A small sideline story that reflects a combination of sociological and economic facets. A Yacht Club in the Hamptons of New York is forced to cancel their restaurant services after their staff is removed from the USA due to immigration enforcement.
The larger picture is well worth discussing, because there is a large and inorganic part of the U.S. economy that will obviously be impacted by immigration enforcement and the removal of illegal or unauthorized workers. First, from the Hamptons:
NEW YORK – An ultra-exclusive Hamptons yacht club catering to the wealthy and well-connected was forced to suspend its members-only restaurant service for multiple days after several of its kitchen staff were booted from the country over visa issues, The Post has learned.
The swanky oceanfront Devon Yacht Club in Amagansett — which reportedly charges around $100,000 in initiation fees — canceled its Wednesday night dinner service after its foreign cooks had to leave the US because of problems renewing their H-2B temporary work visas, according to a letter sent to members the same day.
Food service was also canceled Thursday and was not expected to be back up and running until Friday’s lunch service, the club informed its deep-pocketed members — a group that once included Jacqueline Kennedy Onassis’s parents.
[…] “It seems that an oversight either by the agent or attorney responsible for submitting our petition or perhaps by the US Immigration Office itself has resulted in a situation where our H2B kitchen staff must leave the country immediately and return to their home countries for at least 60 days before their visas can be renewed.” (read more)
Obviously, there is not a lot of sympathy for a bunch of elitists missing their Avocado toast and brunch options. However, if we stand back and think about the scale of economic activity impacted by a return to a nationally organic labor force, we accept there are going to be major ramifications to a variety of businesses across a broad spectrum of sectors.
As a ‘let’s get on with it’ proponent of deporting all illegal aliens, cancelling H1B and J-1 visas as well as removing all Temporary Protected Status populations from the USA, we must also accept the very predictable consequences.
Due to the inorganic nature of corporatized economics built on the backs of foreign workers, right now there are thousands of businesses in the USA operating on an inorganic business model, that could never have been sustained without massive import of cheap foreign labor. Additionally, there are billions of dollars in investment that was poured into the economy based on this inorganic and manipulated job market.
There are resorts and venues operating in the USA which never would have been built without a foundation of foreign labor to service them. Take that labor force out of the economy and things will significantly change. This outcome is both predictable and necessary to reset the labor market.
As all of these foreign workers are removed there is going to be massive pressure on the wage rates for American workers. That’s a great benefit. Simultaneously, there’s also some businesses that will never survive without that foreign labor pool because the business model itself was built upon a false foundation.
Most of the time we think about the service industries with workforces that are significantly staffed with foreign workers. Hotels, resorts, restaurants, vacation destinations etc. Many of these locations currently operating would never have found capital or investment in a true economy that was not built on illegal immigration, visas or foreign workers. There are likely hundreds of resorts that exist only because the labor market is inorganic.
With a predictable rise in wages comes the increased operating costs and diminished profit return for the investors and owners. This can have a major impact, but again, this outcome is due to fraud in the underlying business model. Those businesses likely would never have started and the investment never would have been capitalized without the fraud it is dependent upon.
Take out the illegal aliens; remove the H1B visas and all other ancillary visa approvals and remove the protected status returning foreign workers to their country of origin, and U.S. wage rates and benefits will quickly increase as companies try to find a way to shift to a business model built upon real economics.
This rise in wages will be significant and that can create an inflation increase. As wages increase in price, the operating costs increase. The per unit business model then must adjust and things like hotel rooms go up in price. As resort prices increase, they become unaffordable to the current target customer, that leads to lower sales and decreased revenue. However, that natural dynamic also returns organic competition to a market that has been missing competition for decades.
It’s not just about the service industries. As the labor market contracts, wage rates for blue collar construction and manufacturing jobs also increase. This can lead to higher consumer prices during the painful phase as the natural market balance is restored. Again, many businesses will not exist because many businesses never would have existed without the baseline of imported foreign workers.
Sectors of the economy will shrink just as the restaurant service in the Hamptons has been reduced.
