No Golden Age Without Cheap Labor
Cheap labor, especially immigrant labor, is in the national interest.
The Department of Homeland Security’s social media feeds are rife with disturbing media depicting mass detentions of Hispanics and other people of color at their workplaces.
Often, such videos of allegedly undocumented workers are accompanied by Trump supporters in the comments section shortsightedly hailing the reduction of competition in the job market, simplemindedly hoping that it would lead to an increase in wages.
Trumpists hail this as the dawn of a golden age—one in which Americans shall, quite miraculously, enjoy both soaring wages and unprecedented productivity. A marvelous fantasy, to be sure—though it owes more to political alchemy than to economic reality.
Will the reduction of low-wage workers in the labor pool increase the wages of American workers? Nominally, yes. Functionally, no.
Most importantly, the removal of cheap labor through mass deportations of undocumented immigrants will derail and significantly harm President Donald Trump’s plan to restore American manufacturing by strengthening a push factor that drove manufacturing out of America in the first place.
Whether Trump likes it or not, cheap labor, especially immigrant labor, is in the national interest if economic revival is the administration’s objective. There is no way around it.
Now, simple economics dictates that the greater the supply exceeds demand in the labor market, the lower market wages will drop. That is a fact. Undocumented immigrants often do work that Americans themselves are unwilling to do because of the class stigma associated with said jobs and menial pay, driving down, in some sectors, wages.
Should undocumented and immigrant labor be removed from the market, employers faced with worker shortages will be forced to raise wages to attract workers. As a result, wages will continue to rise until Americans start to fill the roles needed.
Now, out of chauvinism or short-sightedness or a toxic combination of the two, one might look at soaring wages and then assume all is well and that expelling immigrant labor indeed was the solution the United States should have acted on long ago, only if Congress and Republicans weren’t supposedly weak, as some populist national conservatives would claim.
If there is one thing one can credit populist nationalists with, it is a solid understanding of elementary economics. Unfortunately, elementary economics cannot account for complex macroeconomic realities, just as middle school arithmetic cannot send rockets to space.
Likewise, nationalist sloganeering and chauvinistic ballyhoo of “America First” are no substitute for sound policy.
Focusing solely on the potential wage gains from reducing labor market competition overlooks the broader and longer-term economic consequences that could ultimately negate any short-term benefits and harm the American economy.
The fatal flaw many right-wing populists make is treating the labor market as if it exists in isolation—as if improving wages can be pursued without consequences in the wider economic system. While they don’t openly articulate this view, populist Republican rhetoric and policy proposals reveal a quasi-Marxist fixation on the labor theory of value, in which labor is assumed to be the primary source of economic worth. In doing so, they reduce complex systems of value creation, exchange, and consumption to a narrow framework that privileges the worker as the central figure of economic justice. But this is a categorical error.
Everyone, after all, loves higher wages until they transcend their selfishness and see the full scale of what that entails.
Labor is a key input cost in various markets where Americans participate as consumers. Although workers may experience wage increases at their jobs, rising input costs can lead to higher prices for the goods and services they use. As a result, these increased expenses may offset any wage gains.
Free trade could have brought cheaper goods, allowing Americans to spend their wage gains more effectively. Tariffs, however, isolate the country from competitive foreign goods, forcing Americans to buy locally. Buying local while local wages skyrocket means accepting higher input costs and, consequently, losing gains in real wages.
The effects of a shrinking labor pool are already visible in sectors that rely heavily on immigrant and undocumented workers. Take the restaurant and food service industry, for example. It has long struggled with chronic staffing shortages, and tighter immigration policies are poised to exacerbate the issue.
Immigrants make up roughly 22% of the U.S. food-service workforce, and an estimated 7% of restaurant workers could be subject to deportation under Trump’s directives. Their sudden absence would leave thousands of kitchens and dining rooms understaffed, forcing employers to jack up wages by as much as $3 per hour just to attract new hires.
While higher pay might initially appear to be a win for American workers, it ultimately translates into substantial cost increases for businesses operating on razor-thin margins—costs that are inevitably passed on to consumers.
This means that American families will end up paying more for the same goods, all to cover the labor costs that were previously kept low by an abundant workforce not just in foodstuffs but also in other industries likely to be hit hardest by deportation activity—construction, food processing, and basic manufacturing.
The central irony of this crackdown on immigrant labor, undocumented and documented, is that it directly undermines the goal of American industrial revival. Many of the very forces that pushed manufacturing abroad in the 1980s and 1990s—rising domestic labor costs, inflexible hiring rules, and lack of available low-skilled labor—are being reintroduced under the banner of economic nationalism. Tariffs, are being marketed by the administration, as the snake oil that could make things work this time around.
It was ever-expanding, inflexible worker entitlements and rising wages, not primarily some bizarre Chinese conspiracy, that contributed to eroding America’s manufacturing base.
This is not theoretical. The Manufacturing Institute estimates the U.S. will face a shortfall of over 2 million workers in industrial roles by 2030, a gap worsened by deportation drives and reduced immigration flows.
The notion that Americans will simply “step up” and fill these jobs overlooks decades of labor market data.
In several factory towns, where, despite offering competitive wages, employers struggle to find enough local applicants willing to take physically demanding, repetitive, and sometimes hazardous jobs that immigrants, especially undocumented immigrant workers, would be glad to accept.
These employers may raise wages, as populist Republicans hope, but that will only increase the costs of goods and services, making American goods less attractive to local buyers, who will cut back on spending in response to rising prices, and then foreign buyers, who after Trump’s erratic tariff regime, will enforce their own retaliatory tariffs to prevent the U.S. from beggar thy neighbor policies.
After all, there are limits to what the domestic market can afford, assuming the masses do not revolt when they find out it is their own president, withholding them from prosperity and sustenance via tariffs. With Trump’s erratic behavior in international trade, China will likely emerge as a more reliable trade partner for most nations, less subject to fits of tumultuous political tantrums that have characterized the second Trump administration.
In the national interest, the Trump administration must shed all uber-nationalist delusions and surrender to the inevitable fact that it can either have no immigrant labor, undocumented or documented, or a chance at an American manufacturing revival.
But both are mutually exclusive.
Americans who buy into the view that both are possible only deceive themselves.