The Houses Will Rot in the Fields...

With a special guest appearance by former president Bill Clinton!

Senator JD Vance’s conversation with the New York Times’s Lulu Garcia-Navarro is getting much-deserved attention, particularly for their exchange on illegal immigrants and construction jobs. Garcia-Navarro asks:

…about a third of the construction work force in this country is Hispanic. Of those, a large proportion are undocumented. So how do you propose to build all the housing necessary that we need in this country by removing all the people who are working in construction?

One can imagine the field day that Times fact-checkers would have if Vance had jumped from the fact that a third of the construction workforce is Hispanic to a conclusion that deporting illegal immigrant means “removing all the people who are working in construction,” but I digress. Vance responds:

Well, I think it’s a fair question because we know that back in the 1960s, when we had very low levels of illegal immigration, Americans didn’t build houses. But, of course they did. And I’m being sarcastic in service of a point, Lulu: the assumption that because a large number of homebuilders now are using undocumented labor, that that’s the only way to build homes, I think again betrays a fundamental…

The reporter cuts Vance off here with a non-sequitur, an inaccuracy, and an evasion:

The country is much bigger. The need is much bigger. I’m not arguing in favor of illegal immigration.

The size of the country is, of course, entirely irrelevant. Does a bigger country have greater need? Not relative to the size of its potential construction workforce. But more importantly, the need is not greater. Declining rates of fertility and family formation mean that we have fewer young people emerging into adulthood and needing housing than we used to, arguably in absolute terms, certainly relative to the size of the workforce. That is, until you count… immigration. So no, there’s nothing about the nation’s pre-mass-immigration economic model that could not work in today’s “bigger” country.

But don’t worry, she’s not arguing in favor of illegal immigration. She’s just not not rejecting arguments against it... I think? At least that’s how it seems, as she continues:

I’m asking how you would deal with the knock-on effect of your proposal to remove millions of people who work in a critical part of the economy.

Vance suggests in response that we could reengage the millions of prime-age workers who have dropped out of the labor force, leading to an incoherent and innumerate word salad from Garcia-Navarro:

I mean, the unemployment rate is 4.1 percent.

[The unemployment rate does not count labor-force dropouts, as Vance explains to her.]

Most people who don’t work can’t work in the regular economy. They’re in the military…

[Labor-force participation and employment data is specifically for civilians.]

…they’re parents…

[Families are much more likely to have both parents working than in the past.]

…they’re sick, they’re old…

[Vance specified “prime-age” workers, which means those age 25 to 54.]

They might not want to work in construction.

Ah, now we’ve gotten to the nub of the matter. Apparently, the logic of “jobs Americans won’t do” has moved from picking lettuce to building houses. Vance’s response is worth reading in full:

This is one of the really deranged things that I think illegal immigration does to our society is it gets us in a mind-set of saying we can only build houses with illegal immigrants, when we have seven million — just men, not even women, just men — who have completely dropped out of the labor force. People say, well, Americans won’t do those jobs. Americans won’t do those jobs for below-the-table wages. They won’t do those jobs for non-living wages. But people will do those jobs, they will just do those jobs at certain wages.

Think about the perspective of an American company. I want them to go searching in their own country for their own citizens, sometimes people who may be struggling with addiction or trauma, get them re-engaged in American society. We cannot have an entire American business community that is giving up on American workers and then importing millions of illegal laborers. That is what we have thanks to Kamala Harris’s border policies.

I think it’s one of the biggest drivers of inequality. It’s one of the biggest reasons why we have millions of people who’ve dropped out of the labor force. Why try to re-engage an American citizen in a good job if you can just import somebody from Central America who’s going to work under the table for poverty wages? It is a disgrace, and it has led to the evisceration of the American middle class.

You will be unsurprised to learn that our intrepid Times reporter moves on at this point to a new topic. But not me! I’d like to stay on this one a bit longer. Indeed, you may have noticed we spend a lot of time here at Understanding America on the way Senator Vance answers questions—on tariffs, on immigration, on worker power, on family policy. That’s because he provides the best evidence to date of how it will look when political leaders make a full-throated case for conservative economics. What we keep seeing is, it looks quite good.

Anyway, I wrote an essay last year on this topic of illegal immigration, labor shortages, and creating better jobs for American workers. It’s one of my favorites and I hope you’ll take a few minutes to read if you have not already: Jobs Americans Would Do. The crux of the argument was as follows:

Capitalism works when capital in pursuit of profit must find ways to expand output with the labor present, and when it must share the rising proceeds of that joint project. These conditions are more likely to hold, and will hold more strongly, when workers act as the limiting reagent in the production process. Business leaders will always chafe at this constraint and insist they need more labor, emphasizing the additional production they could unleash. The pleas must fall on deaf ears.

