Why Liberalism Routinely Fails

Just about a year ago, Immigration and Customs Enforcement (ICE) officers conducted a raid on the Fresh Del Monte Produce plant and arrested about 165 workers who faced deportation based on allegations relating to a lack of valid Social Security Numbers. At the same time, a raid was conducted at the offices of American Staffing Resources as the agency providing the illegal immigrants. It was front page news and while most public officials were critical of American Staffing and Fresh Del Monte for their conduct, the City of Portland, led by its mayor, Tom Potter, instead criticized ICE and other federal agencies for their temerity in enforcing the nation’s laws.

To put an exclamation point on the city’s disdain for enforcing the nation’s laws relating to illegal immigration, the City of Portland has now opened two taxpayer funded “day labor centers” designed, primarily, to cater to Oregon’s significant illegal immigrant population. Much has been said and heard in protest of Portland’s flouting of the law and, in all probability, lawsuits will be brought to try to halt the use of taxpayer money to fund such an obvious breach of federal law.

But the real story is in the continuing disregard of market forces in pursuit of their belief that “if liberal politicians say it, it must be so.”

The federal minimum wage increased to $6.55 per hour on July 1. The federal minimum wage has driven factory production jobs off shore where the labor rates are so low that it is profitable to ship the materials overseas to where the laborers are and the finished goods back to America for consumption. The result has been that America has lost most of its “piece rate” jobs, such as shoes, clothing, toys and electronic assemblies. Even call centers and after sale product servicing centers have been “outsourced” to Southeast Asia because of low wage standards.

Oregon’s minimum wage increased to $7.95 per hour on January 1. This 20% premium over federal minimum wage standards is one of the primary reasons that Oregon’s unemployment rates are routinely 0.5 to 1.0 percentage points above the national average. It is also one of the reasons that assembly jobs have been migrating to Arizona, New Mexico and Utah for years. Oregon’s supercilious political leaders may sneer that Oregon is “focused” on producing “living wage” jobs — not minimum wage jobs — but the continuing shrinkage in high tech, manufacturing and construction jobs and the continuing growth “service industry” (cooks, waiters, maids, laundry workers, etc.) suggest that the results are at odds with the focus. (The only job growth sector with superior wages continues to be government employment.)

But Portland’s liberal elites never have been much on economics or market forces. In addition to the federal minimum wage and the state minimum wage, Portland has adopted the “family/living wage” which currently exceeds $10.00 per hour. And when Portland opened its “day labor center” for illegal immigrants it imposed a rate of $10 per hour to hire those day laborers. It can be argued that Portland’s liberal elites have their hearts in the right place in demanding a higher wage for unskilled labor. It can also be argued that Portland’s liberal elites are simply continuing a long line of efforts designed to make people dependent on the government and, thereby, ensuring that the liberal elites remain in power and control.

Regardless of the reason, the mission will fail because of market forces.

Employers have been recruiting illegal immigrants as “day laborers” for over a decade because the most they will have to pay is the minimum wage. Often times they will pay less either by using a lower wage rate, using a burdensome piece rate, or forcing them to work overtime without overtime compensation. The hiring of illegal immigrants has always been about extracting labor at a rate below what a rational market would allow. The term “rational market” connotes a situation in which there is a balance between what employers are willing to pay and what employees are willing to accept. A “rational market” does not include a “gray labor” element in which employees are forced to accept lower wages because of a fear of governmental action — arrest and deportation — if the employee protests.

So here’s the point, if employers, searching for the lowest cost labor, can pay the federal minimum wage rate of $6.55 per hour, why would they pay $10.00 per hour to use Portland’s day labor center? If employers can pay the state minimum wage rate of $7.95 per hour, why would they pay $10.00 per hour to use Portland’s day labor center? They won’t. In a private market, Portland’s day labor center would be out of business overnight. However, this is government in all of its glory and it will continue to provide this aberration, not because it is needed, or justified, but rather because it can.

Several of Oregon’s talk show hosts have suggested that citizens take photos of the employers who use a day labor center designed primarily to assist illegal immigrants. They have suggested that the names and pictures of those employers be posted so that others will know whom to boycott for aiding in the violation of America’s immigration laws. Frankly, I would rather have the names and pictures of those using the service so we would all know who is dumb enough to pay $10.00 for a $7.95 product.

And those pictures should be posted right next to the pictures of the Portland city commissioners who are dumb enough to think they have solved a problem. While there will be a trickle of employees and employers using the city day labor center, those employees who want the best chance at getting a job that day will return to the street corners where they will earn less per hour but will have a significantly better chance at getting a job and getting more hours.

What sounds like a great deal for employees — ten dollars per hour vs. $7.95 per hour — will turn out to be another empty promise by well intentioned liberals.

