Cafe Hayek - Latest Comments in The Reddest of Red Herrings

Re: The Reddest of Red Herrings

Nate — Fri, 21 Apr 2006 07:25:54 -0000

It's a simple rhetorical device used by politican's to put it in terms citizens can understand. It's fighting fire with fire. Protectionists claim free trade causes unemployment and now, likewise, free traders are making up their own versions of events that aren't supported by logic/facts but understood by voters.

Re: The Reddest of Red Herrings

JohnJ — Fri, 21 Apr 2006 07:22:47 -0000

I agree. There's not enough information out there to come to a solid conclusion. One could pretty much "what if" any of this to death.

Re: The Reddest of Red Herrings

JohnDewey — Thu, 20 Apr 2006 22:07:24 -0000

JohnJ,

I don't think the source you cited is referring to illegal workers at all. Rather, it seems to be providing an out-of-date estimate for the number of workers legally exempted from minimum wage laws. As I understand it, most are in food service occupations where workers are expected to receive tips in addition to wages from the employer.

The BLS website below provides characteristics of the 1.5 million workers paid less than $5.15 per hour in 2004. Only about 11 percent, or 165,000 are Hispanic. 60 percent are classified as white females.

Please notice the occapational group figures. 2/3 of the 1.5 million less-than-$5.15 wage earners are in the group "Food preparation and serving occupations". IMO, most of these are likely to be waitresses or waiters.

http://www.bls.gov/cps/minw...

I think this discussion is getting a little stale, so don't expect further response.

Re: The Reddest of Red Herrings

JohnJ — Thu, 20 Apr 2006 20:42:31 -0000

I'm gonna cut you off at the pass, JohnD. I'll go ahead and admit that that study doesn't prove that those 1.7 million people are still receiving less than minimum wage. Since I can't prove that it's happening right now at this very instant, I guess you're right. Sadly, that 1.7 million figure falls pretty close to 10 percent of 12 million people, but I'm sure that's not evidence in my favor or anything. Plus that discounts all the people brought here illegaly to engage in illegal industries, such as sexual slavery.

Re: The Reddest of Red Herrings

JohnJ — Thu, 20 Apr 2006 17:35:30 -0000

"1.7 million (U.S. workers) take home

even less (than the minimum wage) because the law doesn't cover them."

http://occawlonline.pearson...

(I don't know how to do that "tinyurl" thing)

But I'm sure that those 1.7 million are legal residents who have the protection of the law, as opposed to illegal aliens, who are more willing to accept jobs that don't question whether or not the law covers them.

It seems to me that we're kind of getting off the point here, though.

Re: The Reddest of Red Herrings

John Dewey — Thu, 20 Apr 2006 05:52:34 -0000

JohnJ,

Here's an example of what I consider real evidence on illegal immigrant wages:

http://tinyurl.com/eo4ny

This study by University of Illinois - Chicago revealed that the median wage rate for undocumented workers in Chicago was $7.00 per hour. The study also notes that only 10% of undocumented workers earned less than the $5.15 minimum wage.

The research data was compiled in the 3rd quarter of 2001. That's right in the middle of the last recession. No doubt demand for workers has increased since then. I can't find any evidence, but I believe it likely that wages for undocumented workers have increased since then.

One could argue the Chicago labor market is not representative of the overall U.S. But as I noted in a previous post, a University of Florida study found that immigrant agriculture workers also earn more than minimum wage.

http://tinyurl.com/rbpzh

I have found no recent research on the wages of construction workers. However, every piece of anecdotal evidence available shows that undocumented construction workers are making considerably more than minimum wage.

Re: The Reddest of Red Herrings

JohnDewey — Thu, 20 Apr 2006 00:59:40 -0000

JohnJ,

My claim was that almost all illegals are now making the federal minimum wage of $5.15 per hour. I didn't argue that all workers are making above the minimum wage, and I certainly do believe that violations have occurred in the past.

