Low-Road Labor Drags Us All Into the Mud

And more from this week…

This week is Daniel’s turn on the soapbox, and he’d like to revisit some unfinished business on immigration, labor, and the American workplace:

A recent Los Angeles Times report begins with an account of an unauthorized worker from Mexico in his mid-50s. After more than two decades working on dairy farms in the United States, he details the conditions under which he has toiled: frequently laboring for 10 hours without breaks; cleaning milk tanks with harsh chemicals and no protective gear; and being electrically shocked when he stepped into a puddle created by a broken water pump. At his latest job, a dairy farm in Kings County, his boss issued a warning during the height of last summer’s immigration raids in California: if anyone tried to take legal action against him for workplace violations, he’d make sure they ended up in Tijuana. That threat, the worker said, was the final straw. He called it quits and packed his bags, telling the Times, “what if they sent someone after me, or they wanted to get rid of me all of a sudden? I couldn’t bear living there anymore.”

The report frames this as the cruel consequence of immigration enforcement. The Trump administration’s deportation campaign, it argues, has “upped the frequency” of such threats and “the fear they create.” But that framing gets the causality backward. The dairy farmer’s leverage over his workers grew out of years of non-enforcement that allowed him to build a business model on unauthorized labor and to wield the possibility of enforcement as a weapon.

As I explained last year in (Labor) Law and Order, failure to enforce our immigration law undermines enforcement of our labor and employment laws. A porous border, combined with a low risk of consequences for hiring the illegal immigrants who arrive, distorts the U.S. labor market by creating a large pool of employment relationships where employment and labor law cannot readily apply. Workers who fear deportation are less likely to report wage theft, safety violations, or retaliation. That fear, in turn, gives unscrupulous employers a ready-made instrument of discipline: the threat of calling ICE.

These distortions reward companies whose business models are built on unlawful employment, low pay, and substandard working conditions, and undermine the bargaining power of American workers. They also penalize law-abiding employers, who must compete in the marketplace against firms whose labor costs are suppressed by fear. And this will be the case regardless of whether ICE is out patrolling the streets or sitting politely in an office waiting for the phone to ring. It is an inevitable consequence of failing to enforce immigration law in the first place, as Oren discussed on the American Compass podcast last year with Seema Nanda, the Biden administration’s Solicitor of Labor.

The Times report illustrates how this mechanism operates in practice: Roughly 60% of California’s farmworkers are unauthorized. These are the workers most vulnerable to the coercion described above. But consider what this means for the other 40%—the workers who are authorized to work in the United States. In a mixed-status workplace, the leverage an employer holds over his unauthorized workers puts downward pressure on conditions for everyone. When an employer can gesture at an ICE vehicle and say he could easily call it over—as farmworkers in the report described as having occurred—every worker in that field, regardless of their immigration status, receives the message, whether or not the threat is directed at them personally. Any legal worker who threatens to create a headache knows he can be replaced by a more compliant illegal one. The predictable result is concealment and underreporting of labor violations. The California Labor Commissioner acknowledged as much to the Times, noting that the roughly 30,000 complaints her office receives each year do not capture the full picture in a state with more than 18 million workers. Of course they do not. In a labor market where so many workers fear deportation, low complaint volumes reveal very little about the actual frequency of violations.

The United States has created a two-tiered labor market in agriculture, one in which hundreds of thousands of workers harvest the nation’s food while facing serious practical barriers to vindicating rights that the nation’s labor and employment law codifies as the baseline for any worker. This is a political and moral failure, repeatedly defended as an unfortunate necessity to keep grocery prices low and fill “jobs Americans won’t do.” But the fact that the Times’s lead anecdote centers on a dairy farm is especially revealing, because the dairy industry already offers a concrete example of how stronger enforcement can change firm-level incentives.

The Kings County dairy farmer should face enforcement action for employing unauthorized workers and for using the threat of deportation to suppress his employees’ labor and employment rights. But enforcement doesn’t just punish bad actors; it reshapes everyone’s incentives. Earlier this year, in Self-Milking Cow Machines, I wrote about another dairy farmer in upstate New York who, after immigration authorities arrested one of his workers, installed milking robots to mitigate disruptions in his dairy operations. His farm now produces 2.5 million pounds of milk per worker per year, up from 800,000 before mechanization. His remaining employees earn more, work shorter hours, and perform less grueling labor. Faced with enforcement pressure, that farm reorganized around labor-saving technology. The contrast with Kings County is instructive. In one case, lawlessness sustains a low-road labor model; in the other, enforcement pressure pushes investment in technology that makes workers more productive, better paid, and less expendable.

