Why Labor Unions Support Amnesty for Illegal Aliens

Tuesday, April 27, 2010

Disclaimer:  Don’t Tread on Virginia does not support amnesty for illegal aliens or minimum wage laws.  This article examines why skilled labor unions support these policies for their own interests at the expense of everyone else.  Please do not stop reading this article prematurely assuming this article or website supports these policies.  The purpose of this article is show that what’s good for unions is typically bad for America.

I've heard several talk radio hosts wonder why skilled labor unions support amnesty for illegal aliens.  The hosts typically allege that it will cost the union members jobs.  Many hosts write off the support for amnesty as support for liberal policies by the leadership regardless of the cost to rank-and-file members.  I agree that this is a frequent occurrence in union political involvement.  A key example is the union support for cap and trade when it hurts everyone, especially the industries with strong union presence such as mining and manufacturing.  However, this is not the only factor concerning amnesty.  In fact, there is an economically rational reason for skilled labor unions to support amnesty.  This reason is bad for the economy as a whole and those not in skilled labor unions, but it can benefit skilled labor union rank-and-file members.

The reason why it may be economically rational for skilled labor unions to support amnesty for illegal aliens is quite similar to the reason why they support minimum wage increases.  This article focuses on skilled labor unions because most unions are skilled labor unions and because advocating these policies will potentially benefit skilled laborers at the expense of unskilled laborers.

One of the main reasons employers hire illegal aliens is to sidestep the costs of burdensome labor and tax laws.  If you pay an illegal alien under the table, you can sidestep minimum wage laws, tax laws, and other labor laws.  Since the illegal alien is violating the law by being in the country illegally and working here illegally, you have a case of mutually assured destruction if the illegal alien reports the employer for violating labor laws or the employer reports the illegal alien to the INS.  Thus, hiring an unskilled illegal alien can be far cheaper than hiring a legal unskilled employee.  Hiring multiple unskilled illegal aliens can be cheaper than hiring one legal skilled employee (e.g., skilled labor union member) to do the same task.

Skilled labor is in competition with unskilled labor in many industries.  For instance, say an unskilled laborer can make one widget per hour while a skilled laborer can make three of the same widgets in the same hour.  The labor cost per widget is the same, ceteris paribus, if you paid the unskilled laborer $5 per hour and the skilled laborer $15 per hour.  The labor cost is $5 per widget despite the skill-level of the employee, so it doesn’t matter whether you use skilled or unskilled labor.

But, suppose there is a minimum wage of $5 per hour for all employees.  At this minimum wage, nothing changes because both skilled and unskilled laborers already make at least the minimum wage.   Now, suppose the minimum wage is raised to $8 per hour.  The labor cost for an unskilled laborer to produce one widget is now $8.  However, the labor cost for a skilled laborer to produce one widget is still $5 since $15 per hour is still above the minimum wage.  Skilled and unskilled labor are substitute goods, so ceteris paribus, the labor cost per widget would rise to $8 for skilled labor as well, for a skilled labor wage of $24 per hour.  However, labor costs are not isolated from other costs, so we can’t consider them ceteris paribus.  If $8 per widget for labor costs is too high for the employer, the unskilled laborers will be priced out of their jobs and replaced by cheaper skilled laborers in lieu of raising the wages of both types of laborers.  A reduced supply of potential employees with acceptable labor costs (now only skilled laborers) will increase the wages of laborers overall and reduce the total quantity demanded of laborers.  Wages of laborers will increase, but won’t skilled laborers lose jobs?  Probably not, and since skilled laborers are taking the place of unskilled laborers, they’ll probably gain jobs.  Remember, the total quantity demanded of labor will decrease, but the share of skilled labor in the total will skyrocket.  Plus, in this example, the work of one skilled laborer can replace the work of three unskilled laborers, so you would expect higher cost but more productive (skilled) labor to replace lower cost but less productive (unskilled) labor, raising wages but lowering the number of laborers.  Skilled laborers gain employment when a substitute good, unskilled labor, is priced out of the market.

That is why skilled labor union rank-and-file members benefit from minimum wage increases despite the fact that they typically make far more than the minimum wage.  However, this raises unemployment for the economy as a whole, especially for unskilled laborers.  What’s good for skilled labor unions is bad for the country.

Now, how does this tie into the main topic of this article, amnesty for illegal aliens?  Most employed illegal aliens are unskilled laborers and many are either paid less than the minimum wage or their labor costs are otherwise less because paying them under the table allows employers to sidestep labor and tax laws.

 Granting amnesty to illegal aliens takes away the threat of mutually assured destruction for the now legal aliens or citizens.  They can now demand that their employer pays them the minimum wage over the table and follows all labor and tax laws since they no longer need to fear deportation from reporting their employer for violating labor and tax laws.

For the former illegal aliens, this is effectively a minimum wage increase for unskilled laborers, which will price many of them out of the market in favor of skilled laborers.  This benefits rank-and-file members of skilled labor unions, again at the expense of unskilled laborers and the economy as a whole, especially the former illegal aliens.  Additionally, former illegal aliens that are in fact skilled laborers will join skilled labor unions, increasing the declining memberships of private-sector skilled labor unions.

In summary, as is often the case, skilled labor unions benefit at the expense of unskilled laborers and the economy as a whole.  Granting amnesty to illegal aliens means skilled labor union employment will increase while overall employment decreases.  So, skilled labor union support for this policy is more than just liberal politics.  Although, like most liberal policies, it favors one group at the expense of all other groups.