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« Common Sense and Social Science | Main | Elsewhere »

August 03, 2006

Immigration and America's Working Class

Michael Blowhard writes:

Dear Blowhards --

A few postings ago, I wrote about how much I enjoyed Dean Baker's "The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer." Today I've been thinking about immigration. Here's an interesting and a propos passage from Dean's book:

From 1980 to 2005 the [American] economy grew by more than 120 percent. Productivity ... rose by almost 70 percent. Yet the wages for a typical worker changed little over this period, after adjusting for inflation. Furthermore, workers had far less security at the end of this period than the beginning, as access to health insurance and pension coverage dwindled, and layoffs and downsizing became standard practices. In short, most workers saw few gains from a quarter century of economic growth.

Got that? 25 years of perky economic growth have resulted in few benefits for America's working class. How to explain this fact? Dean cites a number of factors. One of the major ones turns out to be, surprise surprise, our zany immigration policies:

Immigration has been an important tool to depress the wages of a substantial segment of the workforce ... Meatpacking is an obvious example of an industry that did offer relatively high-paying jobs that were widely sought after by native-born workers, even though no one would be very happy to work in a slaughterhouse. This is less true today than in the past, because the meatpacking industry has taken advantage of the availability of immigrant workers to depress wages and working conditions in the industry. As a result, immigrant workers are now a very large share of the workforce in the meatpacking industry.

Dean's view of developments in the meatpacking biz is confirmed by Eric Schlosser in "Fast Food Nation," btw. I summarized Schlosser's tales and facts about fast food, meatpacking, and immigration here.

The principle is pure Econ 101: If we increase the supply (in this case of low-skilled workers), then prices (ie. salaries, wages and benefits) will decline. Why on earth would we wish lower salaries on our fellow citizens, especially on our working class neighbors?

As Dean asks elsewhere in his book: If we're going to permit big waves of immigration, why not invite in droves of high-skilled workers instead of low-skilled ones? That'd depress some wages -- doctors', lawyers' -- that could use some depressing. Inequality would be reduced, social tension might be relaxed a bit, and all of us would be saved serious dough when we visit a doctor or lawyer. Instead, we -- or at least our elites -- put the screws to our less well-off neighbors. On what basis can such behavior be defended?

In short: One of the best (as well as easiest) things we could do to reduce inequality as well as to benefit our own working class would be to run a more modest and careful immigration regime. Instead we seem determined to hand out benefits to 1) politicians who'll win the votes of Latin American immigrants, 2) business owners who will employ Latin American immigrants, and 3) Latin American immigrants. Take that, fellow Americans.

A reason I'm delighted to quote Dean Baker is that even the starriest-eyed, loftiest-principled lefty can't dismiss Dean as nothing but a -- spit, patooie -- right-wing xenophobe. Dean is so progressive that he's practically card-carrying. He's as obsessed as any present-day Democrat with the "framing" question, and he's enthusiastic about a number of big government programs that make many right-wingers apoplectic. He's a lefty himself. He just happens to be a lefty who isn't so blinded by ideals, rhetoric, and dreaminess that he can't see clearly what's happening in front of all of us.

The new address for Dean Baker's blog is here. Dean's book can be downloaded -- as a free PDF file -- here. It's always fun to point out phenomena that economists' tools can't account for, isn't it? So it's double-fun that Dean's book -- a book about economics -- is one such phenomenon. With it, Dean has made a more substantial contribution than many authors who publish commercially have. Yet is his good work going to show up on any economist's chart?

Best,

Michael

posted by Michael at August 3, 2006




Comments

Annette (sorry, no link to this frequent commenter) had referred to Eric Schlosser's speech at her alma mater's commencementon your post about Eric Schlosser. Here's a link to Schlosser's speech here.

Full text of speech is here.

Posted by: DarkoV on August 3, 2006 4:34 PM



I agree with most of what you say here. One problem I see, though, is that the high-skilled foreign workers you would have the US invite most likely are quite happy where they are, if they haven't already moved here. The low-skilled workers risk life and limb to get to the US because they aren't happy where they are. I'm not saying that's reason to let them in.

Posted by: the patriarch on August 3, 2006 4:57 PM



Why not invite in droves of high-skilled workers instead of low-skilled ones? That'd depress some wages -- doctors', lawyers' -- that could use some depressing.

