Progressives are encouraging the development of a two-tiered labor force.
Charlie writes:
Those of us who favor a secure border, an orderly immigration system, and the swift deportation of illegal aliens are often told that this view must be motivated by animus. In particular, we are accused of wishing to remove those who came here without permission because we believe that they are in some sense “second-class.” But is that not, in fact, a perfect description of the approach of Karen Bass, who apparently envisions a city in which some of the jobs are done by her friends at a minimum of $30 per hour plus benefits, and the rest are taken care of by the faceless “immigrant labor,” which does not deserve to benefit from such rules, and cannot?
It’s not just that. By supporting overly intrusive labor laws and regulations, progressives are encouraging the development of this two-tiered labor force.
If complying with employment laws is straightforward and economically sensible, most people will do it. Most people, especially the kind of people who employ other people, want to follow the law. They want to be able to show their shareholders or investors that they are following the law. They don’t want to be tied up in court cases for breaking the law.
The problem arises when the government starts loading up employment laws with all kinds of extra requirements. A minimum wage, mandated health coverage, mandated paid leave, restrictions on firing workers, etc. Now the government is dictating the terms of employment in ways that will not make sense for all workers.
Businesses’ first response to this is to find ways to cut costs and continue following the law. This can often be bad for workers, who might have their hours cut or be laid off.
There comes a tipping point, though, when complying with employment laws is no longer economically sensible. So businesses start paying their workers under the table instead. The social sanction on this kind of behavior varies. Many people fondly remember jobs in which they were paid under the table, because jumping through all the government’s hoops to legally employ a teenager is often not worthwhile.
Illegal immigration provides an especially attractive opportunity to illegally employ people because the workers broke the law first. If they get caught, the business gets in trouble, sure, but the workers get deported. Now there’s nobody to do the job. The government knows this and therefore has an incentive to look the other way because it doesn’t want to hurt businesses too badly. That would increase unemployment, raise prices, and cause all sorts of other problems that voters would punish the government for.
The Trump administration is disturbing that equilibrium by saying it will enforce immigration laws regardless. This is especially troubling to California because its employment laws are among the strictest in the country, which means its businesses have among the strongest incentives to employ people illegally.
It’s not Trump’s fault, or Republicans’ fault more generally, that employing people in California is harder than it is elsewhere. California Democrats at the state and local levels have pushed through those laws mandating absurdly high minimum wages, restricting independent contracting, and supercharging labor unions that make legal employment such a headache.
To see the far extreme example of this dynamic, look to India. Many of the socialist labor laws from India’s postindependence period are still in place, making it very expensive for businesses to legally hire people. These are far in excess of anything California has done. “The key binding constraint is what we call ‘regulatory cholesterol,’ a universe of 1,536 laws, 69,233 compliances and 6,618 filings that businesses face at an aggregate,” Gautam Chikermane and Rishi Agrawal wrote for the India-based Observer Research Foundation. On top of that, the rules constantly change in minute ways, such that businesses “need an army of compliance officers to keep track of, leave alone file, these changes.”
As a result, 80 to 85 percent of Indian workers are not legally employed, and their employers are not legally registered as businesses. The Indian government has made it so hard to follow employment laws that most people don’t bother.
California is far from that point. But the more restrictions it adds to its labor laws, the further it encourages illegal employment by businesses who simply cannot afford to follow the rules. Businesses aren’t just going to stop existing. They provide valuable things that people will want no matter what the government says. They’ll hire people under the table to do those jobs if the government makes it too hard to hire them legally.
The same principle is at play with U.S. immigration law. The tangled mess of immigration law, combined with poor administration by the federal bureaucracy, has made it extremely expensive and time-consuming to follow immigration law, so many people decide to immigrate illegally. The benefits of living in the United States are so great for many people from poorer countries that they calculate it is worthwhile to break the law and risk deportation rather than try to comply. And the more people do that, the more correct their calculations become, because it’s very hard to deport millions of people.
The laws of economics do not disappear because the laws of government ignore them. Incentives, not the good intentions of policymakers, are what govern behavior. Overly burdensome employment and immigration laws encourage lawbreaking by people who simply want to work or hire people to work for them.