A Rendezvous with Reality: Are immigrants needed to fill our jobs and make us grow?

'Reality," as Oscar Wilde should have said, "is the name we give to our mistakes." It is at any rate the name that politicians, journalists, and intellectuals give to their mistakes. In the last 20 years we have been repeatedly assured by all the wise men that "reality" required us to raise taxes in order to balance the budget; somehow "reality" never asked us to cut spending for the same purpose.

Not that such "reality" is the argument solely of liberals and statists. On some issues -- notably drugs and illegal immigration -- conservatives and libertarians are equally quick to resort to it. To justify drug legalization, for instance, libertarians say that no amount of official interdiction will halt the drug trade -- in other words, the "reality" is that the war on drugs is lost.

When we unpack this argument, however, we find that the concept of "reality" is a device for making certain choices without acknowledging them. It is very possible that the war on drugs could be won if draconian penalties were imposed equally on all offenders; but the more penalties we impose, the more resistance we will meet. Newt Gingrich attracted more than his usual level of controversy a few years ago when he advanced the possibility of executing drug kingpins -- but he was merely pointing to the bare minimum that would be needed to fight the drug war successfully. If he had advocated executing users, he would have caused a conflagration.

In other words, the war on drugs runs up against the general social desire, at least among political elites and criminologists, for a non- punitive and therapeutic approach to drug abuse. Sections of the public favor a stronger approach -- and their feelings have to be at least placated, especially at election time. So the unstated compromise is that the U.S. will fight the war on drugs but halfheartedly.

"Reality," then, imposes nothing on us. What we have here is a choice between legalization and severity. My own judgment would come down against imprisoning someone for life in order to deter him from self- destructive behavior -- and therefore I lean toward a cautious and prudent form of legalization. But I can understand those who take the view that such a penalty is justified because it might deter thousands of others from starting out on a suicidal path. But if there is any real "reality" here, it is the stalemate of a phony war on drugs. If nothing else, that should rob the notion of "reality" of any undeserved prestige.

Thus equipped with the proper skepticism, let us now examine the "reality" of illegal immigration. The typical libertarian view of illegal immigration is that we are essentially powerless before its titanic force, which overwhelms mere man-made borders as might a tidal wave. Daniel Griswold of the Cato Institute puts the argument clearly and narrowly: "America's immigration laws are colliding with economic reality, and reality is winning. Migration from Mexico is driven by a fundamental mismatch between a rising demand for low-skilled labor in the U.S. and a shrinking domestic supply of workers willing to fill those jobs." (For the broader argument that illegal immigration is necessary for economic growth, see the Wall Street Journal editorial page, passim.) In short, there are millions of illegal immigrants here, because we need their labor; and there is nothing we can do about it.

Just how real are these realities? Take the big picture first. Both theory and practice combine to disprove the argument that immigration (legal or illegal) is necessary for higher rates of growth. For many years now, the argument we learned in Economics 101 that growth requires an increase in either capital or labor (or both) has been shown to be false. Economists now recognize that the single most important factor in stimulating economic growth is rearranging the existing factors of production in new and more productive patterns -- in a word, innovation. That was first glimpsed over 100 years ago in Britain by the anti-Fabian critic W. H. Mallock, who called this factor "ability." Since the 1960s, following the work of Simon Kuznets and P. T. Bauer, it has been economic orthodoxy.

This theory is confirmed by the experience of Japan, which for almost 40 years had the highest rates of growth in the industrialized world but no immigration whatsoever. (Japan's current economic woes are the result of mistaken financial policies, and unrelated either to immigration or to the labor supply generally.)

The most sustained academic examination of the economic effects of immigration -- namely, that carried out by the National Academy of Sciences in 1997 -- concluded that immigration added between $1 and $10 billion a year to the income of native-born Americans, in a $7 trillion economy. And that estimate included the impact of immigration both illegal and legal.

In other words, illegal immigration is not the irresistible consequence of the needs of the U.S. economy. America would grow without illegal immigration. But is there an ineluctable demand for it, in particular industries? Surely there are jobs that "Americans will not do"?

Perhaps, but that is a "reality" that needs very careful unpacking. To begin with, the jobs that Americans "will not do" -- agricultural work, gardening, etc. -- are in the majority of cases actually done by Americans. No occupation is monopolized by illegal workers. In addition, Americans would be prepared to take up even more such jobs if the wages available were higher. So a full and accurate statement of the economics of illegal immigration is that illegals take jobs that not enough Americans will do at the wages offered. American prosperity has, in effect, established a "floor" income below which most American workers will refuse a job offer, relying presumably on savings, the income of other family members, or some form of social payment. Illegal immigrants, being poorer and having lower expectations, fill the jobs below that "floor." Of course, one corollary is that they and their families tend to swell the costs of the public budget because their taxes are low but their call on public services substantial. Illegal immigration is a subsidy for employers for which the cost falls on the taxpayer.

Suppose, however, that illegal workers were not available to fill the gap. Employers would then have either to raise the level of wages or to introduce labor-saving machinery. As it happens we have some experience of the latter. In the 1960s, tomato growers opposed the ending of the Mexican guest-worker program on the grounds that it would threaten the survival of the tomato industry. As Mark Krikorian of the Center for Immigration Studies pointed out in testimony to Congress in 2000, when the program was discontinued despite these predictions, the tomato farmers mechanized their production -- with the result that production quadrupled and prices fell over the next 30 years. As to offering higher wages, that raises the question, Are there enough Americans to fill the jobs vacated by illegals? Well, the current INS estimate for illegal immigrants is 6 million (some of whom, of course, are unemployed wives, children, and other dependents). On the other side of the ledger there are more than 8 million unemployed Americans and almost 2 million Americans who have dropped out of the labor market or who are "discouraged" by the lack of jobs -- a total of at least 10 million potential employees.

The problem, then, can be solved -- for most companies that employ illegal workers. The rest of the companies would have the option, under NAFTA, of relocating to Mexico. So what creates the present "reality" is a political decision -- namely, the failure of the U.S. to enforce immigration laws. This gives potential illegal immigrants an incentive to sneak across the border, and marginally competitive American companies an incentive to hire them. Immigrants know that once they have made it to Los Angeles, they will be quite safe from deportation; and their new employers know that no legal sanctions will be imposed against their employment. Our "porous" borders are a direct result of that political failure -- and they will be made secure only when the U.S. government begins to enforce immigration law. That will necessarily be a sensitive and potentially disruptive matter -- involving perhaps a grace period in which companies can steadily reduce the proportion of their workforce accounted for by illegal employees -- but it should begin with the serious enforcement of deportation law.

After all, the U.S. has something else to consider. Our porous borders allow into the U.S. not only hard-working migrants but also resourceful terrorists. As long as the number of illegal immigrants remains so large, and the immigrant-smuggling networks exist unharried, they provide a kind of underground sea in which terrorists swim, as well as gardeners and nannies. That, too, is a reality.