TCS Daily


Criminalizing Economic Self-Interest

By Lee Harris - May 16, 2006 12:00 AM

In the current American debate over immigration, you frequently hear the argument that illegal immigrants come here to do the back-breaking work that no American cares to do anymore; therefore, they are indispensable to our economy. After all, no economy cannot survive unless there is a plentiful supply of people willing to lift heavy things and exercise their muscle power doing productive labor. Thus, if we Americans are no longer willing to use our bodies to get things done, then we must permit impoverished immigrants to come here who are willing to rely on their brawn to make a living, while we Americans educate ourselves more and more, so that we can earn our daily bread using our brains more.

On the other side of this question, there are those who dispute the claim that there is any job that an American won't do, provided that he is paid enough to do it. Their solution to the immigration problem is to get employers to pay more money to Americans to do the work that only illegal immigrants are willing to do at present.

Yet getting employers to pay more for any resource than he absolutely has to pay is not the easiest task in the world. If company A insists on paying more for labor than his competitor company B, then, all things being equal, company A will either become less profitable or less competitive -- and what business owner in his right mind wants either of these alternatives? If the market price for Hispanic brawn is lower than the market price for American brawn, then any business that requires brawn will seek out the cheapest form of it available.

Now there are two ways to deal with this problem. First, you simply ship back all the illegal immigrants who are willing to work cheaper than Americans, thereby eliminating them altogether from the labor market, in which case the cost of brawn will rise to the point where Americans will again be willing to do the work previous done by illegal immigrants. Second, you can try to penalize those companies that rely on illegal immigrants, until the point is reached where, due to active and vigilant government interference in the day-to-day operation of thousands upon thousands of small businesses, each and every labor-intensive business will be so harassed by legal sanctions that they will be forced to adopt a policy of hiring only Americans, at which time the illegal immigrants will simply pack up their bags and go back home.

The first method, the deportation of over eleven million men, women, and children, strikes most people -- even those who are most opposed to a permissive policy on immigration -- as simply too drastic (a fact that President Bush acknowledged when he said that such a solution to the problem of immigration was "unrealistic"). The US has not used mass deportation as an instrument of policy since the infamous forced removal of the Cherokees in the 1830's, and it is not likely to revive it now.

It is little wonder then that so many people think the solution to the problem of immigration lies in the second method -- enforcing the current laws and thereby increasing the real cost to businesses of hiring illegal immigrants through fines and the threat of costly legal action. But what those who take this approach fail to understand is that, in order to make the second method work, it is not enough to make examples of certain businesses who hire illegal immigrants -- the government would have to make it clear to each and every business that it cannot risk hiring illegal immigrants because of the certainty of the fact that they would get caught. But how can the government make thousands and thousands of small businesses feel certain that they would get caught except by actually monitoring, on a virtually day by day basis, their hiring practices? And how much bigger would our already big government have to get in order to achieve that ability to micro-manage all the independent businesses that use illegal immigrants as laborers? And who would pay for this new army of bureaucrats, but the American people themselves?

It is difficult to enforce a law on small businessmen that runs counter to their own economic self-interest -- a fact that I learned first-hand running a small window tinting business in Norcross, Georgia many years ago.

Around 1991, the State of Georgia passed a law that made it illegal to have window tint on your vehicle if the tint was too dark -- light tint was fine and legal, but the black tint was illegal. Unfortunately, many of the people who wish to have their cars tinted preferred to have the dark tint on them. Thus, window tinting companies were placed in a bind: They could either obey the new Georgia law and lose customers, or disobey the law and keep the customers who wanted the illegal tint.

