The New Class War

by Michael Lind

  Compared to the devastation of industrial workers and industrial regions in the US and Europe that has contributed to the rise of antisystem populism, the benefits to consumers from imports from low-wage countries have been trivial, as even some defenders of offshoring admit. A 2017 report prepared for the US-China Business Council for Oxford Economics estimated that “average prices are 1–1.5 percent lower as a result of imports from China. Oxford Economics estimates the influence of such low prices boosted US GDP by up to 0.8 percent in 2015.” Oxford Economics cites other studies that have concluded “that greater import penetration from China reduced US inflation by about 0.1 percent annually in the late 1990s and early 2000s” and that an Apple iPhone might cost 5 percent more if assembled in the US.5

  Does the benefit to workers in developing countries outweigh the cost to developed-country workers of cheap-labor globalization? When China is excluded from the data, developing countries grew at a lower rate in the globalizing era of 1980–2000 than in the more protectionist period of 1960–1980.6 Dani Rodrik has argued that developing countries today and in the future can no longer benefit from export-oriented manufacturing strategies like those of China, Japan, South Korea, and Taiwan and must instead focus on upgrading their nontraded domestic service industries.7

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  GLOBAL LABOR ARBITRAGE in the forms of offshoring and immigration is not the only cause of rising inequality and stagnant wages in the US and similar nations, or even the most important. Only a minority of workers labor in import-competing industries or compete directly against immigrants at home. And wages and unemployment levels are affected by many other factors, including changes in tax laws, reclassification of employees as independent contractors, zero-hours contracts, central bank austerity policies, and, in the US, the continuing practice of interregional labor arbitrage among states and the erosion of the minimum wage by inflation. But the two forms of global labor arbitrage have had their effects multiplied by weakening two institutions that reinforce the bargaining power of workers: unions and the welfare state.

  Private sector labor unions managed to limit the arbitrary power of employers from World War II until late in the Cold War.8 Union membership in the US has plummeted from roughly a third in the mid-twentieth century to only 10.5 percent in 2018.9 This is a transatlantic trend. While a few countries retain high union density, among the developed nations of the Organization for Economic Cooperation and Development (OECD), the percentage of the labor force that is unionized has declined from 30 percent to 17 percent on average.10

  This matters because, according to one estimate, the decline in unionization explains as much as a third of the growth in wage inequality.11 The link between coverage by collective bargaining agreements and the share of the working poor in Western nations is indisputable. In the US, with only one in ten workers covered by union contracts, more than a quarter work in low-wage jobs. In France and Denmark, where more than 80 percent of workers are covered, only 11 and 8 percent, respectively, receive low wages.12

  Labor unions can be weakened or destroyed by offshoring or the threat of offshoring, or in some cases by the use of immigrants, legal or illegal, as a reserve army of labor. In the case of automobile unions, the effects of labor arbitrage—both within nations and among them—are obvious. Not only American firms but also German, Japanese, and South Korean car companies have avoided dealing with unionized workforces in the American “rust belt” by moving jobs to nonunion workforces in the American South and Mexico.13 The use by employers of immigrants, both legal and illegal, to weaken or destroy unions in US sectors like agriculture and meatpacking and janitorial work has been well documented.14

  The mere threat of replacement by foreign workers or immigrants can serve to intimidate a much larger group than those who are actually replaced. During the economic boom of the 1990s more than half of all employers in one study, to discourage union organizing, threatened to shut down all or part of a plant, even though employers acted on the threat in fewer than 3 percent of the cases.15

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  IN ADDITION TO weakening organized labor, high levels of immigration can reduce public support for welfare state services that bolster the bargaining power of workers by allowing them to “hold out” longer in negotiations with employers. In modern Western welfare states, lower-paid immigrant workers may compete with better-paid native workers for limited public resources such as schools, hospitals, welfare services, or, in some countries, public housing. Even in the absence of direct occupational rivalry, this competition for public goods among ethnically divided sections of the working class can provoke a backlash that is channeled against the welfare state itself.

  The incompatibility of the welfare state with mass immigration was noted by the libertarian economist Milton Friedman: “If you have a welfare state, if you have a state in which every resident is promised a certain minimum level of income, or a minimum level of subsistence, regardless of whether he works or not, produces it or not. Then [free immigration] really is an impossible thing.” Friedman callously welcomed illegal immigration—but only as long as illegal immigrants were ineligible for welfare: “But it’s only good so long as it’s illegal. . . . Make it legal and it’s no good. Why? Because as long as it’s illegal the people who come in do not qualify for welfare, they don’t qualify for social security, they don’t qualify for the other myriad of benefits.”16

  His ideological opposite, the progressive economist Paul Krugman, agrees with Friedman’s political point. Because “modern America is a welfare state” and “low-skill immigrants don’t pay enough taxes to cover the cost of the benefits they receive,” Krugman observes that the “political threat that low-skill immigration poses to the welfare state is more serious” than its other consequences.17

  The new open-borders left might reply that unlimited immigration would not be a problem if all workers in a country were unionized, including immigrants who joined unions on arrival. In addition, the open-borders left could speculate that voters who were not racist or otherwise bigoted against particular groups of immigrants for noneconomic reasons would not begrudge the use of the welfare system by wave after wave of poor people from other nations.

