Missouri's 7th District, U.S. House of Representatives




Congressional Issues 2010
Immigration in a Division of Labor Economy

In the case of a continuous increase in the supply of labor, it could be argued that just as the first group of additional workers brings about an increase in the supply of capital goods, a second group arrives on the scene, so that the ratio of capital goods to labor does not increase and may even fall further. In his treatise on Capitalism, Prof. George Reisman explains why even this, more sophisticated version of the reduced-capital-per-worker argument against immigration and population growth, cannot stand.

This is because if the productivity of labor were threatened by a relative excess of labor and a relative deficiency of capital goods, the effect would be a drop in the demand for labor, and thus in the wage earners’ demand for consumers’ goods, and a rise in the demand for capital goods. The effect of this, in turn, would be a higher relative production of capital goods and a lower relative production of consumers’ goods. The larger number of workers of each year would find sufficient additional capital goods available because they would be produced by a larger proportion of the labor and capital goods of each year, as well as by a growing volume of labor and capital goods from year to year.

And, as time went on, the positive effects of the unlocking of more human talent would occur. The effect of this would be an increase in the output of capital goods (and consumers’ goods) that can be obtained from any given quantity of labor working in conjunction with any given quantity of capital goods. Even if it occurred on a strictly delimited, once-and-for-all basis, the effect of this in turn would be a more rapid rate of increase in the production both of capital goods and consumers’ goods, with each year’s larger output of capital goods serving as the base for the following year’s further increase in the production both of capital goods and of consumers’ goods.[117]

Thus, a capitalist economy with the freedom of immigration turns out in the long run to have a more rapid rate of capital accumulation than one without it. For it has both a larger relative production of capital goods and uses capital goods more efficiently in the further production of capital goods than one without the freedom of immigration. The effect of this more rapid rate of capital accumulation is a correspondingly faster rate of economic progress, which soon makes up for the reduction in the proportion of output going to the consumption of wage earners.

If one wants to form a more precise, quantitative estimate of the relationships involved, let us assume that free immigration, together with any increase in population coming from those already present, results in an overall rate of population growth of 3 percent per year. This is a rate last seen in the United States in colonial times. It would be sufficient to double the population every twenty-five years.

In order for a 3 percent larger number of workers each year to be as well equipped as the workers would be without population increase, something on the order perhaps of an additional 9 to 12 percent of national income—more accurately, current net output—would need to be devoted to saving and capital accumulation. This figure is generous. I arrive at it on the basis of the fact that in the nineteenth century and the first few decades of the twentieth century, the period in which the American economy was relatively free, the long-term historical ratio of reproducible capital to national income was about three or four to one.[118] Thus, a 3 percent increase in capital to accompany the 3 percent increase in the number of workers and so maintain a three or four to one ratio of capital to output per worker, would repre sent no more than something on the order of 9 to 12 percent of national income in conditions in which the degree of capital intensiveness was substantially higher than it is today.

Having to obtain this 9 to 12 percent of national income from the share of national income previously going to wage earners, would represent something on the order of a one-time reduction in wages of about 13 to 17 percent, if, as is typical, wages initially constitute about 70 percent of national income. This magnitude of reduction in wages, however, greatly overstates the magnitude that would actually follow the establishment of free immigration. This is because it is predicated on going from zero population increase to an annual rate of 3 percent increase. In reality, the effect would be more likely to be to go from a 1 1 .2 percent annual increase without freedom of immigration to perhaps a 3 percent annual increase with it. The additional capital required would thus actually equal only 4 1 .2 to 6 percent of national income, rather than 9 to 12 percent; and the one-time wage reduction would be on the order of 6 1 .2 to 8 1 .2 percent rather than 13 to 17 percent.

If the freedom of immigration were introduced following the establishment of greater economic freedom in other respects, this short-run negative effect would probably go largely unperceived, since it would be more than offset by other, positive developments. But, in any case, if the effect of the freedom of immigration and the pool of talent it unlocks is to enable the productivity of labor to increase by just an additional 1 percent a year, then, as soon as this happens, within seven to nine years the initial loss is made good and thereafter the process results only in gains. * * *

[117] For a discussion of the causes of capital accumulation and how it is promoted by anything which increases the efficiency of production, see below, pp. 634–636.

[118] Cf. Income and Wealth of the United States, p. 82. (Raymond Goldsmith indicates a significantly lower range. See ibid., p. 297.) In contrast with the previous estimates cited of the ratio of capital to national income in that period, which estimates included the value of land in capital, capital is here presented simply as the value of structures and producers’ equipment, exclusive even of the value of business inventories. However, it is doubtful that the inclusion of business inventories would make the capital-output ratio significantly larger.

A third argument raised against the freedom of immigration is that its effect would be to reduce the wages of unskilled workers relative to those of skilled workers. This result would occur to the extent that such factors as their lack of knowledge of the language, and the possibly lower educational standards of the poorer countries from which they came, led the immigrants to enter the economic system more heavily at the unskilled end of the labor market than at the skilled end. This argument is answered on the next page:

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Gary North's essay on Darwin, Malthus, and a Biblical world-view

In his book The Myth of Over-Population, R.J. Rushdoony shows that the symptoms of "overpopulation" are actually symptoms of government intervention. Darwinian and Malthusian assumptions govern the modern State, and both the Republican and Democrat Parties.

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The Myth of Over-Population

Recent Blog Posts

In the Next Two Years, Congress should:
  • expand, or at least maintain, current legal immigration quotas;
  • increase permanently the number of H-1B visas and deregulate employment-based immigration to facilitate the entry of skilled immigrants;
  • remove the new one-year time limit on filing for political asylum and reform the "expedited removal" laws;
  • repeal employer sanctions;
  • stop the move toward a computerized national identification system and the use of government-issued documents, such as birth certificates and Social Security cards, as de facto national ID cards; and
  • reduce restrictions on the movement of workers within the North American Free Trade Agreement area.
By the end of the decade, Congress should:
  • Abolish all anti-immigration laws.

As soon as possible, America should:

  • Create a vast network of voluntary social service agencies to meet all immigrants at the borders or piers and ensure their literacy and familiarity with American values.
  • Commit to on-going transmission of American values to immigrants in all areas of life. Read more about this.