There will be more housing available and rent prices will return to market competition. New construction homes will be more expensive to build, but less demand for the finished product brings back incentives and competition. Overall home prices for preexisting homes will likely drop significantly; however, on the upside with increased wages and lower home values the younger generation will have the opportunity for home ownership.
The U.S. population is roughly 350 million. There are roughly 170 million civilians in the eligible labor market. If you take out 50 million illegal aliens, then do the math and you will quickly realize how many inorganic or excess businesses are in operation.
Thousands of restaurants will go out of business, because thousands of restaurants never had a real business model to maintain their existence.
The labor fraud created a fraudulent economy, and this reset is going to be significant.
The people who have the ability to pay for good American help are too cheap…. greed
I’m not too cheap to pay for American labor.
A recent poll was taken in California, asking
“Do you think illegal immigration is a serious problem?”
21 percent said “Yes, it’s a serious problem”
79 percent said “No es una problema seriosa”
Any restaurant, especially a “yacht club,” can actually afford to pay a few dollars more – and slightly raise the menu prices. People will continue to pay it.
I’m not buyin’ the assertion that these businesses will “fail” if they can’t get SLAVE labor.
Wow…you nailed that…Slave Labor. I was at Monticello and Montpelier this year and what struck me “at least according to the tour guide” was that both Jefferson and Madison did not believe people should be enslaved, yet they chose not to do anything about it. Both owned 100’s of slaves. I see the parallels with how the wealthy get rich on the backs of other people and even though they know it is wrong, they selfishly continue.
Jefferson had the foresight and strategic vision to compose the Constitution so that there would be the ability to change slavery law in the future. He knew it was too abrupt of a change to do it right away and the emotional debates would stall any effort at independence. It was too controversial of an issue to distract from the birth of a nation. Slavery was an acceptable business model for thousands of years, the target was independence not emancipation, that would have to come later.
And with US legitimate labor making a more middle class income, more people will be able to afford restaurants and motels in the first place helping to offset the costs organically with the new eventual equilibrium.
Exactly what I was thinking. It will expensive, at first, but then it will even out in the long run.
Not true, they wanted to end slavery, but if they pushed it too soon, states would not have ratified the constitution! No country, so it had to wait. Sounds like the tour guide was biased or woke! Liar
It’s the ‘woke’ revisionist narrative that has replaced our history especially in places like he visited. It’s all about the victim mentality and that America is evil bcz we had slaves hundreds of years ago. Pushing reparations to atone for our sins-especially Jefferson & Madison & others-oh those evil patriarchal colonists.
Never mind these owned ‘slaves’ were brought from horrible circumstances & places to a better world with food, clothing & housing given to them for free in exchange for their labor.
Not to mention the fact that their chances of being killed there while they were free were greater than they were here while being impressed.
It was illegal to free slaves. Washington and Jefferson were against slavery. Please read this long-but well worth the read-article about Washington and Jefferson and their works in trying to free the slaves and why they kept them.
George Washington, Thomas Jefferson & Slavery in Virginia – WallBuilders
There might be short term problems but the prices will have to go up somewhat and all will be accepted by the public.
So how many of these “cheap” foreign laborers are paying taxes? Are these employers simply paying these people ‘under the table’ so to speak in order to avoid paying local, state and federal income taxes?
No workers comp or unemployment fees either.
And bypassing minimum wage laws.
Yet, soaking up food stamps and dumping 8 kids into the local school. This rotten practice needs to end decades ago.
They don’t pay social security -federal taxes. That saves the corporations billions alone.
Rush used to tell us all about these country club Republicans. Here they are taking one on the chin. It pains me to see their avocado toast go up to $29.95.
I am betting that the membership reflects the nouveau riche NYC finance or techie types now rather than old New York GOP types. No reason that the club cannot find local older teens to work there unless their parents want them to pad the pre-college CVs with precious “internships “ rather than in service industry. The Board is probably hearing a lot of crap from members who are not getting the dinners and lunches but hopefully the board puts out listings with higher wages to attract these youths.
