The End of Cheap Labor?
- Bob O'Brien
- Jul 21, 2025
- 5 min read
A Blue Elephant? Since the 1870’s the elephant has been the symbol of the Republican party, while the donkey has become the symbol of the Democrat party. Yet Republicans are associated with red states, not blue states. We pictured a blue elephant because we think that the Trump Republican party has enacted policies that target and favor the traditional base of the Democrat party, the working class, the poor and middle-class American people.
Nowhere is this more apparent than the Trump policy toward illegal immigration. I have long thought that the huge increase in cheap, low-skilled immigrant labor tended to depress wages for the poor and middle class – the lower-skilled American workers. Indeed, a comprehensive 2016 report by the National Academies of Science cited numerous studies showing a negative impact from immigration on wages, particularly those with low levels of education.
Increasingly, Washington based organizations, and Democratic politicians seem to agree. For instance, the National Immigration Forum, a leading advocacy group, has abandoned its prior position. It now argues that wages are too high, and that we need more immigration to bring them down. Likewise, the U.S. Chamber of Commerce says that doubling immigration “might be the fastest thing to do to impact inflation” by keeping wages down.
However, lower wages in an inflationary environment are only part of the problem facing the poor and middle-class Americans. For many decades, there has been a prolonged decline in the labor-force participation rate of the US-citizens. There are many American people (especially those without a college decree), who have given up and are not actively looking for work; and thus, they do not show up in the government unemployment statistics. This decline in American workers is a big factor in a number of big problems facing our society today: substance abuse, welfare dependency, mental health issues, crime, family breakup, and even early death. Getting more working-Americans back in the labor force would be a good thing.
In our opinion, the Biden Administration, by encouraging the mass immigration of foreigners who were more than willing to work for cheaper wages, made this problem incredibly worse for the American working class. Government statistics bear this out. In August 2024, data released by the Bureau of Labor Statistics, showed that native-born Americans lost more than 1.3 million jobs over the previous 12 months, while foreign-born workers gained more than 1.2 million jobs.
There has been a dramatic change since President Trump took office this January. The headline from MSN.com says it all: American-born workers see significant job gains as foreign-born employment drops. According to MSN, “The latest workforce data suggests that American workers have been the main beneficiaries in the labor market amid the Trump administration's crackdown on illegal immigration. The Labor Department's jobs report for the month of June 2025 showed that the number of foreign-born workers declined by more than 543,000 jobs since January. By contrast, the number of U.S.-born workers increased by 830,000 from May to June and is also over 2 million higher than when the second Trump administration began in January.”
We expect this new trend to intensify as the Trump Administration increases its efforts to mass deport illegal immigrants. Trump’s new Big Beautiful Bill, which recently passed Congress, dedicates a total of $150 billion toward border security and immigration enforcement. Almost a third of that will go to complete construction of the border wall between the United States and Mexico; most of the rest is slated for Immigration and Customs Enforcement (ICE). Although there have been some lower court decisions that have limited the President’s immigration powers, we expect that the President will ultimately prevail in most cases, and the President will succeed in sending back millions of people back to their native lands.
Many economists and businessmen are alarmed. For instance, Robert J. Shapiro, a former undersecretary of commerce in the Clinton administration, is predicting that mass deportation will “lead to a dire shortage of low-wage workers, which would bring on a recession while reigniting inflation.” Not necessarily! Economics 101 says that when you reduce the supply of any product (in this case the labor work force), the cost of that product will tend to increase. In other words, if you reduce the supply of workers willing to work for low wages, businesses will be forced to pay a higher wage to attract the workers needed to maintain their business, and the higher wages will attract many American workers who are now on the sideline.
For many years now, the Bernie Sanders of the world have been proclaiming that the rich businessmen are making too much money, while the average worker is getting the short end of the stick. To the extent that is true, the Bernies of the world ought to be very happy, for we think Trump’s immigration policies will give the average worker much more leverage and give the working community a higher percentage of business profitability. (That’s probably not bullish for a highly valued stock market).
There’s are a few more related things Trump is doing that is underappreciated. Why do you think that Apple and many other large American companies are making most of their products overseas? We believe the biggest reason is the abundant supply of cheap labor in China, India and other major exporting countries. In placing higher tariffs on exporting countries, and pushing American companies to produce more in America, Trump is diminishing the advantage of employing cheap foreign labor, and as a result, he is putting the American worker in a much better bargaining position.
Finally, let’s go back to Economics 101. Another basic tenet is that if you increase the demand for any product, the price of that product will tend to increase. We believe the huge increase of illegal immigration during the Biden Administration significantly increased the demand for lower-cost housing, thus increasing the cost of housing for everyone. Conversely, with the virtual shutdown of new immigration, that increased demand has come to a screeching halt. In addition, as these immigrants are forced to leave subsidized housing and are retuned back home, the supply of available housing will inevitably increase, and the rents or purchase prices of that housing will tend to go down.
It may be hard for many people to believe, but many years from now, future historians may proclaim that billionaire Donald J. Trump was the champion of the poor and middle-class American citizens.
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