So the Heritage report on illegal immigration got me thinking about something.
It claims immigrants will cost $6 trillion or something, because immigrants are poor and will collect more in benefits than they’ll pay in taxes.
But that analysis assumes at least two propositions which are unproven, and in my view at least, wrong.
One is that a person’s income represents the value of his contribution. Therefore people who make a lot of income contribute a lot, whereas those who make little or nothing contribute little or nothing. It’s an assumption that’s common in the field of economics, but not usually stated, because it doesn’t bear much scrutiny. It would mean Salk’s contribution to the eradication of Polio was worth nothing, because he didn’t get paid for it. Or that getting paid to watch someone else’s children was somehow more valuable than caring for your own.
In fact, income represents a person’s capacity to consume, not how much he produces.
Suppose a CEO makes millions of dollars, while bankrupting his company. The value of what he produced is zero, or less than zero. Yet he may nevertheless consume many times as much as any ordinary worker. So where did all that production come from? It came from ordinary people who produce things, but don’t consume them. In other words, people who get paid less than the value of what they produce.
People who are underpaid are not producing less, merely because they have less income. What’s happening is a greater share of the value of what they produce is going to other people. That’s why companies hire people for as little as possible: because they want the greater share of the value of the work to go to the employer, rather than the employed. That’s why there’s a problem with illegal immigration in the first place: because so many of us would rather pay less than pay more. In fact, that we’re doing it shows we think it benefits us - otherwise we wouldn’t do it.
We hire illegal immigrants because there’s a value to it. The value is the difference between the actual value of their work, and how much we pay them. The less they get paid, the more the rest of us - everyone who is not an immigrant - benefits.
So the Heritage Foundation, to the extent it assumes an immigrant’s income is a measure of how much his labor benefits the rest of us, gets it exactly wrong.