International Trade in Labor Versus Commodities: U.S.‐Mexican Agriculture

Abstract

Illegal immigration and large numbers of illegal immigrants in the United States have become a major economic and political issue since the mid-1970s (U.S. Congress 1981). More generally, significant illegal immigration has been concentrated in the last thirty-five years of U.S. history. If the United States had continued a policy of unrestricted immigration, as it did essentially up to 1921, there would be no illegal alien issue. The positive excess demand for rights to immigrate to the U.S. is a result of restrictive immigration and trade policies, rapid Mexican population growth, and long-term U.S. economic growth that has caused U.S. real wage rates and real income to rise above many other countries. The result is large real wage rate differences between the United States and some other countries (e.g., Mexico). Given the barriers to trade and capital flows, workers have found it rewarding to arbitrage these international labor markets by immigrating temporarily or permanently. Currently, real wage differences are large between the United States and Mexico, and given the common border, illegal immigration cannot be prevented (Hansen 1978). A conflict exists between efforts of governments to enforce immigration laws and incentives for individuals to evade regulation. Immigration laws impose costs on potential immigrants (and their employers), but these are also the incentive for evasion. Perceptive individuals reallocate themselves internationally in response to changes in economic conditions (Schultz 1975). In turn, governments engage in law enforcement to discourage illegal immigration and thereby to alter behavior as intended by laws. Thus, for a given economic environment and set of laws, an optimal rate of law e forcement or of illegal immigration exists (Rodney Smith). An analysis of immigration that ignores the prospect of illegal behavior will incorrectly predict the effects of changes in the statutory provisions of immigration laws. A significant share of the labor force in some other countries is comprised of aliens. Northern European countries established legalized guest-worker programs during the 1960s to facilitate economic growth. Under these programs, workers, mainly from souther Europe (Italy, Spain, Portugal, Greece, Yugoslavia) and Africa, cross national boundaries to obtain employment. By 1973 at least 8 million foreign workers were legally employed i northern Europe (Hansen 1978). The largest numbers were employed in Germany and France, although Switzerland had the largest share of its work force comprised of these workers (in excess of 30% during some years). Also, Iran and Saudi Arabia have employed significant numbers of alien workers. The illegal alien and immigration issues are broader than human resource or labor economics from which they have been traditionally viewed (Briggs 1976, Corwin and Fogel, Chiswick, U.S. Congress 1980). They are part of international trade in commodities and factors and of trade and factor mobility impediments. Furthermore, the issue of obtaining seasonal farm workers is part of a broader issue of obtaining temporary labor. The approach of this paper will be to deemphasize a range of issues dealing with the characteristics of markets for seasonal labor (see Huffman; Emerson) and labor market effects near the U.S.-Mexican border (Briggs 1975; Smith and Newman; Hansen; Cross and Sandos). The author is a professor of economics, Iowa State University. Paper No. J-10809 of the Iowa Agricultural and Home Economics Experiment Station, Project 2590. Helpful suggestions were obtained from T. W. Schultz, Maury Bredahl, Larry Morgan, Robert Coltrane, Robert Emerson, Robert Weaver, and James Paulsen. Twelve supporting tables are available from the author on request.