Now had a state inspector been stationed at every one of the many window tinting shops in the state of Georgia, and if he personally examined every piece of tint put on every window, there is no question that the Georgia window-tinting law would have been a smashing success. But because the enforcement of the law was on a fairly hit-or-miss basis, and since it was aimed primarily at the drivers of the illegally tinted vehicles, the economic effect of the law on the window-tinting businesses themselves was utterly perverse. Those companies that obeyed the law to the letter were economically penalized by their very respect for the law, while those companies that flouted the law were economically rewarded by their lack of respect for the law. Furthermore, since it was larger and more established businesses that were most likely to be targeted by law enforcement agencies, it was the smaller and more fly-by-night operations that were least at risk, and which also had the least to lose -- and hence they were the ones that continued to apply the illegal tint.

The same logic applies to the idea of targeting the big companies that hire illegal immigrants. Yes, you might be able to get them to obey the law, but the smaller companies, who are not by definition exposed to the same degree of risk, will simply take over those customers who would rather have cheaper service provided to them by the labor of illegal immigrants than more expensive services provided by the higher priced American labor. Here, as in the window tinting example, it is, after all, the customer who is ultimately in control. If the customers had all wanted legal window tint on their windows, there would have been no difficulty in enforcing the Georgia window tinting law. By the same logic, if all the customers of the hundreds of businesses who currently employed illegal immigrants were prepared to spend more money for the same service provided by American labor, then, once again, the current laws could be enforced -- or, more precisely, they would not need to be enforced, because the people themselves would be spontaneously obeying them.

Recently, Georgia has passed what has been called the nation's toughest laws against the hiring of illegal immigrants. But if Georgia was unwilling or unable to enforce a law that applied to the relatively few window tinting shops in its state, what prospect is there that it will be willing or able to enforce a law that applies to the vast multitude of small businesses that hire illegals: restaurants, construction firms, landscaping companies, just to name a few? Yes, examples can be made of a few big companies, but it defies credibility to suppose that the law will be rigorously applied to the thousand smaller businesses that hire illegal aliens -- and these businesses are perfectly aware of this fact. Their very smallness protects them.

Herein lies the drawback to laws that are passed by legislative bodies solely to prove to their constituents that they, the legislators, are really doing something. "See," the legislators can tell the voters back home, "we are really cracking down on illegal immigrants by making tougher laws." But what is the point of tougher laws if these laws only penalize, economically, the few who obey them, while rewarding the many who do not? For small businesses, running risks is an everyday occurrence, and where the risk is judged to be minimal, and the rewards of taking the risk are great, the risk will be run. Thus, while large companies may comply with the new Georgia law, the tiny ones won't.

At least in the law against illegal tint, it was the final customer who was penalized by fines; but in the law against hiring illegal immigrants, the final customer is in no way punished if he decides to go with a landscape firm that uses illegal aliens, or decides to have his roof replaced by a company that employs them. In most cases, all the final customer will care about is the cost of the service, and if it is cheaper to go with a company that hired illegals, that is what he will do. And how do you solve this problem? By fining customers who eat at restaurants that employ illegal immigrants, or who have their bushes pruned by them?

As long as the final customers behave as economic actors, preferring to pay less than more for the same quality of service or product, there will be a market for those laborers who are willing to work for less, provided that they work as hard and as well as those who demand a higher wage. Pass all the laws you want; make as many examples as you please -- neither of these policies can hope to do more than to drive up the cost of those businesses that obey the law, while rewarding those that are willing to take the risk of disobeying it. In short, the end result will not be more Americans working at higher wages, but a flight of illegal immigrants from larger and more stable companies to smaller and less stable ones -- or, to put this another way, a flight from higher to lower wages.

Should this surprise us? Considering the history of legislative attempts to regulate trade and commerce, no it should not. There are some things that law can do; but it can never be able to make people act against their economic self-interest. And every time that the law has been used for this purpose, not only does it fail -- it does much worse, it backfires. The French National Assembly during the French Revolution tried to control the price of bread; but the result was less bread available at an even higher price. Similarly, the attempt to raise the wages for American labor by passing laws criminalizing the hiring of illegal laborers will end not in higher wages for Americans, but in lower wages for illegals, thereby creating a bigger gap between what the wages at which illegals are willing to work and the wages at which Americans are willing to work. This was not the intent of the Georgia legislature; but then the French National Assembly didn't mean to raise the price of bread, either.

