David Boaz

President Donald Trump has tried to court executives of technology companies. Before he even took office, he hosted the heads of such companies as Google, Amazon, Microsoft, Facebook and Tesla at Trump Tower.

But now his policies on trade and immigration are generating strong pushback from the tech industry. Silicon Valley executives sharply criticized Trump’s executive order temporarily barring entry from nationals of seven Muslim-majority countries. Under public pressure, Uber founder Travis Kalanick left Trump’s business advisory council, and competitor Lyft has reportedly pulled its ads from Breitbart, a website formerly led by Trump strategist Steve Bannon. Several firms and executives also announced millions of dollars in donations to the ACLU to fight the order and to immigrant aid organizations.

Immigrants have been crucial to the development of the technology industry in the past 50 years.

No company wants to annoy the president of the United States, especially one who gleefully denounces firms and executives and threatens to use his power to hurt them. So when big companies take on Trump so openly, we know they must view his policies as a real danger to their operations.

In an industry desperate to find engineering talent, Silicon Valley executives may also be particularly sensitive to their employees’ generally liberal views on social issues such as abortion, gay rights and immigration. They know that skilled employees want to work for a company that shares their values.

Immigrants have been crucial to the development of the technology industry in the past 50 years, from Andy Grove and An Wang in the early years, to Satya Nadella of Microsoft, Sergey Brin and Sundar Pichai of Google, Pierre Omidyar of eBay and Omid Kordestani of Twitter. Not to mention Apple founder Steve Jobs, the son of a Syrian immigrant.

Indeed, more than half of the country’s $1 billion startup companies had at least one immigrant founder, according to the National Foundation for American Policy.

Tech firms are even more worried about a draft of an executive order that would revamp the work-visa programs technology companies depend on to hire tens of thousands of high-skilled immigrant employees. The draft order would promise to “prioritize the protection of American workers,” but technology companies say they can’t find enough Americans with the skills needed for software design.

Now tech executives are drafting a formal letter objecting to the policy. An early version of the letter says, “Our ability to grow our companies and create jobs depends on the contributions of immigrants from all backgrounds.”

Tech companies also strongly support expanded international trade, including the Trans-Pacific Partnership, which Trump withdrew from on his first full weekday in office. “45 million American workers, 105,000 in (Silicon Valley) alone, should be crying (over) this executive action today,” said Carl Guardino, president of Silicon Valley Leadership Group.

For years, many tech companies tried to ignore Washington. Microsoft in Seattle, Apple and Google in Silicon Valley, went about their business, developing products, selling them to customers, and — happily, legally — making money. But it seems that every successful company eventually finds out that it can’t just work on improving its products and serving consumers. Sooner or later, it’s going to have to deal with politicians and regulators sniffing around its business.

Trump’s number one promise was to create more jobs in the United States. But his trade and immigration restrictions will encourage US companies to outsource research and engineering projects to countries such as Canada, Ireland, and India.

When the federal government restricts trade, limits companies’ ability to hire the best employees and levies the highest corporate tax rate in the developed world, it hurts US companies’ growth. When it also launches antitrust investigations of successful companies such as Microsoft, Google and Apple, companies feel they have no choice but to get involved in politics and lobbying.

And that’s a shame, because the most important factor in America’s economic future — raising everyone’s standard of living — is not land, or money, or computers; it’s human talent. And we all lose when some part of the human talent at America’s most dynamic companies is perted from productive activity to protecting the company from political predation and destructive policies.

The legal minimum wage will increase in 20 states today. The Wall Street Journal news story on that fact starts out accurately enough:

Minimum wages will increase in 20 states at the start of the year, a shift that will lift pay for millions of individuals and shed light on a long-running debate about whether mandated pay increases at the bottom do more harm or good for workers.

But it quickly segues into the same error that afflicts most such stories:

In California, the minimum goes up 50 cents, to $10.50 an hour, boosting pay for 1.7 million individuals.

Wages are also going up in many Republican-led states, where politicians have traditionally been skeptical of the benefits of minimum-wage increases.

In Arizona, one out of every nine workers is slated to receive a wage increase….So will tens of thousands of workers in Arkansas, Michigan and Ohio….

In all, about 4.4 million low-wage workers across the country are slated to receive a raise because they earn less than the new minimum in their respective states.

Every one of those sentences assumes facts not in evidence. What these new laws do is ensure that no worker can be paid less than a statutory minimum. They cannot ensure that every worker with a minimum-wage job will still have one if his employer required to pay more. They won’t prevent employers from replacing labor with technology, such as these McDonald’s order-taking kiosks. 

The Journal isn’t alone, of course. Here’s the Associated Press lead:

It will be a happy New Year indeed for millions of the lowest-paid U.S. workers. 

And CBS:

Millions will ring in the new year – with a raise. The minimum wage is going up in 20 states and Washington, D.C. as well.

And a Washington Post headline:

There’s some really good news for low-wage workers this weekend

What all these chipper stories fail to take into account is the possibility that some low-wage workers will lose their jobs because their work just isn’t worth the new minimum wage or the employer can’t be profitable with higher costs. There’s abundant evidence that higher minimum wage laws reduce employment, especially among young and minority workers. If only Journal reporter Eric Morath had read this op-ed headline in the Journal a year ago:

The Evidence Is Piling Up That Higher Minimum Wages Kill Jobs

Economist David Neumark, perhaps the leading student of the effects of minimum wage laws, wrote:

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired. 

Among the many studies supporting this conclusion is one completed earlier this year by Texas A&M’s Jonathan Meer and MIT’s Jeremy West, which reaffirmed that “the minimum wage reduces job growth over a period of several years” and that “industries that tend to have a higher concentration of low-wage jobs show more deleterious effects on job growth from higher minimum wages.”

The broader research confirms this. An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase.

I hope these stories will prove accurate, that millions of low-wage workers will get higher wages and that the new minimum wage rates will not reduce the growth in jobs that Americans need. But I’d have to shut my eyes to economic theory and empirical evidence to believe that. In fact, you’d pretty much have to be an economics denier to believe that a mandated increase in the supply of labor won’t reduce the demand for labor.