Inflationomics

Illegal Aliens vs. Chinese Imports

Let’s assume that the Chinese can produce and ship a widget to the United States for $5.00.  Not only does this cover the cost of the raw material, and the labor and equipment to move the raw material, but it also covers the cost of transforming the raw material into useable parts and assembling them into a finished product.  And then there’s the cost of financing, packaging, and transportation to the United States, all of which are covered in this cost.  When it is sold in the United States for $15.00, the sales price covers all those costs and earns a profit (minus the sales commission) for the Chinese firm that produced it.

Meanwhile, in the United States many people are complaining about the lax immigration laws and how the illegal aliens are taking jobs from Americans.  The presumption is that the illegal aliens are willing to work for less than the unemployed Americans or that they can work for less because they don’t have to pay taxes, thus preventing the Americans who are trying to work within the existing government-burdened system from finding higher paying (and taxable) jobs.  Let’s assume this presumption is correct for the moment, and the illegal aliens are willing to work for $2.00 per hour, like their Chinese counterparts do.

My question is: What difference does it make whether Americans buy cheaply manufactured goods from China or those cheaply manufactured goods are made in the United States by illegal aliens?  The consumers benefit equally by paying the same low price.  The biggest difference is that the supply chain (and all its employees) is in China rather than in the United States.  Of course, more American jobs would be created if the goods were manufactured in the United States than if they are manufactured outside the United States, even if some of the employees were illegal aliens!

By allowing cheap Chinese (or Indonesian, or Malaysian, or Korean, or Vietnamese, or Indian, etc) goods into the United States, American manufacturers must compete with the cheaper labor found in those countries.  In the long run, either U.S. wages must come down (and U.S. employers may have to find illegal aliens to work for those lower wages and pay the unemployed Americans’ unemployment benefits), or foreign labor costs will rise due to higher productivity, or more capital must be invested in jobs to make the employees more productive and thus capable of earning higher wages.  Those are the three choices.

As I see it, during the last 50 years, the United States has been consuming its capital through wasteful government policies, more and more regulations, wars, and relatively high taxes and it doesn’t look like that’s going to change any time soon.  The Chinese, on the other hand, have been saving and accumulating capital and Chinese workers are becoming more productive all the time (with commensurate rising wage rates and standards of living).  That means that Americans can expect to earn lower wages or receive fewer benefits or retirement benefits (with declining standards of living) in time.  And if the unemployed (as well as the employed) are not willing to work for the lower wages, then, in order to get anything done, we’ll just have to let the illegal aliens into the United States to get the simpler more labor-intensive things done (garbage collection, farming, construction, and janitorial services, to name a few tasks).

Unfortunately, the declining wage rates, capital flight, and declining productivity are all just symptoms of the decline of American society and the inflating of the U.S. dollar; i.e., inflationomics.

Robert Jackson Smith

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