Monday, August 27, 2007

Interesting economic ramifications

Manpower is a commodity. It functions on scarcity just like all other resources. Its price fluctuates in value on the market based on supply and demand. We often speak of "shortfalls" in this country -- oil, credit, natural gas -- and we understand the consequences: higher prices, potential unavailability of things we need.

However, because of the general availability of labor people tend to forget that it is something which functions on the open market. These misconceptions are what cause illogical economic inanities such as the minimum wage and socialistic job security laws. Violating employment at will violates the free market principals with workers just as it does with buying popsicles or computers (can you imagine being told when and how often you could buy, say, steaks at the market?).

This excerpt is interesting.

Unemployment rates have been as low as 2 percent this year in places like Montana, and nearly as low in neighboring states. Economists cite such factors as an aging work force and booming tourism economies for the tight labor market.

The U.S. Department of Labor reports the mountain West region - covering eight states along the Rocky Mountains - has the lowest overall unemployment rate in the nation. The region hit an all-time low of 3.4 percent in May.

The effects are everywhere. Logging equipment in Idaho sits idle as companies have a tough time finding workers. A shortage of lifeguards has forced Helena to shorten hours at children-only pools. A local paper in Jackson, Wyo., has page after page of help wanted ads.
The idea of a gasoline shortage is frightening. Cement shortages have caused paralysis of construction industries (and local economies). Because of the forgetfulness of our society when it comes to labor, we don’t realize that a labor shortfall can be every bit as devastating – if not more.

After all, concrete shortages hurt only construction primarily, and those effects are only felt by the average consumer through a series of economic links. Labor shortfalls would acutely damage every industry directly.

Knowing that, how does it change your views of the illegal immigrant situation in America? “Kick ‘em all out” is good: great, in fact. It’s a start. But the fact that such a large black market for labor exists, and flourishes, is an indication of a disconnect between supply and demand. In a “correct” market, black markets have no reason to exist.

This story demonstrates to me, at least, that we need a better answer to the illegal immigrant situation than just round them up or let them in. We need a method to bring workers in – if and when we need them.

It’s a complex issue, and we need to acknowledge that there is no one-sided answer. Open borders is the equivalence of allowing steroids in baseball. You change the rules to accommodate dirty behavior. This makes it legitimate, but it isn't a fix -- it's moving the foul line to accept the position. Kick 'em all out is a rational response, but ending there isn't sufficient. It's temporary at best.

Castrating a broken market without rectifying the forces that caused it to break isn't a fix -- it isn't even a band aid. Instead, lets find why the labor market became so muddled, why the forces driving it are so strong, and apply logical controls to rectify the situation.

The demand for labor isn't going to go away; nor is the need for border security. And I fear the next non-fix bill that comes through congress may be just as ineffective as the last while having the redeeming quality (legislatively) of fewer enemies.