Immigration and the addiction to cheap labor

Vice President J.D. Vance told a gathering of leaders from the tech industry this week that the Trump administration was fundamentally committed to getting America off of its addiction to cheap foreign labor.

“Cheap labor is fundamentally a crutch,” Vance said. “I might even say that it’s a drug that too many American firms got addicted to.”

This addiction to cheap labor, Vance continued, is a threat to American innovation, “whether we were offshoring factories to cheap labor economies or importing cheap labor through our immigration system,” because it’s a lot easier to make things cheaply than to innovate. (Transcript; video of full speech)

The agricultural industry is a good example of what happens when an industry fixates on keeping the wages of its workers low. Despite an abundance of available workers through an unlimited guest worker program, the agriculture lobby reliably opposes workplace enforcement and E-Verify while supporting amnesty and loose borders. Not coincidentally, U.S. agriculture lags behind other nations in mechanization. When you embrace a serf-style business model, who needs modern technology? Agriculture has always been hard work, but the race to the bottom on wages has delayed modernization and degraded the desirability of these jobs to the point where the “jobs Americans won’t do” argument for increased immigration could become a self-fulfilling prophecy.

“Boosting corporate profit margins by slashing labor costs is much easier than skill-training your workforce and investing in innovative technology in order to increase per-worker productivity,” wrote Michael Lind in his 2022 article that warned of a brewing backlash. “Given a choice, companies tend to take the low road of replacing high-wage American labor with low-wage foreign labor, even if this means the loss of entire industries and supply chains.”

This same scenario threatens higher paying industries as well. When we talk about investing in our own workers and our own innovation, many of us think about education and how we can provide the best opportunities for all American kids. When colleges and universities hook foreign students on the promise of access to the U.S. labor market, American students lose.

De-investing in Americans, by design

The original advocates for foreign student guest worker programs, H-1B, and OPT were driven by a desire for cheap and compliant labor. They wanted lower wages. They wanted to bypass students and workers. These aren’t unintended bugs of guest worker programs, they are the features. Professor Norman Matloff of UC Davis explains in our latest video by Chad Wienczkowksi:

“H-1B has nothing to do with filling workforce shortages,” says Professor Ron Hira of Howard University in an interview with American Moment. “Congress & Administrative State have intentionally crafted it to supply cheap indentured labor to undercut and replace American workers”:

“So you have a system where they claim this is to fill shortages. ‘We’re only bringing in H-1Bs as a last resort to fill a shortage.’ And that’s the concept behind any guest worker program; it’s an intervention into the [labor] market…

“…But if you look at how it’s actually implemented, if I’m a corporation, do I hire an American worker; or do I hire a guest worker, an H-1B, who has fewer rights, who can be paid less, and who I can control? It’s a no brainer. You’ve set up the incentive structure to favor the foreign worker over the American worker. Who wants that?…

“Well, the corporations want that. The immigration attorneys [and] some of the universities want it. But really, I mean you’d be hard pressed to design a worse system. It has nothing to do with merit or competence, and it’s not the ‘best and brightest’. These are ordinary skilled workers.”

The student visa -> OPT -> H-1B -> green cards pipeline is ultimately a self-defeating system for America. Matloff points to Jennifer Hunt’s work on patenting, research, and entrepreneurship and concludes that H-1B isn’t helping in any of these areas. The guest worker program is primarily driving down wages and opportunities for Americans to work in American tech industries. This is clearly not in the national interest.

“Those price signals are also important because they then send the signal back to students,” according to Hira, who logically ask themselves if they want to go into an industry like tech where wages are stagnant and job security is tenuous?

Professor Hira teaches at Howard University, one of the many Historically Black Colleges and Universities that graduate American STEM worker every year. Fewer than half of all STEM grads, however, find careers in a tech industry that finds the H-1B program a more convenient way to get “the body count.”

If Congress limited these foreign worker programs, universities and businesses would get creative and recruit domestic students and workers. We could have an immigration system that brings in exceptional talents while putting most of our investment in American workers. As Matloff says, there are and should be clear paths to a green card for the truly exceptional talents; but that is a small population. Most of what NumbersUSA’s board member Lesley Blackner calls the “immigration industrial complex” produces is unnecessary, unless the goal is to get a cheap labor fix.

The goal SHOULD be to invest in American workers

Cheap labor can be a shortcut to a larger GDP, but we are a nation with an economy, not the other way around. We have been immigrating our way out of innovation for years and, not coincidentally, giving up on productivity gains at the same time. At least we’re not alone.

“If you look in nearly every country,” Vance told his audience, “from Canada to the UK, that imported large amounts of cheap labor,* you’ve seen productivity stagnate.”

*Vance is talking about LEGAL immigration here. Yes, the great broken promise of the last four years is about the border, but the great broken promise of the last sixty years is about Congress more than tripling LEGAL immigration. At a fundamental level, mass legal immigration is no more sustainable than mass illegal immigration.

And then Vance put the Trump administration’s immigration policy squarely in the heart of a larger vision:

“Our goal is to incentivize investment in our own borders — in our own businesses, our own workers, and our own innovation. We don’t want people seeking cheap labor. We want them investing and building right here in the United States of America.”