South-Western College Publishing - Economics

 

 

Be careful what you ask for; it may not be what you wanted.

Subject

Restrictions on foreign loggers in Maine are leading to lost jobs in related industries.

Topic

Supply and Demand; Scarcity, Choice and Opportunity Cost; Resource Markets.

Key Words

price, shortage, cap, logging, H-2B visas

News Story

             In the constant struggle between economic interests and national security, American workers have expressed  concern that foreign workers in this country will steal their jobs.  However, imposing such limits may have additional, unconsidered costs.  The limits on H-2B work visas, which allow foreign workers to work in the US, are being reached with repercussions in a variety of related industries.

            Not only are the numbers limited – 66,000 H-2B visas granted in 2004, but also the amount of time foreign workers are allowed to stay in the country is mandated.  The combination of limits has created a shortage of Canadian loggers in Maine, which in turn causes reduced employment opportunities in logging crews and processing mills. 

            The proof is in the price as well.  One cord of Maine pulpwood – 128 square feet – cost $57 in 2002, when the restrictions first became binding.  In 2004, that cord of wood cost $78. 

            Congress established the cap of 66,000 visas in 1990, but only since 2002 has the cap been reached, limiting the number of workers allowed into the country.  With a job that few Americans seem to want, Canadian loggers had always been willing to go wherever the logging opportunities are.  Now the U.S. government won’t allow them in to go anywhere to find work

Questions

1.

Use a graph of supply and demand to indicate why the price of a cord of Maine pulpwood rose between 2002 and 2004.  Does this represent a shift in supply or a change in the quantity of cords demanded?

2.

What external costs accrue to limiting the number of foreign workers into this country?  Why is it an external cost, and not simply a direct cost on those foreign workers?

3.

Use a graph of supply and demand to indicate the impact of restricting the Canadian loggers  on the wage paid to loggers in Maine.

Source

Barry Newman.  “Rules Restricting Canadian Loggers Backfire on Maine.”  The Wall Street Journal.  A1.  25 April 2005.

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