SullivanPatrick+Product+Immigration

Sullivan Patrick Portfolio

Product Immigration Unemployment in the United States is generally thought to be caused greatly by illegal aliens in the US workforce. The government has been quick to propose immigration related solutions to unemployment. Immigration has become a main issue in political campaigns, giving the general public the illusion that immigration is the only cause of American workers losing their jobs to people from other countries. This raises the question of whether a person needs to be working in the United States for them to be taking away jobs from the American worker. Migration from one area to another is generally done when the expected increase in income from the old location to the new location exceeds the moving costs. Therefore, there is an increase in immigration from Mexico to the United States when minimum wages are higher in the United States. There has also been an increase due to declines in Mexican wages. Many immigrants to the United States from Mexico plan to send money back to support families in Mexico. This causes Mexicans who are considering immigrating to the United States to look at their possible wages in the United States in terms of its peso buying power. Immigrants from Mexico are willing to work for less money than most Americans because their salary will have greater buying power in Mexico than the same salary in the United States. This has caused more immigration in times when the Dollar is worth more and the peso is worth less. (1) The North American Free Trade Agreement (NAFTA) was signed in 1993. The US government has publicized this as a good thing, which would increase jobs in the United States due to the increased products that would be exported to Mexico and Canada. The government has failed to publicize the fact that importing products has been displacing jobs that would have otherwise been done in the United States. This was created without any sort of agreement to maintain labor or environmental standards. As with migrating of humans, the outsourcing of production will occur if the difference between labor costs in one area and another area will cover the costs of transporting the products. The NAFTA was intended to increase the middle class in Mexico due to increased jobs in Mexico. The United States would then have an increase in jobs to produce products exported to Mexico which would be bought by this newly developed middle class. Instead, more products are imported from Mexico due to their lower wages and lower emission and workplace standards. There has been a decrease in Mexican workers wages since NAFTA was created, since Mexican companies are able to gain a greater profit by exploiting its cheap labor and selling its products to the United States where the currency is worth much more. This has prevented a middle class, which can purchase US manufactured products from emerging in Mexico. Today most of the exports from the United States to Mexico are parts, which can be assembled in Mexico by Mexican workers for a much cheaper labor price than in the United States. Many of these final products are then imported back to the United States. The availability of cheaper labor in Mexico has caused prices of products to go down greatly in the United States. Manufacturers in the United States are forced to lower wages for domestic workers in order to compete with these cheap products being manufactured abroad by cheap labor. Workers in the United States are forced to accept this decrease in wages because of the threat of outsourcing production where labor is cheaper. This affects less educated workers the most because of the availability of cheaper uneducated workers. (2) This may be the cause of the current all time highs in percentage of Americans graduating from high school, and the percentage of Americans receiving a college degree or more. (3) One of the biggest incentives for foreign trade is the exchange rates of currency. Almost every country manipulates its currency in some way. In the Example of China and the United States this is done by China buying US Dollars on the open market in order to keep the demand and therefore the price of the US Dollar high. If 1 Dollar can buy 7 yuan then an exporter can sell a product for 10 dollars and get 70 yuan. This is a great incentive for China to export to the United States because the price of a product sold in the United States is essentially 7 times the amount of the same product sold within China. This causes the United States to import a great amount of cheap products from China because their currency is undervalued, not because they are actually cost competitive or more efficient at manufacturing products. China also cuts its manufacturing costs because of lower emission standards and wages. (4) I am proposing to replace the North American Free Trade Agreement with a worldwide trade agreement which only allows trade between areas with the same currency, minimum wage laws, workplace standards, and environmental standards. Trade would still need to be profitable for businesses to have an incentive to do it. Therefore, it would only occur when one area is more efficient at manufacturing a product or when they have natural resources that another area does not have, rather than when one area can exploit cheap labor. This would reduce immigration from Mexico to the United States because equal labor rights would not provide them an incentive to migrate. The United States would also save money from being spent on protecting our borders from illegal immigrants. This saved money could go into the enforcement of this proposed trade agreement. This would stop the United States from importing inexpensive, poorly made products, inhibiting our throw away culture. The American consumer would be forced to keep their products for longer periods of time due to higher prices.

This is a paper on illegal immigration statistics from Mexico to the United States. It goes into depth on why this occurs and when it occurs more. (1) Hanson, Gordon H., and Antonio Spilimbergo. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border." The American Economic Review 89.5 (1999): 1337-357. Web.

This is an article on the effects of the North American Free Trade Agreement. (2) Scott, Robert E. "The High Price of 'Free' Trade." EPI Briefing Paper 147 (2003). Web.

This is a link to the recent rise in people attending higher education (3) High School Graduation Rates Reach All Time Highs

This is a link to an article on how and why China manipulates its currency (4) How Does China Manipulate Its Currency?