Immigration, wages, and falling household income
(2/2016) First, let me thank everyone who commented on last monthís article. Many liked it and agreed, and at least one person, not so much. Iím just amazed anyone reads it.
The question of immigration and immigrants has been heavy in the news recently so letís continue on this topic one more month.
Immigrants will continue to be vital to the US economy but, immigration policy must be based on employment, wage rates, and what is beneficial to the citizens of the country (not necessarily the corporations).
Recently, I had the opportunity to talk with Economist, Milton Ezrati, about his book, Thirty Tomorrows. Mr. Ezrati makes a very good argument for immigration based on the changing age demographics of the American population. Simplified, without refreshing the workforce, there will be a decreasing
number of people entering the work force supporting a growing non-working population.
In 1950 there were 8.1 working-age Americans for each person over 65. In 2010, that number was down to 5.2. The "UN world population prospects, population database" has that number dropping to 3.7 by 2020 and 2.8 by 2050. That is a big burden for each person who remains in the workforce to shoulder.
This has a few effects. First, scarce labor pushes the price of labor up. Secondly, as more people enter retirement age they stop saving and start spending their savings. This has the effect of increasing the cost for industry modernization by borrowing. Labor intensive production will seek cheaper labor markets. Lastly, the
tax burden on workers would be overwhelming.
The only viable solution to this problem of over-burdening is to supplement the workforce with immigration. But we need the right type of immigration. What we do not need is massive influx of low-skilled and semi- skilled labour. But these are the types of immigrants we have coming over the borders and
the type that the politicians have turned a blind eye to.
A word on low skilled jobs and this notion that we need more people to fill them:
As a country, the days when thousands of people worked in the textile and steel mills are gone - never to return. As a society we need a pool of these jobs for those citizens who will never be engineers or business owners. Letís face it, not every kid can be president. There are always a few to the left
of the bell curve, but they deserve fulfilling opportunities.
As business owner, I have some employees. Actually Iím thinking of one specifically who will never make it to management. He is great at what he does, needs some hand holding sometimes, but we could not function without him. And for him, the job is the reason he gets up every morning and he leaves at
the end of every day proud of his work. I could hire an illegal alien to do his work for less than what I pay him, which might be the smart business thing to do. Why donít I? Because we first owe it to our fellow countrymen to provide for them first.
Often I hear that there is a labor shortage as an excuse for massive open immigration. This is just a flat out lie. According to the Department of Labor, there are currently 7.9 million Americans on the street looking for jobs. There are another 6.7 million Americans who are listed as involuntary
part-time workers, (which means they want full-time employment but had to settle for part-time). Another 1.8 million who have simply given up looking for work last month. My point of all this is, donít believe all the hype that the unemployment rate is too low and that without massive immigration there would be no one to hang
drywall and rake the leaves. The employment participation rate is at its lowest in 38 years. For the last 16 years, it has been on a steady drop.
Donít tell me that people donít want to work semi-skilled jobs. To disprove this theory, stop in any Home Depot or Lowes around a city and count the number of men who approach the contractor trucks looking for a dayís wages. Itís humbling and scary that we are back to the transient workforce of the
Cheap labor. Every time a politician starts blabbering about the minimum wage I want to get sick. They give lip service to the working class, then pursue immigration policies and trade treaties that guarantee to suppress wages for the semi-skilled labor market.
These politicians are not stupid, they know itís all supply and demand. By increasing labor supply, demand wage is brought DOWN to the minimum. In 1999, average household income in the US was $57,000. By 2014, (latest data available) itís down to $53,482, according to the The Census Bureauís "Estimated
Real Median Household Income." If all their policies are meant to help American families and workers, why are wages not going up?
Itís not just semi-skilled labor that is under attack. In their book, Sold Out, Michelle Malkin and John Miano make the credible case that the high-tech billionaires and politicians of both parties use the H-1B visa program to decrease wages in the tech industries. The book is a must read for anyone
interested in what is really going on with the visa program. The authors destroy the narrative of the cheap labor cartel that the H-1B program is important for the tech industry to function. They explain how companies like Disney, Intel, Microsoft, Google, etc. use outsourcing firms to remove thousands of Americans from tech
positions and replace them with cheap foreign labor. In many cases, the Americans were forced to train the H-1B foreigners to do their jobs. When I say outsourced, I donít mean these jobs went over to India. Foreign workers are brought into the country to replace American workers at their desks.
Much is made of the increasing wealth divide in the country, many of the current immigration policies only exacerbate the problem. Comprehensive immigration reform must happen if the middle class is going to survive.
Like Canada, we need a point system for immigration. Points are given for advanced degrees in a meaningful field (sorry, but a PhD in ancient Greek culture is not worth much). Own a business, retired with a nice-sized bank account, have a skill the country needs; these things all help you get into the
country, and assure that the immigrants are beneficial to the society.
Read other articles by Bill Hillman