Sunday, November 06, 2005

Immigration Policy and Cheap Labor

It annoys me that a purpotedly business-friendly administration cannot fix our flawed immigration policy. Bush needs to look up from the problems with ethics and judges, and reevaluate his plans to fix a policy that encourages poor Mexicans to spend exhorbitant sums of money to get to the US, and then get scammed of their earnings, like these stories about Katrina cleanup workers not being paid. Capitalism is based on an understanding of supply and demand, and it's not rocket science to realize we have a real shortfall of cheap labor in this country.

Reading a biography on Greenspan, I found it interesting that economists (including those at the Fed) subscribed to a concept called NAIRU wherein unemployment rates below a threshold level trigger accelerating inflation expectations (for more on NAIRU, read this). I don't know if anyone has looked at how outsourcing and cheap labor may help reduce the NAIRU, but it certainly seems intuitively that the threshold should drop lower when there isn't supply constraints.

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