Economics Volume II: Modern Economic Problems

by Frank A. Fetter

§ 7. #Abnormal labor conditions resulting from immigration.# The labor supply coming from countries of denser population and with low standards of living creates, in some occupations, an abnormally low level of wages and prices. Children cannot be born in American homes and raised on the American standard of living cheaply enough to maintain at such low wages a continuous supply of laborers. Many industries and branches of industry in America are thus parasitical A condition essentially pathological has come to be looked upon as normal. The commercial ideal imposes itself upon the minds of men in other circles.

Statistics show that the prevailing wages for unskilled manual workers in America have risen much less since the Civil War than have other wages.[4] Wages in the great lower stratum of the unskilled and slightly skilled workers are much lower in America relative to those of more skilled and professional workers than they are in Europe. It can hardly be doubted that the most important, tho not the sole, cause of this situation has been the unceasing inflow of immigrants going into these low-paid occupations. The "general economic situation" in America, but for immigration, would compel higher wages to be paid to the masses of the workers. If immigration were suddenly stopped in a period of normal or of increasing business, wages in these occupations would at once rise, and that, without the aid of organization, of strikes, or of arbitration. This would affect most those occupations which now present the most serious social problems, in mines, factories, and city sweatshops. In some small measure the war in the Balkan States, by recalling many men for service, had this influence in 1912; and the great war beginning in 1914, by stopping a large part of the usual immigration, gave a striking demonstration of this principle. In employing circles the rise of wages was sometimes referred to with an air of grievance as due to the "monopoly of labor," as if the economic situation here, enabling the wage-earners (millions of them immigrants), to get a higher competitive wage when immigration temporarily was diminished, constituted a monopoly.

§ 8. #Popular theory of immigrant competition.# The depressing effect of the ever-present and ever-renewing supply of immigrant labor upon wages appears most clearly at the time of wage contests, and often seems to be the most important aspect of the question. Laws against contract labor, passed to prevent this particular evil, have put no check to the great stream of those guided by friends to a "job." Organized labor thinks most of these immediate effects. Commonly labor's protest is expressed in terms of the untenable "lump of labor" theory of wages. "Every foreign workman who comes to America" is believed to take "the place of some American workman." The error in this too rigid conception of the influence exerted upon wages by new supplies of labor is evident in the light of the principles of wages. Yet it may be true that, both immediately and ultimately, the foreign workman depresses the incomes of those already here with whom he directly competes. On the other hand, those in occupations into which few immigrants enter may, as consumers of cheaper products, be immediately the gainers in real wages, by the very change that depresses the wages in the lower strata.[5] The manufacturing-employers advocate "protection" which enhances the price of their products, while usually favoring "free trade" in immigration to cheapen their costs. What more natural than that laborers should favor a policy of protection to labor, to keep foreigners from coming here to be their competitors.

§ 9. #Divergent views of effects on population.# The foregoing views of the effects of immigration upon wages, both of those favoring and those opposing it, are short-time views, relating to immediate rather than ultimate effects. If the immediate causes are continuously repeated throughout the lives of successive generations the results are for those mortal men as ultimate as anything that concerns them. In this case it would make no difference to the millions of workers, whose wages are depressed, if it could be shown that wages fifty or a hundred years from now would be no lower as a result of continued immigration than they otherwise would be; or to the employer that wages would then be no higher. But to the social philosopher and to the statesman, interested in the abiding general welfare, the ultimate economic effects are of the greatest importance.

The question is: What will be the far-reaching, long-time effects of immigration upon the general economic situation, as that determines the welfare of the mass of the people? We confine ourselves here to the economic effects, leaving aside as far as possible the racial, moral, religious, political, and general social aspects of the subject.

We are met at the outset by two divergent opinions as to the permanent results of immigration upon the growth of population. The one is that all immigrants coming to our shores are net additions, hastening by so much the growth in density of population; the other opinion, the displacement theory, is that immigration has the effect of checking the natural increase of the native stock so much that it does not materially change the total population, or actually causes it to be less than it would have been had no immigration occurred.