The second source you cited states that "cleaning contractors sometimes hire illegal immigrants for $3.50 an hour, considerably less than the $5.15-an-hour federal minimum wage." However, they provided no evidence this is still happening. Two of the three illegal workers they interviewed are making $6.25 and $5.35 per hour. The third is being paid $50 per night, but the length of his workday is not specified. The violation the reporter did find is that workers are not getting overtime pay.

I tend not to believe reporters' claims when they don't back them up with evidence.

Your first news story also argues that many workers are paid less than minimum wage. They only provide two wage rates: one guy is now making $6.00 per hour and one is only paid $4.09.

Of the five employees cited in your two stories, three are earning above $5.15 per hour and one more may also be, if he's working less than 9.5 hours a night.

IMO, the tiny sample of evidence you provided supports rather than contradicts my argument that almost all illegals are now making the federal minimum wage of $5.15 per hour.

Re: The Reddest of Red Herrings

JohnJ — Wed, 19 Apr 2006 19:21:44 -0000

But I realize that my news sources might not be as authoritive as your two personal friends.

Re: The Reddest of Red Herrings

JohnJ — Wed, 19 Apr 2006 19:20:26 -0000

Many workers claim there are two sets of wages - one for citizens or green-card holders, and a lower wage for illegal immigrants.

"They pay me less because I don't have papers," said Mandy, 27, a clerk at a women's clothing shop.

http://www.nydailynews.com/...

''Cleaning contractors deliberately seek out an undocumented work force because they want workers they can intimidate and exploit,'' said Lilia Garcia, executive director of the Maintenance Cooperation Trust Fund, a Los Angeles group run by business and labor representatives, which investigates janitorial companies to uncover illicit practices. ''Workers who are here legally would not work for the wages that they pay.''

http://www.lexisone.com/new...

Well, you asked.

Re: The Reddest of Red Herrings

John Dewey — Wed, 19 Apr 2006 13:34:43 -0000

JohnJ,

"JohnD, are you suggesting that all or a vast majority of illegal immigrants who work work for minimum wage or more?

Is that really what you believe?"

Yes, I believe that almost all illegal immigrants earn more than the federal minimum wage of $5.25 per hour. I'm not familiar with state minimum wages, so I can't make that claim.

I'm sure that a few businesses pay less than minimum wage, but they cannot keep those employees for long.

I've known very well two employers of illegal immigrants, one in Texas and one in California. They both told me they pay well above minimum wage, and that they couldn't keep their employees if they didn't.

Yesterday morning I provided references that show illegal immigrants in agriculture and in construction are making above minimum wage. I also provided a link to the opinion of Social Security's Chief Actuary. He believes that 3/4 of illegals work in jobs which pay FICA taxes. Those employers are certainly paying minimum wage.

I really don't wish to argue this point any further. If you have any evidence to the contrary, then provide it. Otherwise, just drop the issue.

Re: The Reddest of Red Herrings

JohnJ — Wed, 19 Apr 2006 10:05:26 -0000

3 million, of course.

JohnD, are you suggesting that all or a vast majority of illegal immigrants who work work for minimum wage or more?

Is that really what you believe?

Re: The Reddest of Red Herrings

Morgan — Wed, 19 Apr 2006 05:44:37 -0000

Um, guys - 25 percent of twelve million is *three* million.

Carry on.

Re: The Reddest of Red Herrings

JohnDewey — Wed, 19 Apr 2006 04:26:46 -0000

JohnJ:

"25 percent of 12 million is four million."

What does this refer to? Are you estimating the number of illegal immigrants who are not paying taxes? The estimates for illegal immigrants in the U.S. is indeed 12 million, but only about 7.5 million are assumed to be working. The remainder consist of non-working spouses and children.

What are you assuming about the 4 million workers? That they work for less than minimum wage, as you suggested in the earlier post? All evidence I can find - research studies by economists - show that few if any illegal workers are earning less than minimum wage.

I'm not arguing that wages are not reduced by the supply of illegal workers. I'm only

answering your question:

"What about the low-skilled Americans who are legally required to turn down any job offering less than minimum wage?"

I still see no evidence that such jobs are being offerred.