Vigorous front-end enforcement of our immigration law—especially workplace enforcement directed at law-breaking employers—is the most effective way to break the leverage that makes the coercion described by the Times possible. The Kings County dairy farmer and the upstate New York dairy farmer are not two different stories. They are the same story at two different points in time, separated by the presence or absence of immigration enforcement. One shows how a labor market functions when the law is not enforced. The other shows how American workers benefit when it is. — Daniel

ROTTEN APPLE

Tim Cook announced he will step down as Apple’s CEO, a position he has held since 2011, when he succeeded the late Steve Jobs. The business press published countless retrospectives of his tenure, many of which concluded, as the New York Times put it, that Cook was “very, very good at making money.” Under his leadership, Apple’s market capitalization grew from roughly $350 billion to $4 trillion, annual revenue quadrupled, and profits did too.

But over in the newspaper’s opinion pages, Patrick McGee—friend of the podcast and author of the excellent Apple in China—contemplates the other aspect of his legacy. McGee argues that Cook’s financial record is extraordinary but that his legacy “grows more complicated” when measured against American interests, because that success was built by consolidating virtually all of Apple’s manufacturing in China. Since 2008, McGee writes, “Apple has worked with suppliers to train 30 million workers, principally in China. It has invested hundreds of billions of dollars in the mainland and facilitated an epic transfer of practical knowledge in how to make things to hundreds of Chinese factories.” His conclusion: no single company has done more to strengthen China’s industrial base and advance President Xi Jinping’s economic ambitions.

Cook’s instrumental contribution to the buildout of China’s tech ecosystem earns him election to the Corporate America Hall of Shame, alongside the likes of General Electric’s Jack Welch, who pioneered the offshoring and financialization strategies that hollowed out American manufacturing. But as Brad Setser of the Council on Foreign Relations notes, his global legacy isn’t limited to China. Apple pioneered a corporate tax system that other firms have emulated, “explain[ing] why Ireland is flush with corporate tax revenues—and the U.S. is not.”

MORE ON CHINA AND TRADE

Earlier this month, we highlighted U.S. Trade Representative Jamieson Greer’s recent comments that seemed to pour cold water on the prospect of Chinese foreign direct investment as part of any forthcoming U.S.-China trade deal—an eventuality that we strongly oppose. Said Ambassador Greer: “I don’t think we are at the point in our relationship with the Chinese where we want to talk about investment programs either way.” On Chinese autos specifically, he said existing regulations prohibiting connected vehicle technology and software made by so-called foreign entities of concern would likely keep Chinese automakers out of the U.S. market for the foreseeable future: “It would probably be difficult for certain countries to establish new production here, given those sets of rules.”

Now, another cabinet official in the Trump administration is dismissing the possibility: Lutnick Shuts Down Talk of Any Chinese Investment in US Autos. In a recent interview, Semafor’s Ben Smith said, “There are voices in China who want to see Chinese investment in the US and specifically [joint venture] BYD factories in the United States” and asked him if that was “on the table?” Secretary Howard Lutnick responded with a firm “No.” Good answer.

And so, less than a month before President Trump meets President Xi in China for their long-anticipated summit, Semafor reports that the “mood of top White House policymakers responsible for negotiating summit outcomes seems subdued” and that “the Chinese government is in no mood to compromise” with the upshot that there will be “more, rather than less, tension on the horizon.” The fundamental incompatibility between the American and Chinese economic systems means there is no deal worth having—only a divorce.

One potential source of “tension on the horizon”: the Wall Street Journal reports that Rules of Origin Set Up U.S.-China Clash in Asia: “Many countries are caught in a vise: Washington wants them to strip Chinese content from their supply chains, and Beijing is warning them not to.” The article captures well the implications of the China-containment architecture embedded in the Trump administration’s reciprocal trade agreements that Daniel recently wrote about in A Great Wall Around China.

The Financial Times reports that the White House Accuses China of ‘Industrial-Scale’ Theft of AI Technology, with Office of Science and Technology Policy Director Michael Kratsios warning that Chinese entities are using tens of thousands of proxy accounts to distill U.S. frontier AI models. Perhaps a good reason to restrict the sale of advanced semiconductors to China…

Meanwhile, Ambassador Greer continues to make his case to our trading partners for a coordinated response to break free from China’s chokehold on the critical minerals supply chain. “When trading partners express concerns about the economic cost of price floors or mechanisms, I just say: what you’re talking about, which is cost efficiency, this is why we are in the situation we’re in,” Greer told the FT. “There is a premium we pay, and I call it the national security premium, and we will all pay a national security premium to have a secure supply chain.” Godspeed.

And in other reindustrialization news:

• USA Rare Earth to Acquire Serra Verde in $2.8 Billion Deal (Wall Street Journal): “USA Rare Earth has agreed to acquire the owner of a rare-earth mine and processing plant in Brazil, a move that would strengthen its mine-to-magnets supply chain amid geopolitical tensions between the U.S. and China.” The mine is a “one-of-a-kind asset and the only producer outside Asia capable of supplying all four magnetic rare earths at scale.”

