With Unemployment Rising, Is It Time to Stop Hiring Foreign Workers?

This is the time when anger about the sorry state of affairs for many unemployed or soon to be laid off American workers causes sever misplaced anger towards foreign workers and immigrants. It is worth noting that it is not the fault of these foreign workers who just like many of us want to make a decent living and have no intent whatsoever to cause suffering to anyone. The economic conditions under which companies operate dictate on the type of labor hired. Naturally, companies will seek the cheapest labor possible, and if American labor has become too expensive these companies will outsource. It is not fair for government to interfere in the market and dictate what type of labor needs to be hired because it does not mitigate unemployment risk at all. Seeing how prices and wages are related and a function of supply-demand, introducing any restrictions in the labor market will cause further depression of wages and lower labor demand.

The Senate passed a bill placing restrictions on banks which have received TARP money and who hire foreign workers:

Senate approves restriction on foreign hires

The Senate voted Friday to restrict the hiring of foreign workers by banks that are receiving government bailout funds while undergoing vast layoffs.

The legislation by Sens. Bernie Sanders, a Vermont independent, and Charles Grassley, R-Iowa, would require the banks to seek American workers before turning to foreign nationals when they're hiring. It aims to prevent replacement of Americans by foreigners working under the H-1B visa program, which allows employers to bring in workers for high-skilled and advanced-degree jobs.

The measure has a two-year life and if signed into law would apply to the more than 300 banks that are receiving money from the taxpayer-funded Troubled Asset Relief Program.

The Senate added the restriction as part of the massive economic stimulus package lawmakers are crafting as part of President Barack Obama's plan to reinvigorate the economy.

If it becomes law, banks seeking visas to bring in foreign workers would be barred from displacing or replacing American employees for three months before and three months after petitioning the government for the visas.

...

Partial data from the U.S. Bureau of Citizenship and Immigration Services suggests that the banks ultimately got visas for only about one-quarter of the number of workers they initially sought permission to employ. For example, the banks and their subsidiaries filed more than 5,000 visa applications with Labor Department officials during the 2006 budget year. After that step, they ended up with about 1,200 new workers approved by the Citizenship and Immigration agency.

From: AP

I would imagine that left alone banks would seek the cheapest labor possible. Given the current state of the economy and job market with unemployment surpassing 7% and climbing, it is only natural that wages will go down as long as prices remain depressed.

$2 Trillion Bet

In a feeble attempt at staving off what looks to be a pretty solid recession and restart the economy the Federal Government is planning to go on a spending spree. There's just one thing: the government is illiquid!

The prevailing belief in the Obama administration, and backed by the the Democratic controlled House as well as the Senate, is that pumping large amounts of cash into the economy in a myriad of senseless projects will prove to be the magic bullet. Dr. McTeer, previous president of the Dallas Federal Reserve, rightly notes that this current attempt at fixing the economy is akin to going wild hog hunting with a shotgun.

Secretary Geithner said he wants to spend upwards of $2 trillion to stabilize the private sector, mainly the banking sector, while the Senate was passing the Stimulus Act. Unfortunately for us Secretary Geithner is placing too much faith on the forecasting models his department is populating. The question that should be asked, however, is where is the Treasury going to find this money? If his department is forecasting an increase in government expenditure to stimulate the private sector, hence the economy, the money has to come either from the government borrowing, or increase the collection of taxes. Given that investment is hardly stimulated by an increase in taxes, and if the general economic model of supply-demand holds true, government can hardly afford to increase spending to generate growth while either borrowing or increasing taxes.

Additionally, there is no guarantee that the very large amounts of spending can be effective. The government would be falling into the exact same trap the financial services found themselves in. In effect, it would be over-leveraging its self. Ultimately, the taxpayers will be the ones who will suffer most, who unlike corporations, cannot reorganize financially as easily.