  Perhaps the open-borders left is correct. But shouldn’t such a radical proposition be tested first in one or two countries, before other democratic nations take a chance on it? Let a small democratic nation-state known for the antiracist attitudes of its population, its high levels of unionization and its generous welfare state adopt an open borders policy, allowing anyone on the planet to move there and immediately use welfare benefits on the same terms as citizens, without having previously paid into the system through taxes and with no waiting period for eligibility. After a generation or two, the results of the experiment of a highly unionized welfare state with an open borders immigration policy can be examined—assuming, of course, that the experiment does not quickly trigger an anti-immigration revolt that brings demagogic populists to power and the experiment in open-borders leftism to a swift and unpleasant stop.

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  IF A NEW democratic pluralism were to bring the new class war to an end with a new class peace based on cross-class power sharing, then a chief goal of immigration policy would be to strengthen the bargaining power of national workers with employers. As long as the bargaining power of workers relative to that of employers was not undermined, some democratic nation-states in some circumstances might choose higher levels of legal immigration, including less-skilled immigration.

  The arguments that are typically made for high levels of less-skilled immigration, however, are surprisingly weak. For example, it is often asserted that there are many menial jobs that citizens of the United States and European countries refuse to do.

  This is a common theme among rich people who feel entitled to a supporting cast of low-wage, foreign-born servants. The
billionaire and former New York mayor Michael Bloomberg has asked: “Who takes care of the greens and the fairways in your golf courses?”18 Speaking to a wealthy audience in Abu Dhabi, at a summit organized by the disgraced former financier Michael Milken’s think tank, former president George W. Bush, the former governor of Texas, once the leading cotton-producing slave state in the US, declared: “Americans don’t want to pick cotton at 105 degrees but there are people who want to put food on their family’s tables and are willing to do that.”19 Another Texan born like Bush into an upper-class family, Representative Robert “Beto” O’Rourke, agreed with Bush, his partisan and political opposite, that low-wage immigrants were needed to pick and process cotton in the former Confederate state of Texas. When an African American Texan asked O’Rourke about illegal immigrants, the West Texas patrician uncritically quoted the owner of a cotton gin: “[T]here are twenty-four jobs and the manager of that gin says it does not matter the wages that I pay or the number of hours that we set, there is no one born in Roscoe . . . or Texas or this country who is willing to work.”20

  History records no instance in which all of a country’s cotton pickers, groundskeepers, maids, or construction workers abruptly decided they were too good for the job and quit the industry en masse. The domination of particular occupations by immigrants instead of native workers typically results from an earlier prolonged period of discrimination by employers who prefer immigrants willing to work for less and afraid to complain. In the United States, this phenomenon is evident in the construction and meatpacking sectors, among other industries.21

  Robert Shapiro argued in 2019 that much of the unexpected contraction in employment among native white Americans in recent years had been the result of direct competition of white workers who shared higher wage expectations with immigrants as well as members of minority groups willing to work for lower wages:

  A final critical reason why many employers are more inclined to hire Hispanics, Asians, and blacks than whites in this business cycle is the economics of wages. At every educational level, except people without high school degrees, whites’ wages are higher than the wages of blacks, Hispanics and, in some cases, Asians. There is a long history of immigrants and minorities working for less than others with the same education, sometimes willingly and often unwillingly. Italians, Poles, Eastern Europeans, and Irish, as well as blacks, did so a century ago. Apparently, that pattern has not changed a great deal.22

  Coming from any other source, this acknowledgment that many American employers are indeed using immigrants in labor arbitrage strategies to undercut wage levels would have been denounced by the new open-borders left as “Trumpist” nativism or racism, scapegoating immigrants for employment problems that allegedly have unrelated causes like automation or a lack of skills. But the author was a senior adviser to Hillary Clinton’s presidential campaign, President Bill Clinton’s principal economic adviser in 1991–92, and later Clinton’s undersecretary of commerce for economic affairs. Even more striking, Shapiro’s essay was published in the flagship journal of the American intellectual center-left, Democracy Journal. Coming from a pillar of the neoliberal establishment, in a publication long identified with neoliberalism, this is a remarkably candid admission.

  If there really were shortages of farmworkers and janitors, rather than merely a preference by employers for hiring easily-intimidated immigrants willing to work for little, then wages in those sectors would be shooting up. Rather than attract applicants by raising wages, these entitled employers demand an in-kind labor subsidy from the government in the form of policies importing low-wage immigrants, preferably indentured-servant guest workers who cannot vote or unionize.

