Friday, 10 October 2014

Immigration and the minimum wage

The arrival of our first elected UKIP MP is a good opportunity to draw attention to this piece, by James Meek in the LRB, about Thanet and UKIP supporters. Bearing in mind that the LRB is the house journal of north London liberalism, it is not a wholly unfair piece: for example, Meek does not hide the fact that UKIP’s campaign manager in South Thanet is married to an Egyptian woman or that a keen 18 year old UKIP supporter is a fan of gay marriage.

The interesting bit for present purposes is this."‘I’ve got a friend that runs a business,’ Hughes said. ‘He has about 15 or 16 Polish people working for him, because he only has to pay them £200 a week each. He doesn’t have to give them holiday pay, sick pay, annual leave or anything like that.’"

As a footnote primly points out, that is not good legal advice. But the piece also notes that employment laws are not always enforced: "There are so few inspectors monitoring whether bosses are actually paying the minimum wage that at the present rate it would take two and half centuries to get round every employer." So let us assume that Mr Hughes' friend will get away with it.

What should we do with this knowledge? By which I mean, what should we think about immigration and the minimum wage if we start from the premise that the minimum wage means that there is a special category of work (below minimum wage illegal work) that can only be done by immigrants? Some thoughts below.
Obviously one answer is to say that laws should always be enforced and so that category of work should disappear. But if you're the sort of left-winger who has ever been sympathetic to an argument that involves the phrases 'back-street abortionist' or 'look what happened during Prohibition' then you have to accept that people find ways round inconvenient laws, especially (so the right-winger believes) if there is money to be made by doing so (those back-street abortionists and drug dealers don't all do it for free).

If you're a certain kind of right-winger then there is an easy answer: abolish the minimum wage. That will have the dual effects of liberalising the labour market and reducing the demand for immigrant labour. Bob's your uncle. I suspect that's not an idea that would go down too well with UKIP's new blue-collar supporters. Moreover, it's just implausible as politics: the minimum wage is here to stay.

There are others on the right who think differently. Here I should mention the Adam Smith Institute, on the pro-immigration right, which says that opposition to immigration is largely based on economic reasons, and economically illiterate ones at that. But what is the correct free-market response to the premise I am exploring here? If we have a distortion in the labour market in the form of a minimum wage, and that creates an artificial demand for additional immigrant labour, is it really so stupid to be opposed to immigration? The immigrants, in a way, really are taking locals' jobs: the minimum wage has killed many of those jobs, but no doubt if there weren't illegal workers then some employers (at the margin) would have to offer new minimum wage jobs to locals instead.

There are also challenges are for the pro-immigration, pro-minimum wage left. Meek takes the point this far and no further: "the immigration issue presents a challenge to traditional left-wing thinking about the protection of hard-won workers’ rights in countries that have them, and how to extend them to people from countries that don’t. It’s hard for liberals to answer the question, ‘If you don’t believe in absolute freedom for anyone in the world to live and work in Britain, where would you draw the line?’ The beginnings of an answer might be: ‘Where immigration is a means to undermine people’s existing rights, together with the rights of the people who are being used to undermine them.’" That might be the beginnings of the answer, but it's obviously not the end. (It's only a hard question to answer because liberals now seem to regard drawing any line as being racist and consider any politician with any immigrant ancestry who supports drawing any line to be a hypocrite. It is not immediately clear why these beliefs persist.)

Let's start with your belief that the minimum wage is a good thing. You think it would be demeaning to expect anyone living in this country to work for less. In fact, it would be better to be unemployed. Of course you also hope (believe?) that the minimum wage forces employers to pay more and so shifts money from profits to wages - but you must also think that anyone working for less than the wage is being treated so abominably that the law should prohibit it. (Many right-wingers have no trouble with this kind of thinking either, albeit more on moral than economic grounds, e.g. it is better to be unemployed than a drug-dealer or prostitute.)

But immigration changes the context. You wouldn't expect anyone in Britain to work for less than £x an hour - but what about someone in a poorer country? Is it demeaning for them? No, clearly not - life is cheaper there. So why can't they work for less than £x an hour in Britain, intending to spend the money in the cheaper country in a few years' time? I can see that allowing in immigrants undermines (the effectiveness of) British employment rights, but does it really undermine "the rights of the people who are being used", i.e. the immigrants themselves? Remember that we are talking about economic migrants, not refugees - they chose to come here because they want these below-minimum wage jobs.

On the other hand, you believe that immigration is a good thing, adds to the spice of life, doesn't take jobs away from local workers and so on. But, as I mentioned above, the minimum wage (and employers of immigrants getting round it) stimulates an artificial demand for immigration and, in a sense, does take jobs away from locals. So would you be happy to limit immigration in order to create more minimum wage jobs for local workers? That sounds like the sort of policy UKIP could sell in its new eastern heartlands - but could the Labour Party sell it? Would its modern metropolitan pro-diversity heart be in it?

For both right and left-wingers, it must be reasonable to think that, if there is to be a minimum wage and if it is meant to work in reality, there have to be some additional restrictions on immigration (beyond those, if any, which would exist in the absence of a minimum wage) to ensure that the minimum wage is not being widely flouted. But then that raises more questions: is that fair to potential immigrants themselves? Is it compatible with EU membership?

None of these issues is about the really tricky aspects of the immigration debate (culture, assimilation, whether a country is permitted to perpetuate itself, is Japan entitled to or right to commit suicide slowly, etc). But, even so, they are hard questions for people across the political spectrum and ones that most non-UKIP politicians would rather avoid. All of which, I think, helps explain why UKIP has such support and from such widely different kinds of supporter.

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