The Logic of Loosening Up a Bit

Okay, this is an odd place. Down on the corner there’s a small mall, where Schwab’s Drug Store used to stand, where Lana Turner wasn’t really discovered. But something else did happen there. In early 1939 Harold Arlen slowed his car there one evening, because suddenly he was inspired, and he pulled over and wrote out that song Over the Rainbow, right there in the light of the neon sign – or so he said. The guys down at MGM in Culver City must have liked it. They did put it in their new movie. But you can’t stop there now – the signs say so. The world does change.

And just across the street is the original Hyde Lounge – the one that’s a private club you cannot get into. Only the hot young stars are on the list. A number of years ago Paris Hilton got in a fistfight with Lindsay Lohan in the parking lot out back, and the TMZ crew is there most nights, to see what will happen next. This is the Sunset Strip after all. But that’s next door to the cleaners where you drop off your shirts each Saturday morning – they share a common wall. And the young guy at the counter is cool – he grew up in Istanbul, but he’s Armenian, and he likes punk and rap, and he sometimes wears a Che Guevara beret with the little star. It’s complicated. But then everyone’s gardeners are Mexican, unless you’re really rich, in which case your gardener is Japanese. And down the hill everyone is Russian – except they’re not. They’re Ukrainian and get mad if you confuse them with those Russian fools. But also down the hill, where Laurel meets Santa Monica Boulevard, is the place with relatively cheap gas – across the street from Voyeur, the soft-porn club where the Young Republicans got in trouble a few years ago, and next door to the Lee Strasberg acting school, with its Marilyn Monroe Theater, as she used to study with those folks. And that gas station, with coffee and snacks, is run by a family of pleasant Pakistanis, chattering away on their cell phones as they take your cash. That’s a strange language, which led, a few years ago, to a skinny young white fellow – a displaced redneck no doubt, with his giant pick-up truck with the Confederate flags and all – screaming at the woman at the counter to speak English, damn it! This is America! He’d had just about enough of this, and if he heard one more word of even Spanish, he was going to beat the crap out of someone.

He stormed out. The woman at the counter looked blank – she’d heard it all before. The rest of us shrugged. It’s complicated out here.

But then it’s complicated all across America. Ask Mitt Romney. Obama messed him up, deciding to end the process of deporting young illegal immigrants who were brought here as little kids and have since been good citizens, even if they’re not citizens. The right is fuming, and Romney is kind of trapped between his base and needing at least some of the Hispanic voters to pull the lever for him in November. So he’s saying nothing about that. It’s complicated. There are all these odd foreigners, who are really Americans and have been for generations, and odd foreigners who will be Americans soon, because they want to be – and now all these kids – brought here when they were very young and were raised as Americans and know no other life – kids who will now be permitted to stay. Where will it end? It drives the right crazy, and drives the old white folks in Arizona even crazier. Many seethe with resentment, while these folks just do their work and pay taxes and take care of their families, helping to keep the country running. And some are very good at what they do. We could use more of them – or we should keep them out. Romney doesn’t seem to know which it is – or he doesn’t know what to say. He’s screwed either way. Either way he’ll lose votes. So it’s probably best to saying nothing. Luckily he’s good at that.

Tim Fernholz in this Reuters item captures some of the dilemma in all this:

If you’ve watched the NBA playoffs, you’ve seen the Oklahoma City Thunders’ rangy Swiss guard, Thabo Sefolosha, and his courtmate, human basketball swatter, and Spanish national, Serge Ibaka. To get to the finals, Sefolosha and Ibaka beat Tony Parker and Manu Ginobli, two international anchors for the very American San Antonio Spurs. In the finals, Sefolosha and Ibaka are facing off against Ronny Turiaf, the Miami Heat’s erstwhile benchwarmer, who hails from France, to see who gets to take the NBA Finals trophy away from German forward Dirk Nowitzki, the MVP of last year’s championship.

This seems like common sense – the best in their field want to come ply their trade in America, so why wouldn’t we let them? The increased competition has improved revenue for teams and created a better product for fans. But other sectors of the economy can’t follow the example of professional sport leagues. The government won’t let them.

The NBA is not alone in investing in importing the best human capital from around the world to maintain its edge. The Stanley Cup-winning Los Angeles Kings were powered by the goal scoring of Yugoslavian center Anze Kopitar; Ichiro’s arrival in Seattle to play for the Mariners was accompanied by a crush of Japanese advertising.

If coaches and fans alike can appreciate the benefits of an open labor market in sports, why can’t we take that lesson and apply it to far more important sectors of our economy.

And Fernholz has Silicon Valley in mind:

The Bay Area’s tech sector is the NBA of global technology. It’s not that you can’t start a great tech company anywhere with an Internet connection and some smarts, or that you can’t play basketball anywhere with a hoop. It’s that when you want to have access to the most resources, the biggest arena, the most attention, the most highly talented teammates and competitors, and, above all, the most money, you have to go to the Big Show.

But Silicon Valley doesn’t have the same international labor mobility as the sports leagues. To import the talent it needs – people with advanced degrees in computer science and engineering – it relies on a visa category for highly skilled workers.