Lee Harris is author of Civilization and Its Enemies.

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22 Comments

Don't fully buy your example as appropriate to illegal immigrant market
In case you read the comments, thanks for the article and the practical example you provided. It made me think. However, I do have some issues (unless I'm not understanding things) with your example.

1) The no dark tinting law sounds stupid. And if a law is stupid, quite a few people will simply ignore it. Also the police (or whomever is tasked with enforcement) will most likely spend little time on writing tickets.
2) There were no mention of the penalty of the law. That makes it difficult to compare downsides if a person does not obey the law.
3) Couldn't the logic of your argument be the same for tax laws imposed on "fly-by-night operations"? If the small fly-by-night operator doesn't pay all (or some) of their taxes, they could charge lower rates, and get most of the customers.
Since paying taxes is against their "economic self-interest", why hasn't our tax system collapsed??

I look at this issue of passing laws against using illegal immigrants (and the enforcement of these laws) as making it more difficult and burdensome to hire illegal immigrants. The goal would be to reduce the number of illegals. Just because you wouldn't catch everybody is NOT a reason to not pass and enforce the law.

Also I believe people would look at the illegal immigrant laws as being more serious (and less stupid) than a no dark tint window law. I'm sure the penalties would be higher and therefore the potential downside greater.

Always follow the money
Mr. Harris,

I'm sorry, but this doesn't sit well with me.

While your example is more of an illustration of what happens when A) most of the affected citizens (window-tint customers) do NOT support a new law, and B) those charged with legislation issued a poorly-thought-out law to begin with. Many laws are essentially ignored for this same reason, as the previous poster said; if a law is 'stupid' most people will simply ignore it.

The situation with illegals is vastly different, for many reasons. First and foremost, the overhwelming majority of the affected citizens (EVERY taxpayer in the country) DO in fact want this issue addressed more stringently than it has been. In reality, the government has no choice, seeing as how they are merely an extension of our own collective wills, right?

In any case, though, to use your example of a business quite naturally operating in its own self-interest: first, I will go ahead and stipulate that there will always be some illegal immigrants in this country. I do not see it as a possibility to eliminate 100% of them, nor do I necessarily see that as a terribly bad thing. But there is a big difference between 'some' and 'way way too many'. Our problem is that there are already way way too many, and the problem is only getting progressively worse, as the illegals are literally streaming across our borders in record numbers.

However, to the point of 'small businesses' - if a person is running a legitimate business, however small, there are always going to be certain legal and tax-based pieces of paper which must be pushed and moved, in order for this business to remain 'legitimate'. If said business is not interested in being thusly legitimate, and scoffs at these legal requirements, then I would postulate that said business' possible hiring of illegals would be the least of their (and their customers') problems. A business which does not adhere to these minimums would likely also not have a problem with using other unethical business practices - including cheating of customers.

It seems to me that we are really discussing three types of businesses: 'Large', 'Small', and 'Underground'. Those underground businesses are already operating in many illegal ways anyway, so those would likely be the destinations for employment for the few remaining illegals. The large and small businesses should rightly be expected to comply with the law.

I figure, if the IRS can track down Joe Nobody for miscalculating a line on his annual tax return form, then the same whiz computers which can do that can certain verify and double-check proper legal tax information for anyone who is legitimately hired and paid in any legitimate business in this country.

No need for the big vans to pull up and cart everyone away. Just send the owner a notice stating that 'so-and-so has been found to not have proper legal status, and that he or she is no longer eligible to be employed'. It then becomes the responsibility of the employer to enforce the policy. Fair warning is given. And if the employer fails to comply, then a stiff fine should be given. Habitual offenders would be flagged as possible targets for INS raids.

Eventually this problem clears up on its own because, as you say, it would be in the self-interest of the employers to remain 'legitimate' and avoid large fines, or possible criminal prosecution.

