The California economy should serve as a cautionary tale for the rest of the nation, showcasing the negative impact of illegal immigration combined with liberal social welfare programs that discourage citizens from working.
The ‘Californication’ of the United States would exacerbate illegal immigration, depress market-driven labor rates, expand welfare rolls, significantly raise taxes on those employed, and prompt the government to address the diminished standard of living by imposing an exorbitant minimum wage.
Increasing the labor pool through illegal immigration drives down wages. The most basic law of economics, supply and demand, states that when supply increases and demand remains the same, price goes down.
You need water to live, but water is cheap because there is a large supply. Gold and diamonds are less of a necessity for maintaining life, but they are expensive because there is a large demand and limited supply. If tomorrow a new goldmine was discovered which quadrupled the supply of gold, the price of gold would go down.
Illegal immigrants increase the supply of workers, which brings down the price of labor, i.e., the wage. And although it is true that illegal immigrants are concentrated in certain industries, the decline in wages affects all industries.
The industries with the highest percentage of illegal immigrants are construction, cleaning, maintenance, food service, garment manufacturing, and agricultural occupations. The Americans who were displaced from those industries went to work in other industries, increasing the quantity of labor and driving down wages.
Using California as an example of what some people want to do to the entire country: illegal immigrants comprise 9% of the population. The market wage for workers was low because of the large pool of immigrants.
The Democratic legislation addressed this issue by imposing a draconian minimum wage of $16 an hour for all workers and $20 for those working in fast food.
The state also has liberal unemployment and welfare rules. As market wages drop and unemployment or welfare benefits increase, people are disincentivized to continue working.
In many Democrat-led states, workers can earn more on benefits than they can working. And a minimum wage of $20 an hour will not fix this problem. Jobs like landscaping and construction used to pay more than $20 an hour.
And jobs in maintenance and janitorial services, while not the highest paid, used to have job security and benefits when they were done on the books, by legal workers.
The Americans who lost those career jobs to illegals cannot make up the lost income by flipping burgers. Removing the illegal immigrants from the labor force will cause the natural rate of wages in landscaping, construction, and maintenance to increase, motivating people to go back to work.
Not surprisingly, as a result of its socialist policies, California has the highest poverty rate in the country when the cost of living is considered (the supplemental poverty measure).
The high taxes, high minimum wage, and lack of law enforcement have caused a steady exodus of companies, resulting in rising unemployment. However, the minimum wage only applies to legal workers, not illegals, so many of the unemployed citizens were replaced by illegal immigrants.
And now, the taxpayers are paying for it in the form of unemployment or welfare benefits. However, the illegals do not pay taxes. So, the tax burden on each legal worker is increasing, which then disincentivizes people from working. And the circle goes on and on, spiraling steadily downward.
At the national level, Democrats in favor of illegal immigration claim that low unemployment rates in the US are proof that “we need illegal immigrants” to fill those jobs. However, this claim ignores the labor force participation rate, which took a nosedive in 2020 and has never returned to pre-pandemic levels.
The labor force participation rate refers to the percentage of the working-age population (usually defined as individuals aged 16 and older) who are either employed or actively seeking employment.
People who are on unemployment are still counted as being part of the labor force because they are allegedly looking for a job. Only those who give up or go on permanent welfare or benefits are no longer counted.
There are two important points here. By liberalizing unemployment benefits, increasing the amount and the duration of the payments, the Biden Administration gets to count these people as part of the labor force.
And yet, the labor force participation rate is declining. This brings us to the second point. The federal government spent $1.3 trillion on welfare programs in 2023. If social benefits were not plentiful, more people would remain in the workforce.
In California, the labor force participation rate has been trending steadily downward since 1989. Currently, only 62% of legal adults are part of California’s labor force. Meanwhile, California has one of the highest incidences of tax in the country.
It also has 28% of the total homeless population of the United States, with the number having increased by 40% over the past 5 years. In short, California is a mess of outcomes that could not happen in a free-market economy that enforced immigration laws and was tough on crime.
According to Pew Research, 87% of Democrat voters agree that illegal immigrants only do jobs Americans won’t do. This notion is completely false. The reality is, there is no job Americans won’t do if they are paid for it.
Removing the illegals and canceling the benefits programs will bring about an equilibrium between wages and labor force participation. Taxes could be cut, and the minimum wage for unskilled work could go back to a reasonable market rate.
People would be incentivized to work and to better themselves, while the burger-flipping jobs would revert to the high school and college students who previously held them.
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