There’s Nothing Wrong with “Cheap Labor”

Why artificially high wages are a form of parasitism

Opponents of trade and immigration will often complain that foreigners provide “cheap labor.” They claim that Americans would do the same jobs as immigrants and workers in countries we trade with, but companies would just have to pay them more. Many rightists believe such a position is compatible with a belief in meritocracy.

But “cheap” is not always bad. Should you buy a cheap car or an expensive one? Get a cheap or expensive haircut? Obviously it depends on your financial situation and what your preferences are. Some people really care about driving a nice car, while others don’t. Some can afford to buy a Mercedes and others can’t.

When it comes to business, is a company that pays 100 people $10K a year better or worse for society than one that pays 10 people $100K a year? This has no answer!

As with other goods and services, there is no basis for preferring “cheap” or “expensive” as a general rule. There is only labor that employers do or don’t want to hire depending on the needs of households or businesses and the customers they serve.

And the market’s preference is all that matters from the perspective of meritocracy. Senator Tom Cotton said in a 2017 speech that “if the wage is decent and the employer obeys the law, Americans will do any job.” Sure, if the pay is high enough, you can find someone to do anything. But this is a completely meaningless statement, and quotes like this show how stupid politicians can get when they’re playing to nativist prejudices.

Let’s say that I could be the most productive grocery store cashier in the world, but I would only do that job if you paid me $5 million a year. No business owner would hire me at that price, which means that the typical minimum wage employee is a better fit for the position.

Likewise, there is no rational basis to get upset about employers hiring immigrants who earn lower wages. Imagine an employee A who demands $100K a year but delivers a value of $120K to his employer, and an employee B who demands $50K a year and delivers $90K in value. If A is an American and B is an immigrant, a nativist would say A is the superior employee. But he’s not! He only delivers $20K of net value, compared to $40K for the immigrant.

This is why I have no patience for nativists who say “immigrants are not better workers, they’re just cheaper.” The test is who the market wants to hire. Even if they’re paid less, they must be providing more net value if employers prefer them. Maybe you think employers are making bad decisions, but if I thought I could centrally plan the labor market and I had special insight into who should be hired for which jobs and at what wages, I would be a socialist. There is no place in the capitalist worldview for second-guessing business decisions of this kind from the perspective of the level of wages or who is a preferable employee, though one can of course always have other grounds for supporting regulations. And no, pointing out the fact that H1B recipients are tied to their employers doesn’t help you. That’s at most an injustice against the immigrant (though not nearly as large an injustice as preventing them from coming into the country). From the perspective of American self-interest, that makes the deal we’re getting even better.

Businesses becoming more efficient is not only good for the owners. When firms make more money, they either invest or spend it. In the scenario above, the extra $20K in profits goes somewhere else in the American economy, improving living standards for others. Employee A may take a pay cut and work somewhere else, but if he’s the citizen of a country that believes in trade, immigration, and markets, then he’s going to be fine because he lives in a society that is richer in the aggregate.

The picture ChatGPT gave me to go with this article. Falls into the category of “such slop it’s actually good.”

A person who, out of perceived self-interest, advocates for laws creating higher wages than employers would be willing to pay if they were free to choose otherwise is a parasite. And someone who does the same on behalf of others is fighting for a world with more parasitism, and less freedom and wealth. It’s strange that there is a stigma on direct welfare, but not on political activity centered around interfering with markets to favor some workers over others. At least with welfare, it is clear what is going on.

People sometimes criticize libertarians for being obsessed with “line go up.” Yes, I do care that people have a higher standard of living. In fact, populists also talk about living standards; they just prefer to use terms like “affordability” over something more mathematically precise like GDP, because they want to signal that they’re regular guys instead of nerds.

But my opposition to the artificial boosting of wages – and the deadweight loss it entails – is more than a matter of concern with economic efficiency. In my heart, I have a deep hatred for all forms of parasitism. If I said that Americans should be banned from reading foreign Substacks so my earnings could go up, I would be a disgusting person. I wouldn’t be able to live with myself, and whatever monetary advantage I gained from such a policy being adopted would be outweighed by the loss in personal integrity. It’s no different for a landscaper or a factory worker.

I agree with conservatives who talk about the importance of the “dignity of work.” But whatever else that means, it has to involve not being a burden on your fellow citizens. Defeating parasitism disguised as virtue means fighting labor unions, economic nationalists, and all those who seek to make us poorer and create a morally inferior country. Values should matter. After all, we are a nation, not just an economy.

Happy Labor Day.

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