Those few 'underground' business are already in trouble with the law to begin with. But they would be such a small percentage as to be manageable.

The net result would be that the unbearable strain on our social services would be eased, and that is the ultimate goal.

We citizens are fed up with having to bear the burden of a people who take all the advantages but repay little in return. Yes, I know people will defiantly claim that they are 'hard-working' and 'good people' and all that. I agree. I simply want them to be good and hard-working LEGALLY.

It would only be to their benefit, after all, seeing as how they would be less likely to be exploited by shady employers and paid less than minimum wage in most cases.

solutions?
So what's your solution? If you can't deport illegal aliens, and you can't enforce exisitng laws as a way to force businesses to comply, then what?

Maybe we should just send the National Guard??

Manual labor
The back-and-forth argument about dirty work focuses on illegal immigration. There is another set of factors involved, however. Much of this work in years past was done by young people. Child labor laws and minimum wage laws eliminated much of this worker pool.
I had my first paying job at age seven and was never out of work until I was separated from the Army and returned to college.
Now, in many places, there is a minimum age for legal work as well as minimum wage. Certain types of work are restricted. The obstacles are numerous.
Then, too, there is a social taboo on manual labor that keeps many teens from certain types of work.
In addition to lost oppportunities to earn are lost chances to learn. We have many young people who can surf the net or program a portable telephone, but they can't use a hammer or a saw (or determine the right one for the job), change a tire or even wash a car. E.G.Tripp, Cincinnati

One action is legal, the other is not
I'm afraid that I don't see the two situations as being similar.

- If the law regarding the tinting of windows states (as it does in Minnesota) that it is unlawful to drive a vehicle with windows that block more than "x" percentage of light-transmission, than the simple act of tinting windows is not, in itself, illegal.
- Driving a vehicle on public roads with unlawfully tinted windows is illegal. It is the operator of the motor vehicle that is committing the crime, not the persons or company that performed the tinting.

However, hiring an illegal alien is, in itself, an unlawful act when done with knowledge and complicity.

I reject your premise
You are basing your entire argument on the assumption that the benefit to breaking the law outweighs the risk of getting caught.

Let's revisit the case of the window tinting business. Assume that the penalty for tinting a window black is the following:

1. $20,000 fine per window (e.g. a car with 4 windows tinted black would cost your business $80,000). If you could not pay, you (the CEO of the company) would go to jail until you worked off the debt at a minimum wage rate.

2. Upon second offense (assuming your business survived the first round of fines and/or jail time), in addition to more fines, you get put in jail for 5 years.

3. Also upon second offense, you lose your business license and the right to gain another business license in ANY business in the state of Georgia for the rest of your life.

I agree that the state could not possibly police every small business, but would you be willing to take a chance of the above penalties? This is how we demagnetize the country, one state at a time. Any questions?

Well said
Very good analysis and nice frisking of the author. Illegal immigration does not lift all boats, it lowers them. This is why big business supports the government turning a blind eye to the problem while the middle class suffers from lack stagnation and growing expenses to educate and take care of these uneducated illegals.

False premise leading to erroneous conclusion
Nice comment. The author starts off with a false premise and then seeks to foist an argument for the status quo. If the government can track down the incomes of every America it can track down every illegal.

Exactly to the point -- thanks!
Great analogy, if I might expand upon it a bit.

The fact is, the government can't track the incomes of every American. So what do they do? Red flags and spot checks. They put every tax return into a computer and then if a red flag goes up or you're randomly chosen for a spot check, you get audited. Does it catch every tax cheat? Nope. But the penalties do act as a deterrent. And the harsher the penalties, the more they deter. If you faced certain jail time and huge penalties, would you take a chance in cheating?

You don't have to catch every illegal immigrant-hiring company, just make a harsh example of some unscrupulous CEO's and small business owners and the rest will fall in line.

