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Contrary
to superficial thinking, a tightened labor pool that forces employers
to pay more for scarce labor does not necessarily hurt business nor the
economy. It can be a great stimulator of a country’s
creativity.
The economist Harry T. Oshima has helpfully described the
“virtuous circle” that occurs in an economy that is
far different from our own very loose labor market with surpluses of
workers.1
He has particularly studied the mid-
1910s and the mid-1920s when immigration was seriously restricted. He
notes that during that time, employers were forced to raise wages. That
induced the employers to press for major advances in mechanization.
The resulting new technological applications of gasoline and electric
machines made it possible to mechanize enough unskilled operations and
hand work to release many workers into more skilled jobs. Growth in
output per worker hour was phenomenal. That made it possible to raise
wages still further. Because of the increasing demand for skilled
workers, American parents realized they would need to spend more money
to help each child gain a better education. This contributed to lower
birth rates, and thus to slower labor-force growth, and thus to tighter
labor markets, and thus to higher wages, which pushed manufacturers to
push the skill levels of their workers up even further.
In this cycle of productivity and wage gains – each feeding
on the other – the United States became a middle-class
nation!
What we have had for three decades in this nation is the opposite of
that economic “virtuous circle;” we have had the
“vicious cycle.” The availability of larger and
larger numbers of foreign workers has led employers to substitute labor
for capital development and innovation.
A key example is the atrophy in our agricultural industry which relies
on incredibly low-wage labor instead of continuing its once global
leadership in innovation and technology.
And, of course, the rising incomes of American workers during a
“virtuous circle” economy drives consumer
purchasing and business success.
Excerpt taken from testimony
before the Subcommittee on Immigration, Border Security and Claims of
the Committee on the Judiciary, House of Representatives by Roy Beck,
executive director of the NumbersUSA Education & Research
Foundation on March 24, 2004. Click
here to read the entire testimony.
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