Illegal Labor Markets?
Why would a bunch of illegal immigrants want to gather in one place looking for work?
An article from nola.com concerning the market for “day-laborers” in New Orleans may have the answer.
Not surprisingly, these folks wish to hang out in the parking lot of places like Lowe’s or Home Depot. It would seem that people who are at these stores purchasing supplies might also be interested in hiring some labor. That is, building supplies and day labor are complements.
The article outlines some of the problems that illegal workers face. These workers have difficulty ensuring they are paid for their work and have little recourse if they are not paid. While this problem is unfortunate for the illegal workers, it gives us an opportunity to reflect on how important property rights and the rule of law are in making economic systems function.
Normally, if a person hires a day laborer, there is either an explicit contract or (more likely) an implicit contract. If this contract is violated, the court system is there to resolve disputes. Our civil court system does quite a good job at enforcing contracts.
However, this is not an option for illegal workers – to take their dispute to the court system would be an admission of a engaging in an illegal activity. It is the same reason you can’t take your coke dealer to court if he burns you on a drug deal. But drugs have been sold, and illegal immigrants have been hired for some time. The “bad deals†are a cost of dealing in the “underground economyâ€.
So how are these contracts enforced?
There are other, albeit more costly, ways to enforce contracts other than the court system. “Say hello to my little friend!†As mentioned in the article and obvious from any movie about drug dealers, violence is a candidate. But there is a second way that is hinted at in the article.
One could think of the transaction between a day laborer and a builder as one involving a classic asymmetric information problem. The day laborer doesn’t know about the quality of the employer – whether they will pay at the end of the day. Of the ways we can solve asymmetric information problems, many are not applicable here (guarantees and warrantees will not work). Could reputation solve the problem, outright?
Maybe, maybe not. But these designated “markets†for day laborer would seem to make it easier for reputation to help solve the problem.
If someone who hires a bunch of day labor does so from the same location, and continually pays their workers, won’t that person earn a reputation as someone who is fair? If another person does not pay wages, and the workers inform other laborers, might it be more difficult for the person to hire laborers?
Hiring workers from only a few locations lowers the costs to the contractors of developing reputations because it is easier for both “the good word†and “the bad word†to get out about builders.
While the people who are shooing away these fledgling markets in other locations may not intend to, couldn’t it be the case that they are increasing the likelihood that day laborers will be exploited by unscrupulous employers?
–CT
A hat tip to MC who helped out with this post (only the good parts).
April 16th, 2007 at 5:34 pm
Is it of any real concern if criminals (the illegal day laborers as on side of this criminality and the employers illegally hiring known illegal labor as the other side of the crime) exploit each other?
The owners of the sites where these labor-prostitution crimes take place have their own reputations to consider as well.
Screw taking care of the crooked contractors and obviously illegal day-laborers. They have their own economic interests, which include not being shunned by legitimate (read: more likely to be paying) customers and avoiding the negative attention (and like negative sales push) of ongoing law enforcement activities.
A friend ended up with an assembly plant way up in Chaska Minnesota – a plant that had been staffed in 40+ of the 50 assembly jobs with laborers from a temporary agency.
One morning several workers didn’t show – out of what until then was a reliable hispanic workforce – so he called the agency for six replacements.
They had only three to send over, who happened to not be hispanic, and who also when they walked in yelled “Immigration, Green Cards Please!”
Thirty-two workers disappeared within minutes.
Seems they had bought forged paperwork and were illegals, though disguised.
The only plus side my friend could see is that their payroll deductions would stay with our government, potentially reducing the tax burden for us all.
Nonetheless watching an illegal labor market go on is no different than watching a drug deal go down and not reporting it.
Cheers,
Steve
April 19th, 2007 at 11:08 am
The managers of Lowe’s and Home Depot should tell the illegal workers to leave. If the illegal workers are so worried about getting paid then they should get real jobs and sign contracts. To eliminate illegal workers, all the contractors have to do is not hire them. If contractors would only hire men or women who were not illegal then the illegal workers would want to get a real job. Since the contractors are not paying the illegal workers what they should be paying them, the illegal workers should want to sign contracts and make them not illegal and/or become legal.
April 19th, 2007 at 3:53 pm
It is worth pointing out that the employers using illegal cash labor are also illegally evading taxes, violating employment laws, using employees with no background checks that they know are felons (how do you say “Axe Murderer” in Mexican?) and most likely uninsured.
The word for this is scabs hiring scabs.
Plain & simple – crooks.
By hiring these contractors you can become a scab and a crook with them.
May 9th, 2007 at 4:36 pm
It is very unfortunate that we have this problem. What is an employer suppose to do? They need workers and it seems like only the illegal immigrants want to work. I guess to a certain extend, employer’s don’t mind using the immigrants because they don’t have to pay benefits. On the other hand, they are not guaranteed that the work will get done and will they come back the next day. I think most of the illegal immigrants would give employers a good days work because they need the money. These immigrants should not be in the Country so they are constantly faced with negative people not wanted them around. They have to find work on the street. Yhey don’t go through the normal hiring procedure. They have to find a place where they would be allowed to stay. Society has already decided that all immigrants are up to no good. I heard someone complaining because they had approximately 20 or more immigrants staying in one room. There are issues on both sides of the fence. I guess you would have to weigh out the good and the bad and decide if we should allow them to stay in our Country.