That would be the H-1B Visa – we admit only 65,000 of these workers each year, and that’s in all industries. Fernholz notes we have a workforce of over one hundred fifty million people, so that’s next to nothing at all, and this isn’t working well:

With demand for skilled workers high, the cap is often reached within weeks; in 2008, it took a single day. Last week, visa applicants hit the cap – not for this year, but for the year after. Any company hoping to hire a skilled foreign worker now has to wait until 2014.

This is nuts:

It’s not like Silicon Valley doesn’t want new talent. They’re desperate for it: Peter Thiel, the PayPal co-founder and venture capitalist, has proposed building a floating city in international waters off San Francisco to bring foreign workers closer to the tech Mecca.

Many other sectors are hurting for people with advanced degrees in chemistry, biology, math and engineering; America’s education system just isn’t producing enough of them, a bigger problem for another day. For now, getting the most talented people into the most important sectors of the U.S. economy seems far more important than getting the most talented players into U.S. uniforms – especially considering that immigrants play a major role in founding and running the top venture-capital-backed firms in the tech sector. You don’t have to look further than Google’s Sergei Brin (Russia) or SpaceX’s Elon Musk (South Africa).

The details of that proposed floating city are fascinating – and Peter Thiel is rounding up backers. It would be a place for smart-as-whip talented folks to start companies, to make America amazing, and for them to achieve the American Dream – from offshore. America’s education system doesn’t produce enough of such folks – and additionally, the hot-stuff foreigners who get their degrees at our universities are then told to get the hell out, and don’t come back. Fernholz points to this careful analysis – tossing out those graduates cost our economy fourteen billion dollars or so between 2003 and 2007, which is far beyond counterproductive.

But wait! There’s more:

There are more economic benefits to bringing and keeping highly skilled workers in the United States. Jobs are one of them: A recent study by the American Enterprise Institute found that every 100 H1-B visas issued resulted in 183 jobs created for U.S. natives. More competition among educated workers is still good for less educated Americans; economist Enrico Moretti finds that people with a high school education see their incomes increase 7 percent for every 10 percent increase in their city’s population of college educated workers.

Just ask NBA fans what they think of letting players like Ibaka and Sefolosha do their work in the United States instead of Spain or France. They’ll tell you it’s a slam dunk.

But things don’t work that way – except in sports – and Matthew Yglesias sees that:

While the administration’s decision to suspend deportations of certain young illegal immigrants is a huge deal for the people directly impacted, his order affects a very small number of people. It is more a political gesture than a game-changing economic policy, which is too bad, because broader immigration reform – aimed explicitly at allowing more people to come here voluntarily and work, rather than at “securing the border” – remains one of the best things we can do to bolster economic growth in both the short and long terms.

But he is not impressed with Fernholz, and others he cites, because this is more than an H-1B issue with high-skilled Silicon Valley types:

While the case for high-skilled immigrants is strong, and the desire to take the focus off the culturally freighted topic of migration from Latin America politically understandable, an excessive focus on the idea of importing super-geniuses and talented engineers tends to obscure the fact that essentially any able-bodied, hard-working migrant is good for the American economy.

It’s not just the doctors and the Google co-founders. Those who mop floors and cook tacos also serve.

The idea here is that there are all sorts of “factors of production” in any economy, and they’re all complementary, even unskilled labor:

This can be most clearly seen in agriculture. Some land in America is farmed, most is not. Much of the land is only profitable to cultivate at a wage level that few American workers find appealing. When we cut off the flow of migrant farm workers, that doesn’t magically create high-paying jobs for Americans; it leads in the short term to crops rotting in the fields and in the long term to less land being cultivated.

The land and the unskilled labor, in other words, are complements. More unskilled labor would mean more cultivated land. That would mean more agricultural output and more jobs for people who manufacture farm equipment, build food-processing facilities, or provide accounting or legal services to agricultural firms.

America has historically benefitted from the immigration of the occasional genius scientist, but our history is completely impossible to imagine without the droves of ordinary folks who came here to till the land. Attempting to hoard those natural resources for a small group of native-born citizens would have made the country poorer, not richer, by making it impossible to actually use them effectively.

That’s simple logic, unless, to avoid having those awful Mexicans around, you’d rather have lettuce at six hundred dollars a head, when you can get it, which you wouldn’t be able to do anyway, as no one would be growing it. And Yglesias notes that this goes beyond farming:

For people to reach their full potential, they often need plenty of other people around. An increase in the supply of busboys and dishwashers, for example, creates more opportunities for aspiring chefs and sommeliers as well as for the manufacture and installation of kitchen equipment. Things that don’t even count as skills in a community with no immigrants – the ability to speak English fluently, for example – become at least a little valuable when migrants arrive, creating positions for bartenders and hostesses who need skills immigrants lack.

Meanwhile, in an economy where most people are employed providing services to other people, the availability of extra workers makes it easier for people to specialize and work productively.