You may choose not to believe the estimate provided by Social Security's chief actuary - that 75% of illegal workers pay social security taxes. I don't believe actuaries just pull numbers out of the air. I feel confident he's got more evidence than you or I to support his guess.

Re: The Reddest of Red Herrings

JohnJ — Tue, 18 Apr 2006 18:29:21 -0000

Just to point it out, that "fact" is attributed to this quote from your article, JohnD:

"Social Security officials do not know what fraction of the suspense file corresponds to the earnings of illegal immigrants. But they suspect that the portion is significant.

'Our assumption is that about three-quarters of other-than-legal immigrants pay payroll taxes,' said Stephen C. Goss, Social Security's chief actuary, using the agency's term for illegal immigration."

That's a heck of an assumption.

Re: The Reddest of Red Herrings

JohnJ — Tue, 18 Apr 2006 18:26:57 -0000

25 percent of 12 million is four million.

5 percent of 100 million (my guess at the "employable". If I'm significantly off, please correct me.) is five million.

Hmm...

Both of my figures should be too high. I'm sure not all of the twelve million illegal immigrants are considered "workers", just as I'm sure that my estimate of a "100 million worker" force of Americans is too high.

But I'd like to see if the actual proportions are close. Does anyone have any numbers to go on?

Re: The Reddest of Red Herrings

quadrupole — Tue, 18 Apr 2006 17:19:18 -0000

JohnDewey

You misunderstand. I am *not* talking about marginally attached workers (or any of the subcategories thereof, though kudos for using marginally attached, I prefer it to the somewhat fuzzier discouraged).

Consider for example the labor force participation rate by educational attainment (2005 data):

http://www.bls.gov/news.rel...

The participation for the lowest skilled workers (those with less than a high school diploma, ie dropouts) is 37% (compared for 60% for a foreign born worker without a high school degree). We have 18 million native born workers with less than a high school diploma, and 8 million foreign born workers in the same educational category. If 62% of our high school dropouts were in the labor force that would be an extra 4.5 million workers. Given that our foreign born workers in that educational category only number 5.3 million we are VERY close to being able to satisfy the need directly with native low skill labor, if only it were willing to work.

My thesis is that if wages were not articifially suppresed by illegal aliens from the market clearing rate, that we would see the labor participation rate rise in the lowest skill category, and would not have to redeploy more skilled workers to those jobs.

I find the low labor force participation rate of the unskilled likely to be a much larger factory than early retirement, or disability in lowering our labor participation rate.

I am currently looking for historical tables that contain the native vs foreign breakdown so that I can see what the trend in time has been.

Re: The Reddest of Red Herrings

JohnDewey — Tue, 18 Apr 2006 00:27:54 -0000

quadropole:

"Our labor force participation rate is at a record low, so there are LOTS of Americans who for various reasons aren't seeking work. I suspect a great many of them are uninterested in working for wages commensurate with their skill level."

Upon what evidence are your suspicions based?

According to the latest BLS report, only 1.5 million workers were marginally attached to the workforce but not counted in the unemployment statistics. These were the workers who wanted and had looked for work sometime in the past 12 months. Of those 1.5 million, fully 2/3 had not looked for work in the past 4 weeks due to school attendance or family obligations. The remainder, classified as "discouraged workers", totalled only 451,000.

http://www.bls.gov/news.rel...

So why is the labor participation rate only 66%? Here's a few clues:

A Census report from 2001 showed the participation rate of mothers with less than school age children is just slightly higher than 50%.

According to the 2002 Current Population Survey, "an estimated 3,269,000 out of the 13,474,000 non-institutionalized civilians aged 18-64 who report a work limiting health problem or disability are in the labor force (i.e., 24.3 percent of all persons in the labor forces)." So 10 million persons age 18-64 have disabilities that prevent them from working.

William Poole of the St. Louis Fed said that early retirement is a "disturbing characteristic" of employment trends in recent decades. The employment ratio of males in the 50-64 age group has dropped from 80 percent in the 1960's to only 65 percent today.

