“Foreign Labor Contractors”
a.k.a. Gangmasters —
The New Immigration Paradigm?
Wednesday, October 04, 2006
Edwin S. Rubenstein
We’ve all heard stories about
Mexican immigrants doing the heavy lifting after
Hurricane Katrina. But
Chinese immigrants?
That’s right—2 to 3 thousand Chinese immigrant
workers
may soon help rebuild sewers, houses, and water
systems in small towns along the
Gulf Coast. Local officials claim the Help Wanted
sign has been out for months, but big U.S. contractors
are simply too busy to work in the affected area.
The Chinese workers won’t hop on a
plane or take a
slow boat from China in hopes of landing a job in
New Orleans or Gulfport. They won’t
enter illegally. If the deal closes they will be
hired, en mass, in China by Tangdu International
Enterprises—a Chinese labor contractor. When they
arrive, they’ll work for two large Chinese companies—Beijing
Construction Engineering Co., Ltd., and
Beijing Urban Construction—and smaller local
partners.
To add insult to injury, these companies say they’ll
use
Chinese building materials in order to avoid the
higher-priced, but sturdier, American products.
What does this portend for structural integrity in a
future Katrina? Or, more importantly, for the integrity
of (what’s left) of our immigration controls?
For this anecdote is of more than local interest. It
exemplifies a new model of immigration.
Traditionally immigrant workers negotiated directly
with their U.S. employers. In the new paradigm, labor
contractors like Tangdu hire immigrant workers for many
U.S. employers simultaneously. On VDARE.COM, these
employers have been called "gangmasters".
One of the largest contractors is an outfit called
Global Horizons. Its
website describes it as
"…the first company to
establish a new and improved labor-recruiting, labor
providing business model to meet the temporary and
permanent needs of employers worldwide."
"Recruiting quality
workers from diverse places like Thailand, India,
Nepal,
Israel, as well as
Eastern and
Western Europe, Global Horizons brings these workers
to any economy where domestic labor is in short supply
because of the "economic evolution" occurring in that
particular country. This, of course, includes the
United States of America."
Global Horizons was founded in 1989 by an Israeli,
and is currently headquartered in Los Angeles. At any one
time it has 3 to 4 thousand farm workers
under contract in up to 28 states.
Contract labor is increasingly the norm in
agriculture. In 2002 43% of California’s farm workers
were supplied by third-party contractors, the rest were
hired directly by farmers. In 1983 only 28% were hired
by contractors. [Farms
Increasingly Rely on Subcontracted Farmworkers,
Petoskey News-Review, AP, July 14, 2006.]
Farm workers are brought under the
H-2A visa program for seasonal agricultural workers.
To earn a visa, employers must show that they’ve tried
to recruit US workers first, and provide free, DOL-approved
housing for all temporary hires.
But
western farmers do not like the H-2A program. They
say it is too inflexible for "perishable western
agriculture" because it requires farmers to certify
their need for workers 60 days before hiring them. The
housing requirement is also regarded as onerous.
Enter the labor contractor.
In 2004 Global Horizons brought in
hundreds of H-2As from Thailand to work in
Washington State’s Yakima valley. The workers were
housed in
overcrowded motel rooms that violated local health
regulations for human habitation. There were no kitchens
or laundry facilities. Global Horizon’s workers were
paid
less than the wage for which they were contracted.
Washington State fined Global Horizons for violating
labor laws, and in 2005
forced the firm to pay complete financial restitution
to workers and the state totaling $230,000. The
employers didn’t pay the fine—Global Horizons did.
Similarly, if Global Horizons had brought in illegal
aliens instead of H-2As, they would have absorbed the
fines that would otherwise have been levied on the
employers that hired them.
There are other advantages of hiring via contractors.
Contractors enable employers, in effect, to outsource
their HR departments, reducing the expenses involved in
vetting new employees and applying for their visas. Some
contractors even provide equipment for their workers—a
big savings for employers.
But the big draw is the avoidance of legal liability.
In
the words of U.C.-Davis economist Phillip Martin,
labor contractors act as "…..’risk absorbers,’
absorbing fines that could otherwise be levied on the
farms where the workers were employed in the event of
immigration enforcement."
In theory, the workers can also benefit. They’re more
likely to have stable employment with a large
contractor. The United Farm Workers supports the H-2A
visa program—claiming that H-2A status makes farm
workers more likely to join unions and press for wage
hikes.
But in a global economy, these gains are elusive at
best. Economic differences among countries are
widening—encouraging migration from low to high wage
countries.
In 1975, for example, the per capita income gap
between rich countries (defined as those with $9,300 or
more per person per year) versus poor countries (below
$750 per year) was 41 to 1; by 2000 this gap had
grown to 66 to 1. [Phillip Martin, "Managing
Labor Migration: Professionals, Guest Workers, and
Recruiters," United Nations Expert Group Meeting
on International Migration and Development, July 6-8,
2005.]
International contractors can round up crews from all
over the world, and then negotiate with U.S. employers
on behalf of the entire crew. There inevitably is a
race to the bottom, with Mexicans (per capita GDP
$10,000 per year) displacing Americans ($42,000), and
Chinese ($6,800) displacing Mexicans. Even Chinese
income levels would look good to an
Indian worker ($3,300) or a
Bangladeshi ($2,100).
The wider the income gap between the native and
immigrant workers, the more profitable labor contracting
becomes.
No one knows this better than the federal officials
who administer the H-2A visa program.
In fact, several ex-administrators of the H-2A visa
program have left the Department of Labor to open their own
labor brokerages. They became labor contractors—applying
to their former colleagues for visas.
Surprise, surprise: the number of jobs certified as
requiring H-2A workers rose sharply after they left. Not
to mention the fees collected by the new labor
contractors.
We don’t allow military brass to leave the
Pentagon one day and
work for defense contractors the next. Shouldn’t we
have the same safeguards for officials who administer
our immigration laws?
This is
moral hazard, pure and simple. Yet it’s apparently
all legal—as are the immigrants this corrupt system
brings into the country.
Legal, that is, until Congress wakes up. Or is woken
up.
Edwin S. Rubenstein (email
him) is President of
ESR Research Economic Consultants in Indianapolis.
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