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Believe it or not, this explanation of the dynamics is relevant to Econ 101, in that it employs a number of fallacies directly addressed in a first year intro c
by rz2k 14y ago
Believe it or not, this explanation of the dynamics is relevant to Econ 101, in that it employs a number of fallacies directly addressed in a first year intro class.
Let's start with whether non-engineers should subsidize the salaries of engineers through implementing protectionist policies at their own expense in terms of more expensive products? This isn't an obvious answer. Presumably, protecting the salaries of engineers through strict immigration policies also protects the salaries of doctors, factory workers, accountants, taxi drivers, bankers, lawyers, teachers, agricultural field workers. In other words, doesn't it protect the salaries of everyone, across the board?
Does the cost of excluding foreign trained engineers end up being paid back to everyone when their salaries get subsidized as well?
What do people do with their salaries? They buy services and stuff, and the vast majority of the costs can be traced ultimately to expenditures on labor. In fact, it is counter intuitive, but greater capital efficiency in terms of automation and software for example (developed by engineers) makes the non-labor inputs relatively cheaper in comparison to the labor inputs, and explains why real income and measures of quality of life have surged over the past 50 and 100 years.
How do we know that it isn't just an act of faith to believe greater competition for wages doesn't hurt people more in terms of lower salaries than it helps them in terms of decreased costs? That's a comparatively simple answer—people are only hired if the opportunity cost of not hiring them is greater than the cost of their entire compensation package. In other words, if you make $100k in your job, someone who managed not to go out of business is under the impression that not having you would make them lose out on more than $100k of revenue.
Economic growth comes from a greater number of transactions, where the surplus value from what the work is worth is greater than what the effort is worth. Growth does not come from constraints on supply. The immigrant who is paid $80k for work worth $120k takes out $80k, but contributes $120k of work. The original worker, took out $100k, and contributed the same $120k. The aggregate economy is $20k richer, and it is spread out to everyone, because consumption and production balance out.
- deleted 14y ago[deleted]
- basiceconomics 14y agoHow about we look at some actual numbers: Harvard economist George Borjas, himself a refugee from Cuba in his youth, explained the basic mechanics of this in his 1999 book Heaven's Door: Immigration Policy and the American Economy (Princeton University Press, Princeton). Overall, immigrants, including illegal aliens, modestly increase the Gross Domestic Product [GDP], by several hundred billion dollars per year (against a GDP of about 15,000 billion dollars), but most of the increased output goes to the immigrants themselves. However, the economic presence of all those immigrants does boost the aggregate income of the native-born population by a few tens of billion dollars—relatively a very small amount if we estimate, consistently, that the natives' aggregate income would be 14,700 billion dollars if the immigrants weren't here at all. However again, that small immigration-driven boost in natives' aggregate income encompasses redistribution among us natives from labor to capital amounting to something like $200 billion per year, because the presence of immigrants lowers wages for labor. http://www.vdare.com/posts/immigration-and-inequality-1 http://www.vdare.com/posts/immigration-and-inequality-1
- rayiner 14y agoThe scope of my argument is narrower than you're making it out to be. Letting in immigrants with tech skills would definitely hurt engineering salaries. Would it help the average person who doesn't have a VC fund? Possibly, but deciding that point involves a lot more assumptions about the nature of things.
- rz2k 14y agoIf all occupations cooperate and allow greater competition in their respective fields, then the net wealth effects on the economy are positive. If one occupation blocks competition, its members may benefit relative to other occupations, but there is no reason to assume that only one occupation will be able to defect, and encourage a policy decision that benefits its members. One of the ways to counter the inevitability of actors making rational decisions that end up making everyone worse off is through the setting of effective public policy with an eye to aggregate benefits. I think it is very safe to assume that the point of funding engineering education was that engineers' work is valuable to society, not that people who can make it through intrinsically merit certain salaries. If acquisition of talent through immigration is another channel, so be it. The idea of education subsidies is also interesting to consider. On one hand more people are able to choose the career, so the skills are less scarce, and salaries are lower. On the other hand the increase growth in the community of trained people allows for greater sophistication, cooperation and specialization, which leads to more valuable output, and higher salaries.
- btilly 14y agoLetting in immigrants with tech skills would definitely hurt engineering salaries. Not necessarily. Letting in immigrants with tech skills to compete with software developers should reduce salaries. But letting in immigrants with tech skills to found companies should drive up demand for software developers.
- ontheinternets 14y agoComparative statics are not a good way to analyze immigration policy!
- pfedor 14y ago