David Brat, who defeated Eric Cantor in last week’s Virginia primary election, is being hailed as a free-market hero, a critic of crony capitalism, and a fan of Ludwig von Mises. His campaign manager calls himself an Austrian economics geek. Brian Doherty at Reason.com wonders (albeit skeptically) if Brat's election is a step toward America’s “libertarian moment.”
We don’t yet know whether pundits will say similar things about Brat three or four years from now. But we do know that while Brat is staunchly pro-market in many areas, his ideas on immigration defy some of the most basic economic truths. From Brat’s campaign website: “An open border is both a national security threat and an economic threat that our country cannot ignore … Adding millions of workers to the labor market will force wages to fall and jobs to be lost.”
Simple enough, right? But look a little closer and Brat’s bad logic isn’t hard to spot.
First, Brat assumes in this statement that migrant workers will continue coming to America even when their prospects for employment are nil. This, of course, is a bad assumption. Immigrants don’t come to America (or anywhere, for that matter) to become unemployed. They come for opportunity. If there are no jobs and every new immigrant means one new unemployed worker, immigrants will stop coming. Therefore, “adding millions of workers to the labor market” does not mean jobs will be lost.
Additionally, while the argument that immigrants “steal” jobs from native-born workers might seem straightforward enough, this idea was debunked long ago. Economists call it the “lump of labor” fallacy, and it goes like this: If it were true that every new immigrant worker means one less job for native-born workers, then those countries with the most immigration (the United States) should see the highest levels of unemployment. This, of course, is not happening because there is no “fixed pie” of work to be done. Human beings have unlimited wants but limited means, which renders the amount of needed labor virtually endless—constrained only by the economy’s productive capacity (which, coincidentally, only grows as the supply of labor increases) Of all people, Brat—an economics professor—should know this.
Second, Brat assumes in this statement that migrant workers will undercut the wages of their native-born counterparts. That’s why wages will fall (though they won’t be “forced” to fall, as Brat alleges. The process will be entirely voluntary). This is not a bad assumption. Wages likely will fall in the short term for unskilled jobs. But this probability doesn’t support Brat’s larger point that more immigration is bad for the economy. In fact, it is just the opposite. Adding low-wage migrant workers to the American economy expands and diversifies the supply of labor. Lower wages leave employers more money to invest in other things, including cost-saving research and development. In the long term, this means more efficient production that lowers costs for everyone.
Additionally, though nominal wages may fall, the productivity gains that come from an increased and diversified supply of labor mean costs will fall, too. In a free economy, producers’ goal is not to drive prices up beyond where things are affordable, but to lower them to undercut competitors and gain market share. Consider the price of cars, TVs, cell phones—all of which were once unaffordable to the common man, but are now consumed in abundance. This process is only made faster by a steady supply of cheap and willing labor.
Still not convinced? Then consider that according to Brat’s logic, it makes sense to raise the minimum working age from 16 to 21, as this would cut the supply of labor and eliminate millions of people from the labor market willing to work for less than most other Americans. In fact, why not raise the age to 30 and solve the problem altogether?
So Brat is both right and wrong: He’s right that adding millions of migrant workers will likely cause wages to fall in the short-term; he’s wrong that this means economic ruin. Immigration is both indicative and contributive of economic growth. Slowing it down only limits economic possibilities.