America already accepts huge numbers of physicians as immigrants (look at the names of doctors in the Yellow Pages if you don't believe me). If you look up the statistics on residency match (the program by which medical school graduates enter graduate training), you'd see that the percentage of them that are foreign is vastly higher than in America in general. In 2000, for example, 10,839 were non-U.S. citizens, out of a total of 33,528. The population who goes into American residency programs is basically the same as our physician population.

Incidentally, the same argument is made against economists, and it is just as nonsensical. Almost all graduate programs are majority foreign, and I would suspect (though I don't have data in front of me) that more than half of new professor hires are foreign. In any case the percentage of non-American hires is certainly vastly higher than the general population.

So I don't see how Dean Baker can say that professionals don't face foreign competition. It's true that the immigration occurs "earlier" in the case of the professions, since it is often students who are admitted, but that doesn't change the supply-demand analysis at all.

Posted by: Chris on August 3, 2006 5:22 PM



DarkoV -- Thanks for the links!

Patriarch, Chris -- Actually, my own preferred approach is to let in tons of political-class people. That's a field that could really use some shaking up, fresh blood, and serious competition.

Posted by: Michael Blowhard on August 3, 2006 5:31 PM



I can't say I'm on board with America importing more lawyers. Even to screw over the lawyers that are already here.

Posted by: PatrickH on August 3, 2006 6:29 PM



Frankly, I think the meatpacking industry's successful drive to de-unionize its workforce has more to do with its depressed wages than immigration. There's a reason why the meatpacking industry has lobbied hard for right-to-work laws in the states in which it does business (Nebraska, Texas, etc.). They wanted to drive out their union workforce--and by and large, they've been successful.

With no unions (along with the weak government oversight that goes hand-in-glove with right-to-work laws), they've been able to let plant safety and working conditions deteriorate and have also been better able to hire illegals. But de-unionization came first.

Posted by: Steve on August 3, 2006 7:16 PM



All available evidence shows that immigration is not the most important factor depressing wages in the U.S. or elsewhere. (Read Roger Lowenstein's piece on the impact of immigration in the NY Times Magazine a few weeks ago).

Actually, my hunch is that trade has been a much more significant influence. Just think how much things have changed over the last 20 years. The world economy has had to absorb the entrance of dozens of new participants in the world market, which implies the entry of hundreds of millions of new and mostly unskilled workers.

In the long run, this is a good thing for humanity. But it's definitely not the best time to be a burger flipper in a rich nation.

Posted by: Andrew on August 3, 2006 8:02 PM



Andrew,

I guess the people in the former Soviet Union were told the same thing--you know, "in the long run, socialism will save humanity", but just right now, it sucks.

Globalism is simply capitalism run amok. Its no different from the conditions that prevailed in America before the turn of the 20th century. I hate socialism, because it rewards failures, destroys values, etc. Most importantly it centralizes power. Capitalism run amok is the same, it centralizes power. The greater the size of the organization, the more open it is to corruption and the misuse of its great power. The common people have to be able to check that reach somehow, or they will be enslaved by either the right wing or the left wing. Markets are not perfect--they are human creations, and as such, vulnerable to the same distortions and corruptions as the people who participate in them.

The left hand and the right hand are on the necks of the common people, and they are both strangling us to death. I wouldn't cheer for either one.

Posted by: s on August 3, 2006 11:00 PM



According to Roy Beck of NumbersUSA, it was illegal immigration that largely allowed the meatpacking industry to de-unionize. The big companies were unionized and didn't have much competition with each other regarding wages and working conditions. It was only when new non-union companies, often using a lot of illegal workers, started competing that the big companies got out of the slaughterhouse biz altogether because they just couldn't compete anymore. And you are right, Michael, "Fast Food Nation" is a great source of info on this aspect of wage depession.

One area in which the importation of high-skilled workers has had a serious impact is IT and computer science (CS). Not only is unemployment higher in IT/CS than in the general economy, but the so-called "tech dearth" is becoming a self-fulfilling prophecy because students are looking at the stats and selecting other majors. And as we all know, unemployment rates don't tell the whole story. One of the NYT's now famous "men not working" was a high-tech guy laid off from XEROX. Technically he's not "unemployed" anymore. And, of course, we have the IT/CS major who's selling printers at ComputerWorld and paying off a 5-figure student loan.

A sort of by-product of the H-1B visa in IT/CS is - IMHO - the serious decline of women in IT. According to statistics from ITAA, women in the IT workforce dropped from 41 percent in 1996 to 32.4 percent in 2004. The ITAA is a big promoter of raising the number of H-1B's allowed into the US. Most H-1B's in IT/CS are male. It doesn't take a whole lot of imagination to figure out that a young male H-1B from a country where child-care is women's work just might be more likely not to take family leave and to be able and willing to work long hours into the evenings and weekends - a big plus since most professional jobs are paid as salary, not hourly.

