A forest can only feed so many people...

A forest can only feed so many people…

You deserved it, these lower wages!

There are many arguments to reduce and limit migration. One of these arguments is that migrants will lead to lower wages. Due to some disbelief, people don’t recognize this is happening. A common theme is ”If you lose your job to an unskilled immigrant that doesn’t speak the language, that is your issue, not theirs”. That is saying that if your job can easily be replaced by a migrant, you deserve to lose your job. But that seems a bit harsh and is mostly just used to insult people in internet arguments.

Most of the time, people confess a belief that migrants are a great benefit to the economy. That there is no downside, as migrants create as many jobs as they take up. Maybe even more! Therefore, so they say, we should really welcome this boost to our economy. Especially since the West is aging and in lack of a new generation.

We should ask ourselves the very fair question – are there really no consequences for the working classes?

”They do the jobs we don’t want to do”

The common idea is that a migrant might take a job unwanted by the native inhabitants of a country. The job may be unwanted, because it is tough physical labour, or because it is boring, or because it has poor pay. The natives have other, better paying, and more comfortable jobs available to them. But, not all of the natives will have access to these ‘better’ jobs. Plenty will work in a low-skilled, low-paying, high-physical demand sector. We will simply always need people do perform jobs such as garbageman, and there is nothing wrong with having that job.

The job market works like any other market, it is based on supply and demand. If demand of workers is high, and supply is lower, then it means prices need to increase for there to be an equilibrium. What does that mean? It means that if there is low unemployment, corporations need to compete with each other to get people willing to work for them. They compete by increasing the salaries they pay. A garbage company may need to increase the wages it pays to its employees, and future employees, to attract enough workers. Wages should go up until the vacancies are filled!

It is never the case that natives don’t want to do a certain job, but given the choice, they rather take a different job that either pays more or they enjoy more. Nevertheless, there are natives that perform these jobs. And there is nothing wrong with performing such jobs.

Clearly the statement is false, but what if…?

Even if the statement ‘natives don’t want to do the jobs’ were true, the solution of bringing in migrants would be horrible. It would mean that there is a severe cultural problem, where honest work is not valued. A culture where everyone feels too entitled and too superior to be willing to do the simpler work. If that statement were true, we would need to review our entire educational system. Why would we send everyone to university if there is nobody left to fill the jobs that need filling?

Moreover, how is it morally justifiable to then take foreigners and make them do the jobs we supposedly feel too superior for. Isn’t that actual white supremacy? It would literally be claiming that our own people are too noble to perform such roles, and we need inferior foreigners as these jobs are more suitable for them. Absurd! It is saying ”Sure you can live in our country, but only if you perform the role of being our servant”. That is not a desirable solution at all.

What happens if supply increases?

Now let’s say you work in a factory in a country called Industria. You perform basic tasks, the regular type of unskilled labor. Someone needs to do it, and you have a family to support. In order to keep up with inflation, your wage needs to increase by 2% a year. Unemployment in the country is low, so it is difficult for the factory owner to find workers. You export the products to a country named Consumeria. The demand, what they consume in Consumeria, does not depend on Industria.

So far you are in a pretty good position to negotiate with your employer for a higher wage. If he doesn’t want to increase your wage, there are plenty other jobs and factories that would like to expand their business. If the wages don’t go up, you leave and the factory has to shut down.

Now, here enter migrants from Pooristan. Suddenly millions are flooding the labor market, seeking unskilled work. Your boss stops hiring any Industrians and hires the Pooristanis instead. Your boss does not fire you. He also does not give you a wage increase this year. So what if you quit? There are plenty of Pooristanis willing to take your spot. So you work for a stagnating wage, as other vacancies have been filled up by the Pooristanis as well.

The Pooristanis don’t mind the low wage. Their families live in Pooristan, where costs of living are lower. They are used to wages far below the wages from Industria, and the wage they are earning is allowing them to easily support their family in Pooristan.

But – don’t these new migrants make Industria’s economy grow? Sure, a little bit. But not if they send most of what they earn abroad. Not if most of what they earn is spent in newly opened Pooristani shops. The money gets stuck in a closed loop, or goes abroad. Neither benefits the Industrians.

The factory owner is overjoyed, by keeping the wages down, there is more room for big profits. More labor supply, lower wages. Less labor supply, higher wages.

Counter Arguments

Of course there are some other minor benefits such as taxes paid, and some money gets spent within the country. For Europe however, the economies are mostly very open. This is different to the United States which has a primarily large closed economy. These economies do not function in the same way, and research on migrants and the economy done in the United States is not necessarily valid for European countries.

Moreover, we see in the United States a huge difference between the rich and poor. Why? Is the US rotten and corrupted? Maybe. Mostly this is due to migrants entering the country and willing to work for lower wages. It is also due to a small super-rich elite class of people, absolutely. Yet, the pressure on the lower side is due to migrants pressing down on the wages. This is why services in the US are cheap, despite it being a developed country.

It is not necessarily that migrants come and ‘steal’ jobs, they simply press the wages down to a level that no other person sees a benefit of working for those wages. It reinforces the ‘poverty trap’, where remaining on benefits is economically better than finding a minimum wage job. Note that it mostly affects the lower classes, those with highly skilled jobs might benefit from the population growth.

On top of that many  migrants are sending money back home. This money is pulled out of the economy and handed as charity to a different economy, in economic terms this is a loss. The outflow of money must be filled either by exporting to the country, or by foreign borrowing. Neither is a desirable action.

Conclusion

We must remain realistic. Some migrants will not work, they will simply leech off the welfare state. In fact, quite many of them do exactly that, especially those coming from certain regions. Nonetheless, there are many migrants that work. These people have no bad intentions, they do what is rational for them to do. They have the opportunity to earn more money than they otherwise would, and they grab that opportunity. Great for them, why shouldn’t they? Keep in mind that when we talk about migrants, there are different types of migrants.

But, there are consequences for the host country. The global economy can grow and win-win scenarios exist, but not every scenario is win-win. Some scenarios, frankly, are win-lose. The migrant wins, the native worker loses. Claiming that these people need to find a different job is somewhat arrogant. Not everyone can be university-educated. How would you respond if you got sacked, because your boss found a cheaper replacement? Now imagine if you have a couple of school-going children and a mortgage. Yes, in economic terms this ‘frictional’ unemployment might not be a problem, but on the individual level it can very well be.

Lastly – we must not be blinded by studies claiming the ‘average’ wage is not affected. The average wage is a meaningless number as it does not show the group that loses. The distribution of the wages is critical. Let’s not think that opening the border to migrants leads to pure bliss. It is, as usual, more complicated than that.