would rise and the problem would be over.
Meaning they don't raise wages because there are the immigrants willing to take the jobs at the prevailing rate, right? But it seems there aren't these immigrants, or at least not enough of them.

2. Construction wages don't go up because it "hasn't happened", while the employers were going around in search of workers:

But that hasn’t happened. Builders have gone recruiting in high schools and elsewhere, looking for people willing to learn building skills, but they’re not having much luck.
3. Construction wages don't go up because, um, I don't know, natural-born American workers don't want construction jobs anyway so who cares:

Construction is hard, many families demean physical labor and construction is highly cyclical. Hundreds of thousands of people lost construction jobs during the financial crisis and don’t want to come back. They want steadier work even at a lower salary.
I do wonder what he thinks "demean" means. (Snobs believe that physical labor demeans them, not the other way around.) But on the cyclicality question, if you raised wages high enough the down periods wouldn't be such a problem (or why couldn't you distribute their pay over 12 months as we do with teachers?).

4. Construction wages don't go up because the firms have reasons. Which are not revealed, maybe it's a trade secret:

Employers have apparently decided raising wages won’t work. Adjusting for inflation, wages are roughly where they were, at about $27 an hour on average in a place like Colorado. Instead, employers have had to cut back on output. One builder told Reuters that he could take on 10 percent more projects per year if he could find the crews.
Oh, they decided. So that's settled.

The story he's not telling is such a great example of the Piketty hypothesis operating at a local level: the association between rising inequality and slow growth. Construction firms don't want to increase wages because they don't want to decrease their profit margins, even if that means they can't expand the business; they'd rather not grow than diminish inequality. Thus the effort on the part of the wealthy to maintain their distance from the working class leads to overall slow growth.

The way to create growth is to arrange that people have more money—not the people who already have more than they can spend, but people who don't have enough to buy stuff other than crap from China at the Walmart. That's why they call the current stagnation a "demand crisis": demand is people's eagerness to spend money, and they don't have any. And the way to get more Americans working construction isn't to cut off the flow of immigrants, but it isn't to throw up your hands in bewilderment the way David Brooks does either. It's to pay the work better.

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