The Debate

At Tablet Michael Lind recounts a debate on immigration between two formidable, Nobel award-winning economists: Paul Krugman in 2006 and Paul Krugman in 2024. Here’s the conclusion:

In fact, nothing has changed in the field of labor economics over the last two decades to refute the views that Paul Krugman held about immigration in 2006. What has changed is the class composition of America’s two major parties. In 2006, Sens. Barack Obama and Hillary Clinton voted to erect massive fences along the U.S.-Mexican border. A decade earlier, in 1996, Democratic President Bill Clinton signed the Illegal Immigration Reform and Immigrant Responsibility Act, which expanded the list of offenses to be punished by deportation. Clinton had appointed the U.S. Commission on Immigration Reform, chaired by Black liberal former U.S. Rep. Barbara Jordan, which called for cracking down on illegal immigration, punishing employers of illegal immigrants, and drastically slashing legal immigration numbers in order to protect American workers, including former immigrants, from unfair competition. All of these measures and policies were denounced at the time by Republican libertarians and U.S. business lobbies, for all the reasons that Krugman 2006 made clear.

Within the last generation, however, the Democratic Party has lost the allegiance of most white working-class voters, along with a growing share of working-class Black and Hispanic voters. Meanwhile it has become the home of affluent, educated whites, a dwindling number of nonwhites, and most immigrants, along with many large corporations and the billionaires who profit from them.

Just as Republicans favored wage-suppressing mass immigration when they were the party of the affluent, college-educated overclass, today’s elitist Democrats now favor a never-ending stream of immigrant workers with little or no bargaining power for their constituents—like Silicon Valley donors whose firms depend on exploiting H-1B indentured servants, and urban professionals whose two-income lifestyle depends on a bountiful supply of cheap nannies, maids, restaurant workers, and Uber drivers.

Actually, I think he’s drawing a false dichotomy there. The neoliberal strains remain quite strong in both the Democratic and Republican Parties, just as they were 30 years ago. They were as wrong and feckless then as they are now. And here’s why:

Between 1980 and 2010, chiefly as a result of the massive expansion of the H-1B program, the number of American computer science jobs held by foreign-born workers exploded from 7.1% to 27.8%. In 2021, 74.1% of the 407,071 H-1B visas issued to specialty foreign workers by the U.S. went to nationals from India. The overwhelming share of young Indian men among H-1Bs reflects not any extraordinary skills that they alone possess but rather their willingness to work for lower wages and benefits than their American counterparts, as well as the accidental importance of Indian labor contractors or “body shops” as suppliers of indentured servants to U.S. companies beginning in the 1990s.

The U.S. Department of Labor sets four H-1B wage levels, based on the median wage of other workers in the same occupation and region, with the help of survey data from the Occupational Employment Statistics survey by the Bureau of Labor Statistics (BLS). As Daniel Costa and Ron Hira point out in a 2020 study, the Department of Labor sets the two lowest wage levels for H-1Bs well below the local median wage. “Not surprisingly,” Costa and Hira write, “three-fifths of all H-1B jobs were certified at the two lowest prevailing wage levels in 2019.”

This finding bears some attention. If H-1Bs are all geniuses with unique and valuable skills that both American workers and immigrants with green cards lack, then why are tech firms and their contractors so determined to pay most of their H-1Bs the very lowest wages permissible under U.S. law? Costa and Hira point to corporate savings on wages: “Wage-level data make clear that most H-1B employers—but especially the biggest users, by nature of the sheer volume of workers they employ—are taking advantage of a flawed H-1B prevailing wage rule to underpay their workers relative to market wage standards, resulting in major savings in labor costs for companies that use the H-1B.”

The main effects of this development are to place downwards pressure on wages for software developers and boost the stock values of companies that depend primarily on software development. My next post today will be a graphic illustrating the increasing amount of national wealth being held by a very small number of people. If you want to know why that might be, this is it.