Business Insider

Peter Crabb: Why we need free international trade in workers

As Bill Clinton learned during his campaigns for the presidency, “It’s the economy stupid. “

Most political issues have economic principles at their core, and immigration policy is no different. Illegal immigration is a particular hot-button issue.

According to new research from the Pew Hispanic Center released this week, illegal immigration is down. The drop directly corresponds to the U.S. economic recession.

The Pew research and another study from the Department of Homeland Security show illegal immigration down by at least 8 percent between 2007 and 2009. As job opportunities in the U.S. fell, so too fell the opportunities for immigrants, illegal or not. According to Department of Homeland Security data, the number of new legal immigrants is down even more, dropping 11 percent between 2007 and 2009.

Idaho officials have long been arguing that illegal aliens take jobs away from the state’s unemployed workers. A weak economy takes a lot wind out of that argument, and the new laws can discourage hiring.

Idaho legislators put through a bill this past year requiring employers to check the immigration status of new hires or face penalties. But businesses around the country are facing more problems policing the issue. The federal government is saying you have to be sure you don’t hire illegal immigrants but also to make sure you don’t ask too much.

The Immigration Reform and Control Act of 1986 prohibits employers from knowingly or intentionally hiring illegal immigrants. But the Immigration and Nationality Act has anti-discrimination protections. Employers can be sued if they place added burdens on a new hire to show his or her citizenship status or national origin.

State lawmakers and local businesses can forget about the much-talked-about new law in Arizona for policing illegal aliens. Instead, they must concern themselves with the federal employment laws. The U.S. Supreme Court is currently studying whether or not federal statutes usurp an Arizona law enacted in 2007 that allows the state to revoke the license of any employer found to knowingly hire illegal workers.

All the talk continues despite more findings by economic researchers that immigration is good for the U.S. and its workers.

Giovanni Peri, an associate professor at the University of California, Davis, and researcher at the Federal Reserve Bank of San Francisco, found evidence that immigrants expand the economy’s productive capacity, stimulate new investment, and boost productivity. Peri’s study is unique in that he followed immigration patterns at the state, not national, level. States with higher immigrant worker populations have higher rates of output per worker.

Economists have long known that higher productivity is the key to long run economic growth. Higher worker productivity lowers product costs and increases output, raising our standard of living.

But productivity is currently falling. The Bureau of Labor Statistics reported this week that productivity at non-farm businesses fell 1.8 percent. States that put up walls against immigrant workers are likely to find output growing slower than elsewhere.

Demographic studies are also showing the U.S. needs more immigrants. David Wessel argues in The Wall Street Journal that ambitious immigrants will help lift living standards and bring faster growth. This will do more to repay the massive federal debt than any other economic policy as higher growth brings in more tax revenue.

In contrast, Europe and Japan are in for slower growth and increasing debt loads. The reason is low growth in worker populations and longer life expectancy for retirees. These countries will be competing with the U.S. for more workers.

Immigration, both legal and illegal, rises and falls with the number of jobs available. As long as the U.S. economy produces jobs over the long run, which it has and will, many workers will seek our shores through any means possible.

Our current immigration laws and hiring burdens for employers are inconsistent with our laws regarding international commerce. If our country is going to support and advocate for the free trade of goods and services throughout the world, why would we not support the free trade of labor?

Labor is a service, and if we want other countries to buy the services for which we have a comparative advantage, such as new technologies and services, we must be willing to buy goods and services for which other countries have a comparative advantage, such as labor.

When discussing immigration, remember: It’s the economy, stupid.

Peter R. Crabb is a professor of finance and economics at Northwest Nazarene University in Nampa. He earned his doctorate in international and financial economics from the University of Oregon.