Flooding the low end of the domestic labor market with foreign workers may boost production but it erases the incentives to produce in ways beneficial to the lower-wage workers already here, or to share the proceeds of rising output with them. Total output may increase, but output per person will not. The nation might simultaneously become “wealthier” in aggregate and place itself on a lower trajectory for economic progress—for instance, with 50 years of declining construction-sector productivity. Owners of capital and managers of firms might see their profits and wages rise, even as the typical worker’s wage stagnates or falls. In many respects, the impact of reliance on foreign labor entering the United States mirrors the impact of offshoring American production to foreign labor abroad. Capitalism will not deliver on its promise so long as American capital can choose workers in those markets over the workers in its own.

By contrast, when employing the nation’s workers is a competitive imperative, and increasing productivity is the key to growth, that is what firms will do. This principle is so obvious to capitalism’s proponents in other contexts, as they celebrate the power of competition in free markets to solve any problem, overcome any scarcity, innovate around any obstacle. Yet when labor is the problem to solve, scarcity to overcome, or obstacle inviting innovation, all is suddenly lost. If complaints about “jobs Americans won’t do” elicited only laughter, and creating jobs that Americans would do were a non-negotiable prerequisite to generating profit, imagine what capitalism’s awesome power might achieve.

The point about productivity is especially important, and the one thing I would add to Vance’s own answer. Yes, part of the solution to a “labor shortage” caused by enforcing our immigration laws is to bring American workers off the sidelines. But equally important is boosting productivity of workers, both existing and potential, within the sector.

It’s one of the most stunning facts about the American economy in the past 50 years: productivity in the construction sector has declined. It literally takes more labor than in the 1960s to produce the same output. How is that even possible?! It’s possible because in the intervening period, cheered on by the Lulu Garcia-Navarros of the world, we opened the floodgates to unskilled immigration both legal and illegal, which enabled builders to throw more low-cost labor at projects instead of investing in better processes and technology. Any time anyone faced a challenge filling these unproductive, low-paying jobs, the answer was not to rethink the model, it was yet more immigration. And here we find ourselves today.

Had productivity increased at even 1% per year since then, the sector would need 40% fewer workers today to produce comparable output, and each worker’s wages could be much higher and the jobs much better. Of course, had that happened, construction activity would also be much higher, creating new demand for workers. The market would find an equilibrium—this is, of course, what markets are good for—in which construction firms could offer good jobs to workers and use that labor to provide useful products and services to customers. Investing in better and more efficient ways to use workers productively and serve customers well would be the best path to profit for the firm and higher wages for the workers, and would benefit the nation as well. This is, of course, the point of capitalism.

What’s most galling about Garcia-Navarro’s line of questioning is not that she knows so little about demographic trends, the housing market, and employment data—in her defense, those are all fairly technical topics and she is not an economics reporter. The bigger problem is her apparent instinct, even while lacking any useful information or arguments, to embrace a nonsensical and ahistorical narrative that sees cheap labor as good and necessary. Inadvertently, she is endorsing the foolish position of the Heritage Foundation’s Steve Moore: “Cheap labor leads to a booming stock market? That benefits everyone.”

Possibly, some element of a New York Times reporter’s default worldview points in this direction. More likely, the issue is an overpowering social and political imperative to demonstrate pro-immigration bona fides by opposing any enforcement of immigration law (but don’t worry, not in favor of illegal immigration). If that means toeing the corporate lobbyist’s line, so be it. As Vance’s counterpart, Governor Tim Walz, argued in their debate, one way to identify a good immigration bill is if it’s what “the Chamber of Commerce in the Wall Street Journal said.”

BONUS COVERAGE: IS THIS NEOLIBERALISM?

Always good to see former president Bill Clinton rehashing the worst mistakes of neoliberalism. Campaigning for Kamala Harris this week, Clinton said:

We got the lowest birthrate we’ve had in well over a hundred years, we’re not a replacement level, which means we’ve gotta have somebody come here if we want to keep growing the economy, unless one of you is one of these artificial intelligence geniuses and figured out how we can all grow with no work, which I’m not sure would be good for us.

He has the wrong metric. “Growing the economy” is not an end unto itself. The goal is prosperity, which requires growing the economy not merely by adding people, but rather by increasing the productivity of the people. Apparently that’s not a concept he is familiar with, because he jumps immediately to the idea of AI rendering work superfluous.

This is indeed how much of the mainstream economics and policymaking community thinks these days. Growth comes from adding people, new technology eliminates employment. It has not an ounce of theoretical or empirical support. But by discounting the very existence of the tested and proven pathway for growth driven by and for workers, it conveniently absolves the elite of any accountability for the economy’s failure to deliver broad-based prosperity. Whatever we do, let’s not grow the economy with the people here, deploying technology that boosts their output in a tight labor market that ensures they enjoy the gains. Stock portfolios might not rise as fast.

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