Re: The Reddest of Red Herrings

JohnDewey — Mon, 17 Apr 2006 23:46:44 -0000

JohnJ,

Do you have any evidence that illegal immigrants anywhere in the U.S. earn less than minimum wage?

The Chief Actuary of the Social Security Administration estimates that 75% of illegal workers in the U.S. work report their income and pay FICA taxes. These employees use phony ID's to work in jobs covered by minimum wage laws.

http://tinyurl.com/jfp2n

Fritz Roka and Robert Emerson, of the University of Florida, determined that agriculture workers make more than minimum wage. Tomato harvest workers paid on a piece work basis average $8.87 per hour. Orange harvester pay ranges from $4.50 to $11.00 per hour, with 94% earning above minimum wage.

http://tinyurl.com/rbpzh

More illegal immigrants are employed in construction than in any other industry. According to this report from the Chattanooga Times Frre Press, immigrant construction workers earn between $8.00 and $14.00 per hour.

http://www.msnbc.msn.com/id...

That's consistent with the rates here in Texas, according to my relative who manages homebuilding projects in Houston and Dallas.

http://www.msnbc.msn.com/id...

"What about the low-skilled Americans who are legally required to turn down any job offering less than minimum wage"

JohnJ, I can find no evidence of such jobs.

Re: The Reddest of Red Herrings

JohnJ — Mon, 17 Apr 2006 21:28:30 -0000

I suppose the best way to bring this up is with a question.

Though Americans tend to have higher skills than many immigrants, especially illegal immigrants, what about the low-skilled Americans who are legally required to turn down any job offering less than minimum wage, that can then be taken by those who see no need to concern themselves with the law of minimum wage? Do these Americans not make up the bulk of our current unemployed?

Re: The Reddest of Red Herrings

quadrupole — Mon, 17 Apr 2006 16:13:47 -0000

John Dewey,

Our labor force participation rate is at a record low, so there are LOTS of Americans who for various reasons aren't seeking work. I suspect a great many of them are uninterested in working for wages commensurate with their skill level. Or to put it differently, there are a lot of folks being displaced by lower cost illegals who are simply exiting the labor force.

Re: The Reddest of Red Herrings

Patrick — Mon, 17 Apr 2006 15:50:14 -0000

I ain't workin' in no fields so....yeah they are doing jobs I (an American) won't do.

Re: The Reddest of Red Herrings

Half Sigma — Mon, 17 Apr 2006 14:34:28 -0000

Produce brokers probably also make a decent amount of money.

Re: The Reddest of Red Herrings

John Dewey — Mon, 17 Apr 2006 13:30:33 -0000

"I have seen it alleged, that of the cost of produce you buy at the grocery store, 5% actually makes it's way back to the farmer."

"That sounds believable. Because we live in a marketing economy and the cost of most of the stuff you buy in stores goes to marketing expenses."

Five percent sounds low to me. Is it possible this includes machine-picked produce?

A University of California study a few years ago estimated the total farm cost to produce iceberg lettuce was 22 cents a head, of which 15 cents was for farm labor. Iceberg lettuce prices are dependent on weather conditions, but I think the average retail price at the time of the study was about $2.00 a head. So that means that at least 11% was being returned to the farm even if the farmer made no profit.

I agree with Half Sigma that marketing expenses are the major part of produce cost. But marketing includes, of course, transport and distributor costs as well as retailer costs.

Re: The Reddest of Red Herrings

Half Sigma — Mon, 17 Apr 2006 12:13:44 -0000

"I have seen it alleged, that of the cost of produce you buy at the grocery store, 5% actually makes it's way back to the farmer."

That sounds believable. Because we live in a marketing economy and the cost of most of the stuff you buy in stores goes to marketing expenses.

Re: The Reddest of Red Herrings

John Dewey — Mon, 17 Apr 2006 11:48:38 -0000

quadropole,

Don't you think most U.S. workers are doing higher wage, higher skilled jobs? We're basically at full employment. Immigrants can't be displacing many U.S. workers. But most of those immigrants are doing jobs that must get done. So if the illegal immigrants suddenly vanished, higher skilled workers would have to do lower skill work.