When foreign labor is ‘dumped’

One of the major labor issues facing the United States today is one nobody in Washington is willing to talk about. But unless they do, Johns Hopkins economist Steve Hanke said, they can’t make intelligent decisions about immigration because they aren’t dealing with a key source of the problem: labor dumping. Labor dumping is what centralized and socialist governments do to evade the consequences of not allowing their citizens to enjoy the opportunities and prosperity that come with a free-market economy. These governments send millions of unemployed citizens to countries with free markets. That’s because nations with the lowest tax and regulatory burdens typically grow faster and create more jobs than countries with state-run economies.

Hanke points out that labor dumping is practiced by overregulated, overtaxed European countries such as Turkey and Poland, where unemployment remains high despite massive emigration. But Mexico is by far the worst of the lot: 30 percent of its 38 million-strong labor force is not only working in the U.S. but also is sending back $23 billion in remittances each year. That is more than Mexico receives from its tourism industry and does much to explain why the Mexican government is actively facilitating labor dumping as an official policy, Hanke said. It not only gets rid of Mexico’s huge unemployment problem, it brings in so much foreign currency that the government has absolutely no incentive to make politically unpalatable changes to its inefficient economic system. Why bother, if you can just send the mess over the border and get billions of greenbacks in return?

American businesses know what happens when heavily subsidized foreign imports are “dumped” in U.S. markets. Steelmakers say Indiana, the largest steel-producing state, lost 17,108 union manufacturing jobs due to illegal dumping of hot-rolled steel from China and elsewhere. The industry wants higher tariffs to protect domestic producers. But nobody in Washington is even talking about what happens when cheap, below-market labor is illegally “dumped” here as well. A 2005 Bear Stearns report estimates that Mexico’s labor dumping has depressed American wages from 4 percent to 6 percent, putting the social costs of the “largest migration wave since the late 1800s” at $30 billion per year. Since these costs are also borne by U.S. workers in the form of higher local, state and federal taxes, they can lose as much as 10 percent of their annual income — considerably more than the 3.1 percent average wage and benefit increases they got so far this year.

So what are President Bush and the Democratic majority in Congress going to do to protect the American worker from this unprecedented economic onslaught?

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