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Leave Immigration to Work Itself Out
[Opinion] Financial market philosophy the best solution to the problem
Thomas Johansmeyer (tomj)     Print Article 
Published 2008-02-06 06:32 (KST)   
The same people who argue for strict immigration controls want business to have a free hand in how they operate: Build a wall along the Mexico border, but repeal Sarbanes-Oxley. Don't regulate hedge funds. And so on.

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But if the "invisible hand" that guides financial markets works so well, why not let it control immigration?

Leave the market to take care of itself, and the immigration problem will be solved.

What Is the Immigration Problem?

Right now, we have an immigration "problem." Illegal immigrants reside in the United States, often working for substandard wages and in difficult conditions; they are not going away.

These residents don't receive the benefit of working in an enlightened community, and they don't contribute to it. Living off the books, so to speak, illegal immigrants can be mistreated by employers, yet at the same time, they consume social services without contributing to the tax revenues intended to support them.

The problem is not the drain on entitlement programs, nor is it the lack of contribution to tax revenues. Instead, the issue is of efficiency.

Easing the process of attaining legal citizenship and mainstreaming into American society would reduce the cost and disruption of illegal immigration while quickly attaining a balance around wages and worker treatment.

Essentially, the demand for labor will attract immigrants until that demand is satisfied. At this point, wages will have reached their peak, and continued immigration will drive wages down. Immigration and labor, like capital markets, operate efficiently.

Wall Street's Efficient Market Hypothesis

Financial markets live and die by the efficient market hypothesis. This law of public finance simply states that with information available equally to all participants in the market, securities will reach their appropriate prices quickly.

Think about a stock that trades at $10 a share. It announces that it had a great quarter. Even if only a few people are told of this news, the information reaches the market quickly. Those who learn of the news initially start to buy the stock. The information itself doesn't move the market, but the behavior does. Soon, the stock price reaches $12 a share. If the company's record quarter warrants a 20 percent gain, this is where the stock price will remain.

If information reaches the market quickly, the market itself will decide at what level demand stops. The market sets the tone, and the participants follow. Wages then will be squeezed, pinched by a decline in demand from the top and ultimately minimum wage at the bottom. Either full employment in the United States or a lack of financial upside by immigrating will slow the tide. The immigrant workforce, essentially, will reach room temperature.

The problem occurs when the open market is disrupted. Regulation slows the "invisible hand" of the markets, making it difficult for the market to ascertain the elasticity of prices. In the stock market, for example, high compliance costs erode profits, and investors will not see the real value of the company.

Regulation also disrupts the efficient immigration market; the labor force and demand for immigration will have trouble determining what the room temperature is, making future immigration inefficient and based on false premises.

Quite simply, there is an immigration problem because regulation is getting in the way.

But What About Security?

Of course, we can't just throw open the doors and let everyone through. While deregulation has its advantages, in contemporary society it is impossible. Every aspect of society -- from finance to immigration -- requires some sort of control. Front of mind since the end of 2001, of course, is security. The purpose of immigration control, at least for the past six years, has been to reduce the threat of terror.

While the risk of allowing a terrorist into the country must be respected, it should not preclude a liberal immigration policy that satisfies domestic demand for labor. A path to citizenship should exist, one that includes due diligence on the applicant's background and an opportunity to participate in mainstream society. The result would be an increase in immigration and workforce market efficiency without a reduction in security.

Let's face it, security is compromised already. We can't do much worse. Even if we maintain the security status quo, at least we can solve the problem of immigration efficiency.

The immigration problem is of our own creation. Through the restriction of movement across our borders, we create unnatural demand for labor and restrict the supply. Yet the demand eventually is satisfied through the illegal labor market, creating substantial employer and employee risk.

Illegal immigrants and their employers put their livelihoods on the line every day because of strict regulations that create more problems than they solve. Liberalizing immigration will stabilize the workforce and immigration trends without adding a security risk.
©2008 OhmyNews
Other articles by reporter Thomas Johansmeyer

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