  If employers had to raise wages to attract workers to unattractive jobs, inventors, investors and entrepreneurs would have an incentive to invest in automation to substitute technology for more-expensive labor. Another alternative would be self-help. Writing in the New York Times, Patricia Cohen notes that “many tasks that most people previously did themselves—mowing lawns, polishing nails, picking up takeout, driving—are now contracted out because there is labor to do them.”23

  Opposing the self-help option, the neoliberal journalist Matthew Yglesias has argued that low-wage immigration is good because it provides college-educated professionals with inexpensive maids:

  But it’s obvious that in a world without immigrant housecleaners, we wouldn’t have an equal number of much-higher-paid native-born maids. What we’d have is less housecleaning done on a market basis and more being done as unpaid work at home. For many middle-class families that would be pure waste. Time spent cleaning the toilet that could be spent on higher-value labor, on leisure, or on quality time with friends and family.24

  A more serious argument for mass unskilled immigration than the danger that maid shortages will inconvenience the overclass involves economic growth. The claim that immigration expands the national economy as a whole is true but trivial; increasing any country’s workforce by any means, including the abolition of retirement, the abandonment of wages and hours laws, and the legalization of child labor, would increase a country’s overall GDP by definition.

  What counts are the distributional effects of mass unskilled immigration and these differ among races as well as among classes. The beneficiaries tend to be affluent overclass households that hire servants and firms whose business models rely on cheap labor. The victims are the working poor, including previous waves of immigrant workers. According to the US Commission on Civil Rights in 2010, “illegal immigration to the United States in recent decades has tended to depress both wages and employment rates for low-skilled American citizens, a disproportionate number of whom are black men.”25 A 2017 National Academies of Sciences, Engineering, and Medicine report noted that previous studies had found “more-negative results for low-education blacks than low-education whites” and “larger negative effects for Hispanic dropouts than for all dropouts. This could be because native dropout minorities are the closest native substitutes for immigrants.”26

  A related argument attributes a magical economic multiplier effect to immigrants. To lobby for more H-1B guest worker visas for foreign nationals, who are legally bound as indentured servants to their sponsoring corporations or intermediary firms known as “body shops,” Facebook’s Mark Zuckerberg and other Silicon Valley executives have formed a lobbying group named FWD.us. In the Washington Post Zuckerberg wrote: “Why do we offer so few H1B visas for talented specialists that the supply runs out within days of becoming available each year, even though we know each of these jobs will create two or three more American jobs in return?”27

  The claim that each foreign indentured servant admitted under the H-1B nonimmigrant visa program has a Midas touch capable of creating two to three American jobs is ridiculous. If it were true, importing 50 million H-1B guest workers all at once could create up to 150 million jobs in the US overnight—the equivalent of the entire US workforce.

  A legitimate case can be made for modestly increasing skilled immigration. As we have seen, there is widespread public support in Western democracies for increasing the numbers of skilled immigrants, even among many who want unskilled immigration to be cut. But if their numbers are increased, skilled immigrants should be legal permanent residents with the rights to quickly become citizens and to quit one employer for another, not easily intimidated and easily exploited indentured servants whose lack of bargaining power makes them attractive substitutes for workers who possess more rights.

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  ANOTHER FALLACIOUS ARGUMENT holds that it will be necessary in the future for aging countries with low fertility rates like those of Europe and North America to import enormous numbers of immigrants to maintain the “dependency ratio”—the ratio of workers to retirees and other dependents, including children. This argument is intuitively plausible—and dead wrong.

  How many immigrants would be needed to ma
intain today’s dependency ratio in the US indefinitely? In 2000, the UN Population Division calculated that in order to maintain the worker-to-retiree ratio in the US, the US would have to increase legal immigration from roughly 1 million a year to 12 million a year, adding more than half a billion additional net immigrants to the US population by 2050.28 Using more recent data, the Center for Immigration Studies has estimated that maintaining the US worker-to-retiree ratio would require increasing immigration fivefold, more than doubling the US population between now and 2060, to 706 million.29 Even worse, in order to maintain a fixed dependency ratio of workers to an ever-growing number of retirees, the US would need to import ever-growing numbers of immigrants until the unsustainable demographic Ponzi scheme collapsed when the rest of the world was depopulated.

  Those who claim that mass immigration is needed to maintain dependency ratios in Western nations exaggerate the change in those ratios caused by population aging. Under a scenario in which US immigration was slashed by two-thirds to stabilize the population, in 2060 there would be 2.2 workers per retiree, compared to 2.5 workers in an alternate scenario in which the US adds 46 million net immigrants by 2060.30 This is hardly a crisis.

  Fortunately, the challenges posed to social insurance systems in the West can be solved in ways that do not require North America and Europe rapidly to import immigrants until they are more populous than China and India—or, for that matter, to try to boost native fertility to balloon their populations to gargantuan dimensions. The rational methods to ensure the fiscal sustainability of social insurance entitlements are growth in productivity per worker, revenues other than payroll taxes, higher taxes or cuts in benefits. In the words of the US Census Bureau’s Population Projection branch: “International migration may address a high dependency ratio decisively in the short term, yet is highly inefficient in reducing it over the long term—especially if considerations of population scale, as well as age composition, are taken into account.”31