Illegal immigration and the economy of Guatemala

The immigration debate in the United States always seems to dwell around prevention, walls, and how to keep people out. It is rare to hear any discussion about why all of these people might be willing to risk life and limb to make their way through deserts and passed armed guards to work illegally in the U.S. Why is it that there with a population of around 13 million people in Guatemala, there are an estimated 2 million more or 13% working illegally in the U.S?

The official minimum wage in Guatemala varies a bit by type of work, but sits around roughly 55 Quetzales ($6.87) per day. Of course, with an unemployment rate of over 30% many people are desparate enough for a job that they'll accept less than the official minimum. Spanish teachers at the various language schools, many of them holding graduate degrees, can make a bit more. They end up getting paid around 350-400Q per week when teaching one student, or closer to 700-800Q per week with two. Students receive 5 hours a day of individual instruction. Doing the calculation, this means a fully employed professional teacher, with graduate degrees, is earning around 160Q a day, or $20 for 10 hours of work.

By contrast, working illegally in the States in manual labor such as construction or in a restaurant might pay between $5 and $10 an hour, or $40 to $80 for an 8 hour day. Working the 10 or 12 hours that is more common, this can mean up to $100 to $120 a day. Thus by going to the States and working in manual labor, a professional from Guatemala can double to sextuple their daily income. Someone with less of a leg up at home sees an even larger improvement. Is it any wonder that they come?

Visiting various towns, while some are filled with poverty and crumbling buildings, a few have many larger houses and new construction. Upon asking about them, the answer is always the same: There are many people from this village working in the U.S. Illegal immigration represents the dream of a better life. Despite all of the hardships and the risks, the benefits are real and visible everywhere.

The demands of importing

Adding to the poor incomes is the problem that Guatemala has to import almost everything. Foods that are grown here (corn, beans, tropical fruits) and labor are very inexpensive, but everything else has the cost of travel, fuel and the poor exchange rate added upon it. Even things that are made locally like much clothing and housing require imported materials, and thus while cheaper in absolute terms than in the U.S, chew up a far greater portion of monthly income than they do for most U.S. families. Some things such as gasoline and cars are even more expensive here than in the States.

All of this importing also demands a constant stream of foreign currency. The largest source of this is money sent back from the U.S. to the families of those working illegally there. The second largest is tourism, and then followed by the exportation of various forms of fruits, vegetables, and of course coffee. When we visited a coffee plantation this weekend, we were shown how they filter out the different grades of coffee, and how the first 4 grades out of 7 are all for exportation only. Despite growing some of the best coffee in the world, the coffee most Guatemalan's drink is of the lowest quality.

Implications for U.S. Policy

To me, seeing this reality has humongous implications for U.S. immigration policy. The entire reason why the United States exists is because people in our history were willing to risk everything for the dream of a better life. So long as such poverty exists in our neighbors, it does not matter how many fences we build, how many struggling people die in the desert, or how many people we throw into prison for the crime of being poor. They will continue to come, so long as there is vaguest chance that they will get through and that they and their families will be able to live a better life.

If we really want to reduce the problem of illegal immigration, we need to help create opportunities for Guatemalans and other Latin Americans to improve their lives at home. We need to provide sane and understandable channels for those who still wish to immigrate to do so. And we need to cease our self-interested manipulations and intimidations of the governments of other countries when they implement policies that help their citizens at the expense of foreign companies.

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Consumption and Investment

What is the difference between consumption and investment? A first pass answer is that consumption is the use of resources to provide immediate pleasure, while investment is the use of resources to provide a means for procuring additional resources or reducing the work required to achieve the same results. An example of consumption would be spending on fine food, or television, or a massage. These are immediate pleasures that do not in general provide benefits in obtaining other resources. An example of investment is the purchase of washing machine, which reduces the time needed to was clothes, allowing it to be used for other purposes.

Most examples are not so simple. Is purchasing a new computer consumption or investment? It likely has characteristics of each. To the extent that it allows you to be more productive at writing, doing your taxes, or programming it is an investment. To the extent that you play games on it or surf the net, it begins looking much more like consumption.

The picture gets murkier still when you look at intangible, or even just nonfinancial benefits. Is a liberal arts education an investment? If it does not improve your job prospects, many would argue that it is not. However, if it enables you to enjoy life more, engage in more meaningful relationships, and better understand the world these seem like long term benefits enabled by the education, implying that it was investing in something, if not the ability to generate financial wealth.

A lot of the difficulty seems to come back to a question of value. If an investment is an expenditure of time or money that returns long-term value, what is it that we believe has long-term value? Limiting it to only things that have obvious financial benefit seems too limiting, while extending it to anything that makes someone happy seems too broad. Where is the line here?

Maybe its wrong to assume we need to draw a line. We certainly need to keep in mind the long term impact of any spending that we are doing, but there are no absolutes here. Borrowing endlessly in order to buy more fancy clothes, shiny cars, and oversized houses is almost certainly a problem, and we're seeing much of the after-effect in the current economic collapse. However, if we were to only invest in the future, today would be pretty miserable. In the end, some middle way seems indicated. Consume enough today to stay healthy and happy, but don't eat the seed corn, and give up a little bit of comfort to invest in a better future.

Better, not More

I had a discussion the other day with a friend who was a little dubious about the value of economic growth. Her perfectly valid point was, "I don't need more stuff". I agree, I don't need or want more stuff either. But I do want better stuff.

This highlights why I prefer the expression 'Economic Progress' over 'Economic Growth'. Growth seems to imply more stuff, and as libertarian (and sometimes too bitter for my taste) econoblogger Mish has said many times, there are tons of things we don't need more of. Progress, on the other hand, can imply quality.

One of my favorite quotes about products is one I heard from Paul Buchheit (the inventor of Gmail & founder of FriendFeed) when I went to Ycombinator's Startup School a few years ago. He said something like:

To create something fundamentally different,
try adding the words 'that actually works' to things that already exist.

As in Google: Search, that actually works. Gmail: Email, that actually works.

If you think about the companies that are succeeding and growing right now, very few of them are offering more of something. Google doesn't offer more search or more ads than Yahoo, they offer better search and better ads. Facebook doesn't offer more than MySpace does, or Friendster did before it. It offers a better way to connect with the real life people you care about.

37 signals has even built an entire philosophy and an extremely successful business around doing less, rather than more, with a cult following among web software developers. Their products are simpler than the competition, and yet do incredibly well, by solving their core problems incredibly well.

So no, we don't need more things, we need better things. Faster access to the internet, better healthcare, a public transit system that gets you where you want to go when you want to get there. Energy that doesn't require us poisoning our land and air to create it. Economic progress, not just blind growth.