Impact Of Government On The Market

Once in a while you come alone a story in the news that has more of a story between the lines then in the story itself.

Blue Hampshire posted a story that linked to an article in the Boston Globe.  Blue Hampshire's story, found HERE, attempted to put a positive spin on the fact that companies are now finding themselves paying as much as 40% more in wages for imported workers because of new regulations pushed through under Obama.

Here are the highlights from the original Boston Globe story found HERE:

For more than a decade, employers on Cape Cod and the Islands have depended on seasonal foreign workers to meet their summer staffing needs because they cannot find US citizens to fill the jobs. But new rules for the H-2B seasonal worker visa program have sparked unexpected increases in required wages – some in excess of 40 percent — after room rates, menus, and other prices have been set for the season.

Some Cape Cod resorts are now paying hourly wages that are $4 or more above expected rates, Cape tourism officials said. The minimum required wage for a house cleaner has jumped more than 30 percent to $13 per hour from $9.91, according to figures from the H-2B Workforce Coalition, an association of employers who use the program. Drivers must now be paid $18.02 per hour, up more than 40 percent from $12.76.


Many business owners are also keeping a close eye on the debate over the immigration bill, which passed the Senate Thursday but faces opposition in the Republican-controlled House. They are worried that lawmakers, concerned about jobs for American workers, might not appreciate the importance of seasonal foreign help to tourism industries and make the program more restrictive and costly.


For many Cape and Islands businesses, the H-2B visa is at the heart of summer hiring. The program allows businesses to bring in workers from abroad to fill low-skill positions for which they cannot find qualified domestic applicants.


The developments that led to this year’s wage increases began in 2008, when the Department of Labor issued new rules for determining prevailing wages.

Note here that in 2008 Democrats were still in control of both houses and Obama was president.

So basically what this story is saying is that seasonal businesses look for cheap labor because US citizens can collect an average of $63k a year in salary and benefits from being on welfare, many would rather sit back and collect instead of working a hard job to collect $10 or $20 an hour (equivalent of $20k to $40k per year).  And with government grants and loans paying for college education, even most college kids don't have to work to pay for their education.

Businesses resort to bringing in workers from other countries who are willing to work for $10 an hour.

Government allowing more and more workers from other countries drives down the salaries of US employees as well.

We saw this play out in the 90s under Clinton with IT jobs.  Because of the boom from the internet IT people were able to come directly out of college and demand high salaries and even "programmers" with minimal skills could find themselves decent jobs just from getting a couple certifications and not even having full college degrees.  Government stepped in and allowed a massive influx of H1-B visas, brining in IT workers from other countries.  These workers were more then happy to accept jobs paying half of what many US IT workers made but even with the influx of non US workers there were still more IT jobs then people to fill them.  Then came the dot com bubble burst.  Thousands of IT workers making six figure salaries for companies that had no income structures found themselves out of work and to make matters worse, there are now the cheaper out of country employees willing to work less and put in far more hours competing for the same jobs.

Same thing is playing out again with these lower skilled workers, only this time government seeks to correct its prior mistakes by trying to level out the salaries forcing companies to hire foreign workers at higher salaries.

As a result, as the article above points out, businesses are looking for ways to recoup the added cost which they point out it is too late this year to increase costs but more then likely next year we'll see higher room rates, meal costs etc making it more expensive on the rest of us essentially increasing inflation driving the worth of our own salaries down.