If working people in the US don't weaken the grip that the multi-national corporations have on our country - and our necks, the middle-class is going to all but disappear. Unfortunately, I think it will take a third party to do this since both major parties have sold us out.

Posted by: D Flinchum on August 4, 2006 7:07 AM



There is something beyond economics when it comes to open immigration - the almost fanatical support neocons have for it goes beyond common sense.

Another thing people don't think about - the long term quality of life in this countyr - you can't keep going on adding a million+ people forever - though the neocons like Norman Podoretz think you can.

I think among many neocons is a thinly vield distrust for the West, or at least the need to radically transform it.

Posted by: a reader on August 4, 2006 9:45 AM



Michael: I think you're going to have to grapple with the actual arguments and calculations that economists have made about the degree to which US wages are suppressed by immigration. The range seems to be below 10%. Not saying that I necessarily believe that statistic but this sentence:

"If we increase the supply (in this case of low-skilled workers), then prices (ie. salaries and benefits) will decline"

ignores efforts to quantify the problem.

In general, I think it's fair to say that growing income inequality is a deeper and complex problem with multiple causes.

Posted by: jult52 on August 4, 2006 10:24 AM



D Flinchum, you make some good points in RE: outsourcing of IT jobs. But, as someone who's worked in the IT industry for almost 20 years, I see positive benefits in outsourcing. Firstly, after the "tech bubble" and Y2K, we were left with a lot of useless people in the industry. People who got into the field because it was booming, but had neither the skills nor talent to be there. They accounted for a good 70-90% of the industry during the 90s. By outsourcing, a lot of those jobs and people went away.

But, the second big bonus from it is it raised the bar to entry much higher. With fewer entry-level jobs available, there are fewer people coming in, allowing the industry to hire, keep, promote and utilize people who know what they're doing and get rid of those who don't. It's going to take a long time to unmire ourselves from the mess left behind by these idiots, and regain the trust of our employers, but I think in the end it'll be worth it.

Posted by: Spoonman on August 4, 2006 12:16 PM



Read Roger Lowenstein's piece on the impact of immigration in the NY Times Magazine a few weeks ago.

And laugh. For example, he notes that wages in cities where immigrants have clustered, like NY, have tended to be higher not lower and low-immigrant Mississippi has the lowest per capita wages in the US. What isn't noted here is that it costs a heck of a lot more to live in NYC than in Mississippi. As a former resident of Northern VA just outside of DC who retired to SW VA just east of Appalachia, I can tell you that cost of living matters.

Second he misses entirely the fact that unemployment alone doesn't tell the whole employment tale. EMPLOYMENT levels for young men - especially young black men - are the lowest they've been in decades. Plus people who are UNDEREMPLOYED are still counted as employed. That IT/CS grad working at ComputerWorld because he can't get a job in his field is still employed. So is the woman who lost her unemployment benefits months ago and is now cobbling together a living with 3 or 4 part-time or odd jobs or consulting work.

But for the record, the unemployment rate for jobs where there are a lot of immigrants - construction and IT/CS, for two - tends to be higher than the overall unemployment rate. How do you explain that if they're just doing the jobs no American wants? How can there be any unemployed construction workers in the US with the housing boom??? Also when the housing bubble bursts or deflates, construction companies won't be laying off 10-20% of their work forces; it'll be more like 80%. What happens then, especially if we've just awarded legal status to all of our now illegal workers in the construction industry?

And as for the costs vs benefits of immigration, remember this: All children born to immigrants - legal or illegal - are US citizens so their costs - schooling, welfare benefits in some cases, and health care - are not counted as a cost of immigration. It's sort of like adding insult to injury: Not only are US citizens paying the cost, they're having the cost attributed to THEMSELVES. Many states have passed a number of laws that deny certain benefits to illegal immigrants. These laws do not apply to their children born in the US, who are US citizens.

Posted by: D Flinchum on August 4, 2006 1:42 PM



I'm sure this has been mentioned before, but what about changing the law so that a child born in the US has whatever status his parents have? I don't think that's being unfair to anybody.

Posted by: the patriarch on August 4, 2006 2:46 PM



Spoonman, I'm not certain what you mean by 70-90% of people in the 90's lacked the skills or talent to be in IT/CS. If you are referring to the huge ramp-up of mostly young IT/CS workers that entered the workforce then, I can't make that call - I don't know. If you are referring to ALL IT/CS workers in the '90's, I'd have to disagree.