• US Steel to Restart Gary Tin Mill Production (Manufacturing Dive): “The company said it will spend up to $20 million to support 225 jobs, as well as pay for costs related to equipment inspections, maintenance and materials to resume operations” in order to “serve growing demand for domestic materials.”

• America’s First Commercial Nuclear-Power Projects in a Decade Just Broke Ground (Wall Street Journal): “The first commercial nuclear-power projects in a decade are now under construction in the U.S., a potential turning point for a segment of the power industry that has been stuck in neutral for years.”

And, “The S&P Global US Manufacturing PMI rose to 54.0 in April, up from 52.3 in March and its highest since May 2022. The expansion means factory business conditions have improved continually since last August. Production growth accelerated to the fastest since April 2022 as new orders showed the largest rise since May 2022.”

BIPARTISAN LABOR REFORM

On Tuesday, Senator Josh Hawley (R-MO) introduced the Know Your Labor Rights Act, legislation that would require employers to post and maintain notices of workers’ rights under the National Labor Relations Act and to inform new employees of those rights upon hiring. Senator Maggie Hassan (D-NH) is the lead Senate cosponsor; Representatives Riley Moore (R-WV) and Marie Gluesenkamp-Perez (D-WA) introduced companion legislation in the House. The Teamsters have endorsed the bill.

It is the second piece of bipartisan, bicameral labor legislation with organized labor’s backing to be introduced in the 119th Congress. The first was the Faster Labor Contracts Act, which would require employers to reach a collective bargaining agreement with newly organized workers within a defined timeframe. That legislation is also sponsored by Senator Hawley, and is cosponsored by Senator Bernie Moreno (R-OH) and, as of this week, Senator Roger Marshall (R-KS), who, along with Senator Hawley, sits on the Senate Committee on Health, Education, Labor, and Pensions, which has jurisdiction over it. This week, Representative Donald Norcross (D-NJ), the legislation’s champion in the House, filed a discharge petition. This measure could, if it receives 218 signatures from his colleagues in the House, force the legislation onto the floor for a vote, even without the support of House Speaker Mike Johnson. The end-around approach has the support of the House Minority Leader Hakeem Jeffries, the AFL-CIO, and the Teamsters. Notably, 17 House Republicans have cosponsored the underlying legislation. Together, the two developments suggest that bipartisan coalition-building for labor law reform continues apace.

THIS WEEK IN DYSTOPIA

• Trump Administration Reclassifies Marijuana as Less Dangerous Drug (Wall Street Journal), providing an occasion to re-read Oren on Vice President Donald Trump.

• Bonus link: The Marijuana Backlash Is Here by Kevin Sabet in Compact

• AI-Generated Child Pornography Is Overwhelming Law Enforcement (Bloomberg): “Today, law enforcement must parse through abusive material ranging from conversations with AI chatbots like OpenAI’s ChatGPT—where offenders fantasize about sexual acts with kids, or seek advice about how to groom them—to photos and videos generated by AI tools…which can create graphic content from a simple text request. Often, investigators can’t easily tell whether the children in pornographic images are real kids in imminent danger, AI adaptations of regular child photos, or outright fakes. That distinction is important, as it can determine which cases demand urgent attention.”

• DOJ Arrests Soldier Who Made $400,000 Betting on Maduro’s Removal (ABC News): “Federal authorities arrested a special operations soldier who was involved in the capture of Venezuelan President Nicolas Maduro for allegedly pocketing more than $400,000 by betting on his removal from office, the Justice Department announced Thursday.”

And to end the newsletter with some GOOD WEEKEND READS:

• Saving a Lost Generation of Young Men—with Chop Saws | In the New Yorker, Emma Green profiles the College of St. Joseph the Worker, which “combines the trades with a liberal-arts education, is trying to restore its students’ sense of their own competence, and to revive the city of Steubenville, Ohio, along the way.”

• The New Trade Order | In Foreign Affairs, Ambassador Robert Lighthizer writes about what broke the international trading system, and what it will take to build a better one.

• Also writing in Foreign Affairs, A. Wess Mitchell argues for A Grand Strategy of Consolidation: “Going forward, Washington must fully commit to the consolidation blueprint; future administrations need to stay the course to ensure the strategy bears fruit. That means not getting sucked into big wars or lulled back into old policy habits that reinforce the U.S. strategic predicament. If it focuses on consolidation, the United States has a historic chance to regain its bearings as a great power and prevail in a sustained competition with China, the most powerful adversary in U.S. history.”

Enjoy the weekend!