§ 10. #The displacement theory; its fundamental assumption.# The latter opinion which still has many upholders[6] was first advanced by a distinguished economist, Francis A. Walker, but his first statement of it referred only to the period between 1830 and 1860. The main argument in support of this opinion was that in the three decades from 1830 to 1860 during which a large immigration occurred, the decennial rates of increase of the population were almost the same as in the three decades from 1800 to 1830.[7] The conclusion drawn from these figures is that the immigrants were the cause of the decline of the average birthrate that occurred in the families of native stock. The validity of this conclusion is absolutely dependent on the assumption that no other forces were at work to produce this result. Must we believe that, but for immigration, the native birthrate would not have declined at all? This is incredible. The birthrate of the native stock had already begun to decline before 1820 as is shown by many family records, and by the fall of the decennial rate of increase from 35 and 36 in the decades ending 1800 and 1810, to 33.1 and 33.5 in the next two decades. This occurred despite the enormous western settlement then under way on the Louisiana Purchase. The decline of the birthrate began at that time to appear as a world-wide phenomenon, accompanying improved transportation (roads, steamboats, steam railways), the rapid growth of cities, and the general industrial revolution. The general birthrate has declined of recent years in Australia and New Zealand, where there has been little immigration, more rapidly than it has in the United States.[8]

§ 11. #Magnitude of the inflow of immigrants.#In view of these facts it seems necessary to modify the displacement theory greatly. To the extent that the coming of immigrants caused a net addition to the population, it doubtless hastened the growth of cities and the development of industrialism, and thus helped to reduce the birthrate in some classes. But this view admits the effect upon population which the displacement theory denies. Probably, in a good many cases the more rapid business advancement of the natives, because of the coming of the immigrants, led to the decline of birthrate that is a consequence of economic success.[9] But a large part of this change would have inevitably occurred even if there had been no immigration after 1820. Between 1820 and 1910 the population increased 82,400,000, and the total number of immigrants was 27,800,000, or 33.7 per cent of the total increase. In an urban environment the birthrate among immigrants always has been very much higher than that of native Americans. This fact alone might well be taken as sufficient to offset whatever depressing effects the coming of the immigrants may have had upon the native birthrate, leaving the immigration nearly a net addition to population. It does not seem possible to believe that if there had been no immigration, our native population, rapidly advancing in average wealth, wages, and general education, would have continued with an unchecked birthrate, and would have filled all the places taken by immigrants. And no believer in the displacement theory has ever ventured to claim, as the argument requires, that if immigration were now stopped, the birthrate would again return to the old standard of 1820, or would cease to decrease somewhat. Especially of late, since the rate of increase of the native population has become much less, is the effect of continuing immigration apparent. In the decade of 1900-1910 the total population increased 16,000,000, while nearly 9,000,000 immigrants arrived. Of the remaining increase, 3,000,000 consisted of children born of foreign parents. That leaves three or at the most four million (4,000,000) increase attributable to the native stock, white and negro combined.

§ 12. #Earlier and recent effects of immigration upon wages.# Let us now correlate the principle of decreasing returns and the facts as to the exploitation of our natural resources[10] with the growth of our population, on the assumption that immigration has been a net contribution to our numbers. While the vast frontier was open to settlement, the growth of population could not fail to be looked upon as a blessing, even tho somewhat mixed with political evils, immorality, and pauperism. Beginning in colonial times, the policy of "the open door" to immigrants came thus to be deemed the traditional, patriotic American policy. Yet there is grave reason to believe that the rate of growth in the nineteenth century was wastefully rapid and that a slower and sounder growth might have been better.[11] However, this rapid growth was largely extensive, spreading over wider areas, and was consistent with a pretty steady rise of real wages in America until about 1895,[12] the level continuing higher than that of Europe despite the contemporaneous rise of wages there. Much of this general rise is undoubtedly attributable to the adoption of better tools, machinery, and industrial processes, the more so as inventions and new methods have rapidly become free goods.[13] The beneficial improvements long cooperated with the rapid exploitation of rich resources to raise real wages, and then undoubtedly continued to offset for a time the unfavorable effects as the richer resources began to show signs of exhaustion. Since the end of the last century, however, the net trend upward seems to be checked, and "the rising cost of living" (real cost) has come to be a serious actuality for larger sections of the population.[14]

Yet so long as wages are enough higher in America to pay the passage of the low-paid workers of the industrially backward nations, they will continue to come. The ease and cheapness of migration in these days of steamships, the encouragement of immigration by the agencies and advertisements of the steamship lines, and the increasing readiness of the peasantry to migrate, have become well known through recent discussions. Unless immigration is limited, it must continue to depress the wages of American workingmen, through both its immediate and its ultimate effects.