We hear Bush talking about “jobs that others won’t take,” to sell his new “guest worker” plan. He is talking about importing workers for jobs that are not filled by American workers — largely agricultural jobs, but also including jobs in restaurants and others. Sounds reasonable, right?
Economists talk about “the law of supply and demand.” This law applies to labor as well as consumer goods. What this law is supposed to mean is that if you can’t find enough workers to fill your jobs, you raise wages until you can. What is happening in this instance is that the American companies are not paying enough, so people are not taking the jobs. These are not jobs that can be exported to China — the farms and restaurants are here. So, instead of raising wages until they are able to fill the jobs, they are proposing to allow more Mexican and other immigrant workers into the country to take these jobs, keeping wages low.
This “guest worker” scam is just one more example of the Bush administration working against the interests of American workers. The minimum wage need to be raised.
Ricardo, however, had a second theory, which he called the “iron law of wages.” You do not hear much about the iron law, in part because you wouldn’t want to hear about it, and also because experience has seemed to prove it untrue. But times are changing.
The iron law of wages is also simple and logical. It says that wages will tend to stabilize at or about subsistence level. That seemed inevitable to Ricardo, since while workers are necessary, and so have to be kept alive, they have no hope of any better treatment since they are infinitely available, replaceable, and generally interchangeable.
Ricardo’s wage theory has seemed untrue. The supply of competent workers in a given place is not unlimited; neither workers nor industry are perfectly mobile, and labor demonstrated in the 19th and 20th centuries that it could mobilize and defend itself. The iron law of wages would seem to function only if the supply of labor is infinite and totally mobile.
Unfortunately that day, for practical purposes, has now arrived, thanks to globalization.
Globalization is removing the constraints imposed in the past by societies possessing institutions, legislation, and the political will to protect workers.
If you have time read the entire piece as well as Sideshow’s comments:
That’d be things like, oh, unions, for example, and laws that prevent import of goods produced under unacceptable worker conditions, and that old stand-by, import duties. Fantasies about free trade are all very nice, but if ultimately they mean stabilizing wages at subsistence globally, you’re not doing much good with it for anyone but that small handful of nobility at the very top.
During the ’90s you had all these economists who should know better claiming that the modern economy had somehow magically risen above everything that had gone before and that now there could be no down-cycle. And I said, “No. It doesn’t work that way.” And I was right. So now when economists are rhapsodizing about the wonders of free trade and how it will make everything better for us all, I’m again saying, “No.”
Globalization is good if it means retaining high standards of treatment for workers at home and exporting those standards to other nations when we trade with them, but not if it means exporting American jobs without the encumbrance of those standards. You don’t have to be a genius to work this out, you just have to be able to separate the hype from what you can see with your own eyes.