Friday, October 09, 2015

Economics and Politics of Columbus Day

Christopher Columbus apparently set sight on the New World on October 12, 1492.  Although Congress did not get around to setting aside an official holiday until 1937, U.S. citizens found it appropriate to celebrate the day even in the 18th Century.  Few argue with an extra day off, but Native American groups have increasingly objected to a celebration in honor of someone who heralded several centuries of what they regard as genocide and oppression.

Consequently, several states observe the federal holiday as Indigenous Peoples Day.  In 1989, my home state of South Dakota unanimously passed legislation to proclaim 1990 as a Year of Reconciliation between Native Americans and white people.  Columbus Day was changed to Native American Day to give the Sioux peoples who populate South Dakota a chance to celebrate survival if nothing else.  Their parents and grandparents knew well the sting of broken treaties, decimation of the buffalo (their principal source of food), starvation, smallpox, measles, alcoholism (there had been no precedent in their diet for hard liquor), discrimination, law enforcement abuse, injustice in the courts, and all-round indifference by the white immigrants who found it so easy to take away Sioux ancestral lands. 

Interestingly, Native Americans in South Dakota celebrate October 12th with the Stars and Stripes hoisted high.  There are few who are more patriotic and veterans of any military service are held in high regard in their communities.  Native American loyalties to the nation stand in bold contrast to the bombast of some of our country’s politicians, who denigrate today’s immigrants.  This year the holiday  -  no matter what you call it, Columbus Day or Native American Day or Indigenous Peoples Day  -  is a good time to consider the value of immigration to the U.S.

Empirical research has found that immigrants, even illegal immigrants, add economic value to the U.S.  Immigrants create new jobs through their purchasing power and by setting up new businesses.  The presence of immigrants in a community can spur expansion of business activity, which can lead to the creation of new skilled jobs.  Indeed, illegal immigrants might be particularly important to job creation and business expansion in the U.S.  They are often willing to work at lower wages, allowing business owners to stretch their labor budget across more employees.    

Furthermore, immigrant workers are typically not competing for the same jobs as native-born workers because they have different levels of education and training.  Indeed, immigrants often complement native-born workers, increasingly productivity and potentially the economic value of their positions.

It is especially interesting that immigrants to the U.S. are twice as likely to start a new business as native-born workers.  The data is from the Kauffman Foundation study in 2010.  It is often cited to support the view that immigration is important for new business formation.  The Brookings Institute completed a similar study that found immigrants are three times more likely to file patent applications than native-born citizens.

There are about 40 million immigrants in the U.S.  That is about 13% of the U.S. population and 17% of the labor force.  The Economic Policy Institute estimates there immigrants account for about 15% of the U.S. total economic output.  There are another 12 million unauthorized immigrants in the U.S.  That is about 4% of the U.S. population and 5% of the labor force.  There is no measure of their portion of the U.S. economic output, but likely it is proportionate to their numbers.

We do not know their economic output, but a recent study by the Institute for Taxation and Economic Policy shows that illegal immigrants have a significant value from a tax standpoint.  In 2014, undocumented works paid $8.5 billion in sales taxes, $1.6 billion in property taxes and $1.2 billion in personal income taxes.  The study also revealed that over half of illegal immigrants pay income taxes.

There is a particularly large Native American Day celebration held on October 12th at the Crazy Horse Monument in South Dakota.  The likeness of the Lakota leader is still under construction very near Mt. Rushmore National Park and the four stony visages of U.S. presidents glaring down on the tourists below.  I rather like the unfinished nature of the Crazy Horse Monument.  It is a testament to the unfolding story of the Sioux people.   The immigration matter is much the same. 

Christopher Columbus unwittingly wrote the preface to the American story.  The Sioux have added a few chapters and today's immigrants a few more.  Let’s hope there is a happy ending.


Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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