I loved Rush for going after Boehner types (Speaker Boehner had his own BARTENDER at his Ohio country club. !!!). Too many of them still in our party…..
America can sustain itself with legal immigration
Maybe teenagers will leave their basement game boards and learn the benefits of an
after school job
Maybe schools will teach real world skills
Everything has become so convoluted and disconnected from reality. I suspect it’s gonna be a while for brains to come down to earth, if ever
Maybe schools will teach real world skills
That would be refreshing to see high schools offering classes in the trades again.
Young people with no desire for college can learn real world skills, get OJT that pays them while they learn from skilled tradespeople and make a very good life for them selves with no student debt to crush them.
Unfortunately there are very limited entry level jobs in the building trades. We graduate 2 million from high school with no job openings
Probably because they graduate them even though they are illiterate. After all, we don’t want to hurt their feelings.
I’m proud to say it’s happening one a large a diverse level in Knoxville Tennessee.
High schools in Knoxville teaching trade skills
I’m just google “Knoxville high schools teaching trade skills”. I suspect there are a lot more communities doing the same
The only way to fix this country is to remove democrats from office!
More than 90% of the Republicans are just as bad.
Remove them wherever you can find them.
So CA has twenty dollar minimum wage. Isn’t this the equivalent to hiring Americans? It has the same effect on restaurants. Just saying one is good for America and the other not so good. There should not be cheap labor attached to breaking our laws and the government has no business setting prices either.
There are so many comments to this post I don’t have time to read them all, so apologies if this has been covered elsewhere.
One implication of this that I think Sundance has overlooked is businesses will to survive and prosper. Some businesses that might otherwise fail if they can’t use illegals anymore will innovate and develop substitutions. That’s especially true in these days of AI, robots and the like.
We’ve already seen examples of this: at McDonald’s you order on your app or at a kiosk; that eliminates their needing humans to do it. Reportedly some fast food places had people in India and elsewhere taking drive through orders. There are efforts to automate much of the cooking.
I don’t dispute Sundance’ general premise, but I know that many firms will try to innovate to stay in business. What comes of that is hard to predict but will likely contain unexpected surprises both good and bad.
There have been illegal immigrants working in restaurants since I was a girl here in California, back when California was a red state and elected Ronald Reagan as Governor. Reagan did the amnesty. The crop workers used to be seasonal and even Caeser Chavez came out against ilegal immigration back in the 60’s because it was bad for the legal immigrants.
Today I see illegals working McDonald’s and other fast food places. They make pretty good money and I am sure kids would take those jobs if they were available. We are over run here with immigrants. Not necessarily bad people though, but the welfare state is what is killing us. They take what our own citizens need and corporations benefit from the cheap labor.
It is a difficult situation once you get to know individuals and their struggles on a human level.
Not pro amnesty though. If I entered a country illegally I would expect to take my chances with being caught. We have a right to our own country.
Illegals do not have social security numbers how does McDs hire them?
Fake numbers. Easy to get.
Go to any graveyard and find someone about your age that has died and then not to distant past and then go down to Social Security office and tell them you have lost your Social Security card when you were you and don’t know your number, but they’ll ask you for information they need and you’ll have it to give to the name the date of birth. Then they look up a name and DOB and give them a card. The system is so overloaded with so much going on coming at them from every angle, but they don’t have time to try to verify an individual walk-in to get a new card. That’s my guess as to what is happening. There’s probably other ways too
Makes me wonder how many McDonalds restaurants I am working at as we speak.
Bring it on!
Americans are going to have to start having kids again.
Can’t afford that
The Caucasian Americans are choosing to have one perhaps two children or none at all we’re far behind other races
Uhh, NO. Only in economics is constant expansion seen as a positive. Many adults are not interested in having kids, or even getting married, and guilting them into having a family is just a recipe for neglect and disaster. Why does the economy have to always have inflation, and the supposed experts expecting a larger population gobbling up scarce resources?