  • Britt Storkson

    While you bring up some valid points the core issue here is that the government should not set the price for anything. Whether the commodity be wheat, corn, oil, labor or anything else in a free market the government should set the price (and enforce it by law) for anything.

  • Bob Clark

    Some more eclectic observations: (A) Commissioner Randy Leonard criticized the police bureau for not enforcing his ban on “duct-taping” a rose festival spot. He said what gives the police bureau the right to choose what laws it enforces and what laws it doesn’t? Yet this same commissioner and his fellow councilors blantantly disregard federal and state laws, and even aide its routine breakage particularly with regard to illegal hiring practices.

    (B) If the minimum wage is so good, why not raise it to say $100 per Hour or a $1,000 per hour?

    (C) The minimum wage should be a guideline and not a law. It’s real purpose seems to be like codifying the expectations about tipping in restaurants, barbershops, etc.

  • Sybella

    I’m an employer. The mandated minimum wage is costing my employees money. Not only has their cost of living increased so they can’t get ahead, it’s eating up the higher wage. We have had to cut our business hours and get by with less employees than we should have. People who should be making a lot more can’t because their earned raises must by government mandate go to the employees that do not do as good a job. For those of you who would attack me for actually taking a wage which, quite often I don’t get to cash, I make less than minimum wage. Why do we stay in business? Excellent question. We are currently considering closing the doors. That should male Salem happy. We haven’t done it yet because we keep stupidly hoping the voters will throw that crowd out. They won’t though .

  • William Neuhauser

    Even at yesterday’s new minimum of wage of $13,100 per year (well below the poverty rate), such rates did not drive factory jobs off shore since the vast majority of those jobs were already paid more than that.

  • Richard Brown

    Why is it the conservative insist to criticize the speck in the liberal eye while ignoring the plank in their eye (to take a certain biblical parable ) On one had conservatives have a disdain for minim wage end up supporting it though their protectionist tendency by restricting immigration in the name of protecting high “American” wage jobs. The fact both screw private business in one way or another.
    As for you comment on the ration market, could it be as I believe the undocumented worker is defining the rational market for unskilled arbor and both liberal and conservative policies are distorting the rational market by forcing employers to pay an artificially inflated labor price.
    The solution is not Government labor centers or border walls but free and open trade between employers and consenting future employees regardless of national origin.

  • dean

    Larry….in the late 1960s, when the US economy was arguably at its strongest point internationally, the minimum wage of that time was equal to just under $10 an hour in todays value. Up until this week the federal minimum wage was $5.85/hr, meaning those at the bottom LOST 42% of their purchasing power in 38 years. So as the minimum wage has DECLINED, wouldn’t we expect that we would have GAINED low end manufacturing jobs in the US, rather than have bled them overseas? And wouldn’t we expect taht we would have had much higher illegal immigration rates in 1970 to take adavantage of that higher wage rate?

    In other words, your conclusions are not warrented by the data. Not the first time for you, but this is what happens when you craft posts out of your bias rather than out of reality. Word to the wise…if your persist in this then find ways to cherry pick data that actually support your thesis.

    • Anonymous

      have you ever taken the time to figure out the loss in buying power now, 2008, to minimum wage people?

  • Jerry

    There is no reason on earth why the minimum wage can’t be set to $17.23, which is exactly where it needs to be to provide a living wage standard.
    Why is everyone afraid to set the wage where it actually needs to be?

  • George Forsman

    In reading the comments of Britt and Sybella, as well as this article,I feel that these issues of wages and illegal immigrants are just the tip of whats to come. Controling labor costs or prices are not the solutions. they keep compounding the real problem created with uncontrolled tariff barriers. As a nation, we are being manipulated by foreign companies.

    During the Depression of the 1930’s, we saw over-production on the farms by falling prices. This depression started in the late 1920’s where we overbuild houses with creative financing. Banks allowed the contractor to carry second loans on their houses. When prople couldn’t pay their mortgages they lost their houses in foreclosures, along with the contractors.

    Today, we are seeing the same problems for which our future hangs by a thread. Do we electing elect a president who will raise taxes or elect one who will cut taxes? Electing the wrong one will put us into food shortages, massive mortgage foreclosures, and a massive depression. I’m not an economist; but I did study history, economics, and ran a farm. We hear about the plight of the truck drivers; but not the farmers. As grain, hay, and fertilzers increase, the costs to grow beef, chickens, and hogs also increase. Unlike the dairy indutry, these later farmers can not pass their costs onto the consumer. So they will liquidate their livestock, which will produce food surpluses for a short time; then later food shortages which will result in huge food cost increases; much greater than the fuel increases which we presently experiencing today.

    We won’t have to worry about illegals; but rather being able to feed ourselves and our families.