Outsourcing IT/CS jobs and importing H-1B's into that sort of work here has more to do with driving US wages down and company profits up than getting rid of incompetents. A lot of it is simple age discrimination. If you are over about 45-50, good luck finding work if you get laid off. And if there are fewer entry level jobs, why are the high-tech companies constantly calling for more, more, more H-1B and L-1 visas while ignoring recent US graduates?

I entered IT/CS in the late 60's, put in over 35 years in the biz, and retired from it at my own free will. Since my last employer has asked me to come back for special projects, I guess I could say I must be competent. In my 35+ years I have worked with, for, and over a number of IT/CS workers with varying degrees of competence. There are 2 things that I would never have an employee whose competence I questioned even slightly do for obvious reasons: 1- documentation and 2- training of other employees. Unless a person is competent to do his job, I don't want him explaining his notion of how that job should be done to others.

Yet those are the two tasks that companies give to those employees whose jobs they are about abolish via outsourcing and/or importing cheaper foreign workers. I have to believe that these employees aren't incompetent because no employer - certainly no intelligent employer - would have an incompetent person train new employees. The IT/CS industry is full of stories about employees who were basically told, "Train your replacement or forget about a decent severance package."

You say that you have been in IT/CS for about 20 years. Chances are you haven't had the chance to see age discrimination in this profession up close and personal. Let me say, it can be ugly - very ugly.

This profession isn't for sissies. It means long hours, heavy stress, hard deadlines, and often not knowing when you'll get to leave work on any given day or if you'll get the weekend off until mid-afternoon on Friday. There are people who have worked many years under these conditions and played by the rules who find themselves in the above situation.

Posted by: D Flinchum on August 5, 2006 6:58 AM



Speaking of lawyers, they're already outsourcing a lot of back office legal work to India. Accounting and finance too. Healthcare is more challenging but they'll find a way.

Want to see the future of the United States? Look at Mexico or Brazil. A tiny crust of superwealthy elite on top of a mass of struggling people.

(Although, in fairness to Brazil, since Lula got elected their government is actually become a model of fiscal prudence compared to the US. They've got a trade surplus, paying down debt . . . etc. Mexico however is just plain screwed. Cantarell is in decline and it's all they've got).

Posted by: Brian on August 6, 2006 1:33 AM



It should also be noted that "wage stagnation" over the last 25 years is not an undisputed fact. The Cato Institute and many other conservative think-tanks believe that a lot of the "stagnation" that we have seen is a statistical anomaly. Of course, they would, but it's a point of view worth noting. Also not to neglected is the amount of money that would have been paid to workers that was sucked up by rising health care costs. It's a complicated problem, and there are factors involved that contravene both Left and Right wing dogma...

An example of Cato Institute thinking on "wage stagnation" can be found at http://www.cato.org/pub_display.php?pub_id=5044

Posted by: tschafer on August 6, 2006 11:26 AM



D Flinchum: "Second he misses entirely the fact that unemployment alone doesn't tell the whole employment tale. EMPLOYMENT levels for young men - especially young black men - are the lowest they've been in decades."

That's a very good question and I wonder if there's been a correction for that effect in the data. There are prominent economists on both sides of the "does immigration hurt US low-wage workers" so I suspect it has been corrected for, but I'd like to be sure.

Posted by: jult52 on August 7, 2006 9:39 AM



I suspect it hasn't.

First of all, if former workers are no longer in the system, how do you count them? The IT/CS major working at Computer World is a retail clerk, not an unemployed systems engineer. His education doesn't matter. The 50ish engineer laid off from XEROX who still isn't working doesn't show up at all. All those early retirement folks who were really push-outs are off loafing, don't you know, so they don't count. The young black men who are not being hired at construction sites - and who may never have held a real life job - aren't counted. Other than an occasional newpaper article, do we even know where they are?

Second - and most important - the open borders elites see what they want to see and if it isn't their job prospects being depressed, what do they care? Why do you think we keep hearing that since hunting them down and deporting illegal immigrants "can't be done", of course, we have to grant them amnesty? You don't get the option of cracking down hard - jail time for repeat offenders - on businesses who hire them. Minus the lure of jobs, they'd leave on their own. Most of them left jobs in Mexico, etc to come here. They can make more here, especially with benefits, but most were employed at home.

Posted by: D Flinchum on August 8, 2006 9:22 AM






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