MISSING from this analysis is that – in the aggregate – the businesses employing illegal aliens HAVE BEEN RECEIVING A TAXPAYER SUBSIDY.
Those illegals and the illegal + anchor baby children only accept below organic market wages because they can afford to live with those wages + taxpayer subsidized housing, food, medical care and education. The businesses get to profit from that arbitrage.
So what will really be happening is that those de facto taxpayer subsidies for those businesses will go away, and the economy adjust to organic, “invisible hands” wages while benefiting from the tax subsidy savings.
Walmart workers often need food stamps
In general, a very positive development.
If we eliminated the tax on your hard work, and my business’s net income the price increases would be affordable.
The amount of oxygen the giverment sucks up in the room is stunning.
Starve the beast!
Well, it COULD lead to temporary inflation. It should lead to better paying jobs and it may lead to housing depreciation (lower prices).
I think that this is somewhat flawed. Housing is a big segment of the economy and if housing prices drop, as you predict, that would lower the increase in inflation.
Additionally, many businesses would close because they could not be profitable—as you surmise. Two things would happen, the business owners would either need to start new businesses or become employees of existing businesses. The number of business owners becoming employees would put downward pressure on salaries, so it might not be as great as predicted. (I do believe that salaries would increase—some). With salaries increasing and the housing shortage as it exists, there will be some relief, it prices will not collapse—they may drop a small amount but not drastically. There is still a shortage of needed housing (even with a segment of population leaving/deported). The demand from new household formations (largest generation yet—larger than boomers), and with the higher wages, more people will have the desire to and ability to, purchase homes. That will keep pressure on home prices.
Second, a lot of businesses will fail, as you point out. But, many will succeed. The ones that do, will probably be paying higher wages, but that doesn’t necessarily mean higher costs to the consumer. It might be moderately higher, but maybe not. Lower competition means more demand by the surviving businesses which means potentially more profits. If there are enough surviving businesses, there will still be competition and the businesses may keep prices down even though their costs are up because they can afford to since they are generating more revenue. So their margins may be smaller but they are still making more money since their is reduced competition.
I do believe, like you Sundance, that eliminating all of these visas and illegals is a great idea. I think it’ll cause a bit of some inflation initially, depending on how long it takes for it to come to the new equilibrium. I don’t believe it’ll create that much inflation long term as the markets figure it out and I don’t believe that housing will drop drastically. It might drop drastically in some areas, but overall not so much. It should also lead to a higher standard of living. And when paradigm shifts happen, like this, it’ll also create unseen opportunities for new businesses and wealth creation.
I feel like we’ve been using the word “inflation” rather loosely of late. As an exercise in clarity of terms, when the economist speaks to “inflation”, he means the decline in value or devaluation of existing money.
Economists do not generally refer to simple supply and demand economics as inflationary. That’s just the natural goings on in a free-market, open economy.
Hire Americans and services won’t stop! Idiots!
Wouldn’t it be wonderful to see families starting small businesses again? Haven’t grown up in a small town where there was nothing but small businesses, it was wonderful. The service was terrific as it was always someone available to help you. And most places had focused on specific areas of commerce, well a few others were relatively diverse. It provided a lot of jobs for locals and the community seem to enjoy it as they seem to know most of the people working and coming in to the facility. The walk in a mega store is daunting. You can really find help and you generally end up spending more as you wander around the store looking for what you want and spot other things. And then once you get home, you figured out that several of the additional items you picked up weren’t really used to you and should’ve never been placed in your shopping bag.
When “hiring more Americans” is TOO EXPENSIVE, H-1B becomes a COST ADVANTAGE.
And American workers end up losing TWICE.
I guess the Mexican Poop Lettuce crowd didn’t work out too well for the Grey Poupon crowd!
“The labor fraud created a fraudulent economy, and this reset is going to be significant.”
Yes. It will.
But the consequences of reality breaking through the fairyland of delusion always have a steeper price (figuratively and literally) than having dealt with real life in the first place.
We can’t have it both ways.