    • Joanne Rigutto

      George, you’re right as far as what is happening to farming. I heard so many people crowing over the price of gas as it started to rise (these were the people who would like to get everyone out of their cars), and now I hear people saying that by the end of summer it may be up to $5/gallon or more for gasoline, even higher for diesel. I keep asking the question ‘How much did you say you wanted to pay for your food?’. But while we hear about truckers, and others being impacted by the fuel prices, it’s true that we seldom hear about food and farming.

      All industrial farming depends completely on oil, and this is true for almost all non industrial farming as well, be it for equipment fuel, fertilizer, transportation of produce to processor/market, production of feed, processing of food animals, produce, grains, etc. Rising fuel prices will do nothing other than raise the price of food. Grain prices have risen high enough that I’m switching the animal ag on my small farm to grass farming for red meat, pasturing for eggs and chicken meat, as well as raising and processing my own feed corn and wheat. I can do this myself by hand (mostly) only because I’m a very small farm and while we do sell eggs, we’re primarily homesteading. That kind of switch probably won’t work for a small commercial farm, even one that is not integrated into the industrial food system. Those people are going to take it in the shorts as fuel prices continue to rise. The large industrial opperations, at least in animal ag, swine and poultry opperations, will survive. Industrial poultry production is pretty much completely vertically integrated, and companies like Foster Farms, Tyson and Perdue, among others, will have to increase the price they are paying their contractors to grow chickens or they will have to staff production facilities themselves as those contractors get out and start growing more profitable commodities. This is even true for beef production. If the industrial producers, that is the feed lots, packers, etc., refuse to increase the ammount they pay per pound for steers, cull cows and the like, more cattlemen will either get out or will switch to a different type of distribution. Country Natural Beef did this and has been very successful. They are vertically integrated, but they are a coop run by the members instead of a bunch of independant cattlement being told by the large packers what they will be paid for their cattle when they sell on the regular commodities market. Country Natural doesn’t sell on the commodities market. They do their own distribution.

      But anyway, getting back to the farms, swine production is almost as integrated as poultry, and they are both completely dependant on high cost imputs like grain, as well as long hauls to slaughter facilities. In fairness, though, I belive that cattle and swine travel much greater distances for finishing and slaughter than do poultry, at least as far as industrial production is concerned. The small custom growers have more access to local slaughter than the really big producers. These large producers won’t go out of business because of higher costs related to inputs such as fuel/fertilizers, etc., or higher labor costs. They are too tied into the lucerative international markets, and while it’s true that many of the big animal ag producers like Tyson, Perdue and Swift are setting up production facilities off shore, they are primarily doing so to produce meat and poultry to sell in the countries they are setting up production facilities in. At least as far as animal ag goes, because of the disease status of the USA, those corporations will continue to opperate facilities in the US for both domestic distribution and export, especially of raw meats and poultry. Even though production costs are substantially lower in countries such as those in SE Asia, due to the disease status of most of those countries, you can’t produce over there and import into the USA. The closest you can get to foreign production in a country where the inputs are less expensive that here would be Mexico, which already provides a substantial number of feeder cattle imported into the USA. Also, there are companies like JBS, a Brazilian company, that has recently bought one of the largest packers in the USA, and is in process for buying another large packer. If the second sale is approved by our government, JBS will become the 3rd largest meat packer in the USA. I’m sure that they are doing this to access the lucerative US and world markets for beef and pork, and this is only possible because of our disease status.

      As of this time, and for several years now, imports of beef and pork that have not been processed, as in canning, have been prohibited in the USA due to Brazil’s disease status. JBS, being the 3rd largest packer in the USA would be able to place substantial influence on USDA as far as opening US markets to Brazilian beef, pork and poultry, which would impact our domestic cattle producers perhaps even more than fuel prices. Although with COOL (country of origin labeling) implementation, domestic producers may become more popular. Brazil is the biggest exporter of beef in the world, and if our market is ever opened to Brazilian beef, then our cattlemen will be in real trouble, especially if the American public accepts foreign beef as much as they’ve accepted foreign produce. Only time and COOL will tell.

      Of course, all of this is made possible by the trade agreements that the US has entered into. WTO membership, GATT, NAFTA, CAFTA, etc.. That is the real reason that manufacturing jobs have been sent off shore. Not necesarily the minimum wage in the USA, although that is, of course a part of the equation. If it weren’t for the dropping of tarrifs, and the liberalization of international trade, it wouldn’t be as cost effective to produce overseas and ship back here.

      Also, if the minimum wage in those foreign countries was as high as it is here, there would be less incentive to move production so far away. Of couse, if we dropped the minimum wage here to what it is in Mexico or SE Asia, China, etc. no one would be able to afford the products anyway, even if they were produced here. We’d all be spending a much larger portion of our income on food, and the higher wages of employees would drop along with the minimum wage. I’ve always been told that the higher wages are tied to the minimum wage, which is a really big reason why increases in the minimum wage are opposed. I would think that if an increase in the minimum wage makes the higher wages go up, then a decrease would also make them go down eventually.