Mass deportation
Despite the article's claim that "The US has not used mass deportation as an instrument of policy since the infamous forced removal of the Cherokees in the 1830's, and it is not likely to revive it now." the reality is that the United States conducted a mass deportation of hundreds of thousands of US citizens of Mexican descent during the 1930s.

Good points
I think you nailed it. But our elites are creating a mess with an guest worker program that we've all ready seen the results of in Germany. Worse no nation can absorb 100 million people in 20 years as this measure proposes without significant change in its basic character. Do we really want our government to be more like Mexico's?

Enjoyed your points and comments.

The problem is
that one cannot make the simple assumption that Company A and Company B are equal. It is a decisively false premise that paying better (i.e., more competitive) wages for the same or similar labor makes a company less profitable.

The rest of the essay would be sound if not for that false premise.

Palmer deportations
I am not aware of the deportation of hundreds of thousands of Mexicans in the 1930s perhaps you can recommend a book or a source so I can learn about this.

The US did deport over 100,000 Eastern European anarchists and socialists in 1918 after a series of terrorist attacks.
This is the last widespread deportation I am aware of.

False premise #2
I liked the comment that you could make the same argument for paying business taxes- its against their interest to do it. The way that problem is handled is you make the penalty high enough to:
1) Pay for the enforcement itself
2) Make it worth the business' while to comply

Hell, you could even have a bounty for finding businesses that are ripping everyone off with taxs supporting their employees.

And no, you don't have to get everyone, the more the better. It ain't all or nothing. The last 1% might be too expensive to deal with so you live with it.

No Subject
The solution I'd like to put in place is threefold:

1) Install meaningful security at the border, and deport any illegal immigrant discovered in the course of routine law enforcement duties. (Alternatively, the immigrant may pay a hefty fine, and proceed to part 2. The fine should be at least three times the application fee in part 2.)

2) Make the process of getting a green card quick -- an hour or two to do a security check by computer and create a tamper-resistant ID card, and cheap -- on the order of the amount people have demonstrated the willingness to pay a coyote to smuggle them into the country.

3) Enact a "green card minimum wage" at least 50% higher than the minimum wage in any given location.

Since there will continue to be immigrants who haven't gone through the process of becoming legal, let's add an additional part:

4) Any employer found to have hired an illegal immigrant will be required to pay the processing fee for that immigrant, if he wishes to remain in the country. He will also pay a significant fine -- at least $10,000.

The point lost
Many of you have totally missed Mr. Harris' point, which is that consumers demand low prices forcing businesses to meet their demands anyway they can. Most consumers I know will look to purchase a house for the least amount of money not the most. One way a builder can do that is to hire illegals to cut down on labor costs. Now if the builder increases wages to attract only American workers, that builder will have to pass the cost on to the buyer, namely you. If you pay more for your house obviously you're going to have to get a raise at work, and your company will need to generate higher revenues. Eventually we have inflation and the builder will have to pay the American laborer a higher wage and we start all over again.

For this reason many businesses are against raising the minimum wage because in the end everybody's wages go up and we're at the same place we started. It's all relative.

I don't advocate illegal immigration but attacking a problem that adheres to the simple equation of supply and demand at the supply side is asinine. The demand for cheaper products is the problem.

Are we treating the real problem?
Is the real problem Mexican immigration to the USA or Mexican emigration from Mexico?

Is USA the land of wonderful economic opportunities for the poor or is it that Mexico is such a poor place to live and raise a family?

Is it just better to go north than to go south or stay in Mexico?

Why does it seem better to travel hundreds of miles to find a job than to stay home?

Why not become the imperialists we are always accused of being and annex Mexico and get rid of the corruption and add a few stars to our flag.