Then Yglesias tackles the notion that there’s some sort of fixed pool of jobs that we all compete for, and unless we close the borders and toss out these low-life losers, they’ll grab jobs from good hardworking Americans:

It’s obvious that in a world without immigrant housecleaners, we wouldn’t have an equal number of much-higher-paid native-born maids. What we’d have is less housecleaning being done on a market basis and more being done as unpaid work at home. For many middle-class families that would be pure waste. Time spent cleaning the toilet that could be spent on higher-value labor, on leisure, or on quality time with friends and family.

So folks should get over their resentment and fears and look at this pragmatically, and also consider secondary matters:

Talking about the broad social benefits of low-paid domestic labor makes people uncomfortable, but it’s crucial to recognize that by far the largest benefits of immigration accrue to the immigrants themselves, who earn vastly higher wages by relocating. These benefits are far larger than any foreign aid program, but they’re not just charity. In an interconnected world, when foreign-born people increase their earnings, they increase their demand for American-made products. If Haiti’s population experienced a five-fold increase in incomes, we’d sell more cars and airplanes to Haitians and more Haitian tourists would visit our shores. When Haitians experience a five-fold increase in income by physically relocating to the United States, the exact same dynamic takes hold, except with an even wider range of services that native-born Americans can now sell to the newly enriched migrants.

And then there are all those now law-abiding folks who already came here, but without permission. Maybe there’s not the problem that those on the right see:

Granting temporary work permits to a young sub-set of this population is a good start. But kicking out the many people who are ineligible for Obama’s program either because they were over the age of 17 when they came or because they’re over the age of 30 now does the overall economy no good. By contrast, creating a path to legal status and legitimate work bolsters immigrants’ earning power and contributes more in terms of tax dollars, production, and consumption. Meanwhile border-control and immigration-enforcement resources could be better spent on targeting actual criminals rather than job-seekers.

The politics are fraught, but bigger, bolder immigration reform aimed at leveraging America’s continued desirability as a destination ought to be a major part of our strategy for economic growth.

But of course that’s not going to happen. Yglesias is just being too logical. That doesn’t play well in an election year.

And now Romney is off to Orlando to speak to the National Association of Latino Elected and Appointed Officials – he speaks Thursday and Obama speaks to the group Friday. And the Los Angeles Times’ Paul West notes some of Romney’s difficulties:

His tough rhetoric on immigration during the GOP primaries – combined with a lingering reputation for reversing course for political benefit – has left Romney with little room to maneuver.

Mark Krikorian, executive director of the Center for Immigration Studies, said that Romney was “trying to walk a tightrope and doesn’t want to alienate Hispanic voters.”

But “there’s only so far he can move from his earlier immigration positions without completely forfeiting his limited credibility as a conservative. In fact, immigration was one of the only issues where he stood out from the other people in the primary field. It was his Good Housekeeping seal of approval as a conservative,” said Krikorian, whose Washington-based group advocates for increased immigration enforcement.

Steve Deace, a nationally syndicated talk-radio host, maintains that Romney’s “refusal to give a straight answer” when asked whether he would undo Obama’s policy threatens to diminish the enthusiasm of many Republican voters.

“Anger is beginning toward Mitt Romney on the lack of leadership he has shown on the issue,” Deace said. “Conservatives are beginning to think that the people who run both parties are really the same.”

Romney clearly needs Yglesias on his team. Yglesias could coach Romney on how to say, look, I’m a highly successful businessman and I know exactly how the economy runs – all the factors – and we need you folks, and my party is wrong, economically and logically, and, if you wish, morally.

Sure, right – that’s not going to happen:

Romney has acknowledged that his party faces what he described as electoral “doom” if it does not win over more Latinos, the nation’s largest minority group.

His aides have given few hints that he will announce major initiatives when he appears before NALEO, the influential Latino organization of Democratic and Republican officials. Last month, in a highly anticipated appearance before a Latino business gathering, the former governor skirted the immigration issue and largely avoided making a direct appeal for Latino votes.

Even if Yglesias, and all sorts of economists, explain all the complementary factors of production in any large economy, logic isn’t an option here, and disaster looms:

An opinion survey found that Obama had improved his standing with Latinos in five battleground states. The Latino Decisions poll showed that his new policy had erased an earlier “enthusiasm deficit” for Obama among Latino voters that stemmed from the large number of deportations during his presidency.

Separately, a national Bloomberg poll found that a majority of likely voters approved of Obama’s immigration policy, with a key swing group – independents – agreeing with it by a margin of more than 2 to 1.

Something is up here. Yes, it’s complicated out here in Los Angeles, particularly here in Hollywood, and particularly here on this end of the Sunset Strip – the Armenian kid from Istanbul at the cleaners, the pleasant Pakistanis down the hill, and when a workman shows up to fix something here in the building he might be speaking Spanish, or Ukrainian, or something else – and that computer whiz who fixes your laptop might lapse into Vietnamese. But we need them all. It’s only logical.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
This entry was posted in Economic Theory, Illegal Immigration, Immigration Policy, Life in Hollywood, Mitt Romney and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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