The Price of Everything - Eduardo Porter [58]
FARMERS AND FINANCIERS
The biggest seals work for banks. Banks pay enormous bonuses to draw the brightest MBAs or quantum physicists. These bright financiers, in turn, invent the fancy new products that make banking one of the most profitable endeavors in the world.
Remember the eighties? Gordon Gekko sashayed across the silver screen. Ivan Boesky was jailed for insider trading. Michael Milken peddled junk bonds. In 1987 financial firms amassed a little less than a fifth of the profits of all American corporations. Wall Street bonuses totaled $2.6 billion—about $15,600 for each man and woman working there. Today, this looks like a piddling sum. By 2007 finance accounted for a full third of the profits of the nation’s private sector. In 2007 Wall Street bonuses hit a record $32.9 billion, $177,000 per worker.
It goes without saying that this type of pay is not the norm across industries. In America’s rural economy, far from the steroid-laced streets of Lower Manhattan, remuneration is less about incentives than about keeping workers alive. In the spring of 2009, the average wage of fieldworkers on American farms was $9.99 an hour.
Among other tactics to ensure cheap labor, farmers regularly lobby Uncle Sam. They asked the government to open the door to farmworkers from Mexico as far back as World War I. They did it again in the 1940s, when the Bracero program was launched to replace the American men who had been shipped off to World War II. The program survived until 1964, a tribute to the lobbying power of growers. But when it ended and farmworkers’ wages started to rise, farmers replaced them with something cheaper.
Farmers today estimate that about 70 percent of the million or so hired workers tilling fields and picking crops are illegal immigrants. In 2006, as the United States Congress debated an overhaul of immigration law, I met Faylene Whitaker, a farmer who grew tobacco, tomatoes, and other crops in the Piedmont area of North Carolina. Whitaker was concerned about the high cost of employing immigrant workers through the prevailing legal channels and wanted a better deal. “We would rather use legal workers,” she said. But “if we don’t get a reasonable guest worker program, we are going to hire illegals.” The visa set a minimum wage by comparison with other farm wages in the area. At the time it was about to rise to about $8.51 an hour from $8.24. Illegal workers, by contrast, could be had for less than $6.50.
ILLEGAL IMMIGRANTS, OF course, want the $6.50-an-hour jobs. That’s why they risk life and limb to come across the border to get them, evading Border Patrol agents, criminal gangs, and snakes. These are the best jobs many poor Mexicans can aspire to. They are a path to relative prosperity, compared with the deep poverty of their villages and neighborhoods. Migrants’ comparative good fortune—loudly displayed each time they return home with spare dollars in their pockets—spurs their younger brothers, sisters, and cousins to make the voyage as soon as they come of age. They want to be rich like them.
This is exactly what is supposed to happen. Like differences in other prices, pay disparities steer resources—in this case people—to where they would be most productively employed. Some of the hardest-working Mexicans are drawn by the relative prosperity they can achieve north of the border. Similar drives motivate the 11 million immigrants living in Germany, 7 million in Saudi Arabia, and about 6.5 million each in France, Britain, and Spain.
The inequality that has spurred such vast movements of people is an inevitable and, indeed, necessary feature of a capitalist economy. In poor economies, fast economic growth increases inequality as some workers profit from new opportunities and others do not. The share of national income accruing to the top 1 percent of the Chinese population more than doubled between 1986 and 2003, to almost 6 percent. Inequality, in turn, can spur economic growth, drawing people to accumulate human capital and become more productive. It