Illicit immigrated person` life is very difficult in U.S.
I was in U.S. in 2001 and watch very carefully illicit Indian immigrated people.They came from India spending all their life saving to U.S. they are really greedy, heard from heresay that U.S. is very rich country, and they attract one very foolish notion, that one dollor means 45 ruppi,suppose they earn 50 dollor a day, they calculate that you are earning rup 2250,that one is dream in India, anybody who came to U.S. legally or illicit way,he may softwear engineer or doctor, or sweeper, they all are counting their earning in compare to Indian rup. and this greedi ness attract to Indian.Though who immigrated lawfully they are also living in U.S.fearfully, as a second rate citizens,Illicit immigrated are living more fearfully, hiding their identinty,just living as a slave,doing very very dirty jobs,they never did such dirty job in India,they now cry, repent but there is no way to them , dollor attract them foolish way..

RE: Window-tinting law
I was wondering...if the Georgia law that affected your window-tinting business were to be reworded to the effect of specifically targeting the *drivers* of illegally tinted vehicles, where the only opportunity to escape a fine was to produce proof of where you got the tinting done...would that have had the desired effect on the behavior of the tinting businesses, large and small?

I think so...maybe there's something to be learned from that.

PS. Not that I agree with such laws at all!

Starting point
A good starting point would be the NPR story at
http://www.npr.org/templates/story/story.php?storyId=5325400

The Easiest Solution
Everyone is focusing on the wrong issues.

These points must be recognized in any 'real' immigration reform legislation or discussion.

First Point - The illegals are making a lot more money than people are giving them credit for. 11 million illegal immigrants are able to send 20$ Billion every single year. Thats just shy of 2000$ for every illegal man, woman and child. That's above and beyond what they pay for Rent, Food and any other expenses. This means that anyone living in America right now can afford to live on what Illegal Immigrants make in todays market. That is also 20 Billion dollars of potential revenue that American Owned businesses will never see. Further exacerbating the problem of unemployment and lowered profits.

Second Point- There are right now approximately 11-12 million people either unemeployed or on welfare. That is 11-12 million people that can step right into the illegals shoes when they are deported. Doing the work that supposedly no America wants to do.

Why will they do this you may ask. That leads directly to the Third Point. 99% reduction in Welfare and Unemployment benefits. If someone is physically able to work, which means that they can stand and move all their limbs, they no longer get any type of welfare whatsoever. Either work, starve or find a family member who is willing to support you becuase the gravy train that is paid for by actual hard working tax paying American Citizens has ended.

Forth Point - This all leads to the biggest point of all, reduce the Federal Deficit by not having to pay American Citizens to not work, Reduce taxes due to decrease expenditures on the Federal Budget, Increased revenue from over 11-12 brand new tax paying American Citizens allows furthter tax rate reduction and even more revenue, which allows actual paying down of the Federal Debt. Which, now say it with me, further reduces the amout of expenditures every year which allows taxes to be lowered which increases revenue which allows for EVEN MORE of the Federal Debt to be paid down, etc, etc, etc,....

The Final point - Getting rid of Illegals and forcing Amercian Citizens to actually have to earn a living without a Government handout, promotes a stronger, more independent and financially healthier nation.

Any Questions?

P.S; lets not forget about the 10's or 100's of Billions of Dollars that are spent every year in local, state and Federal tax dollars that go to Feed, clothe, shelter, hospitalize, jail and rehabilitate people whose first act upon entering this country was knowingly and flagrantly breaking International and US Federal law by entering into this county illegally.

But what will Steve, Roy and Hampton do?
Who'll fed them and pay for their section 8 housing? What about the lawsuits the Mexican government will bring? How can you throw people into the streets and off welfare?

Nice post and analysis but you didn'f factor in the costs that the alien criminal elements cost. About 26% of those held on federal charges are illegal aliens. My understanding is that each inmate costs about $50,000 per year. I'll have to look up the number of federal inmates but its in the hundreds of thousands. Also if they're in a Federal pen they have been sentenced for some years.

One thing everyone is missing is that the costs will all be forgotten when a US city suffers a major attack when a WMD is smuggled across the Mexican border. I just hope they string up all those individuals who have obstructed border security for the past 30 years.

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