WITH A DWINDLING LABOR SUPPLY IN THE U.S., ARGUMENTS ABOUND FOR EASING IMMIGRATION RULES
By William Pesek Jr.
Give me your tired, your poor, your ... unemployed. You won't find these exact words carved on the base of the Statue of Liberty, but they represent an idea for which economists, including Alan Greenspan, increasingly have endorsed. It's a concept that may just help keep alive this New Economy of ours.
As we're all well aware, the New World is simply running out of workers, particularly skilled ones. The depleting pool of available labor in the U.S., along with the economy's strong growth rate, prompted the Federal Reserve to boost interest rates last week. Tightening employment conditions could prompt them to act again if Help Wanted signs go unanswered. Or if everyone from burger flippers at McDonald's to Silicon Valley computer wizards continue to see paychecks fatten.
Why not open the floodgates to more immigrants? The Pat Buchanans and Archie Bunkers of the world may wince at the idea, but Fed Chairman Greenspan recently said more immigrants would help make the unemployment rate's effect on inflation become "less and less of a potential problem." And in a new study, economists Gordon Hanson of the University of Michigan and Antonio Spilimbergo of the International Monetary Fund argue that authorities might want to relax immigration enforcement in light of rising demand for labor.
Over the last decade, immigrants have played a vital role in the economy. Because foreign workers have boosted the labor force, companies have been able to expand and profit even as the number of available native workers shrank. If jobs had gone unfilled, businesses couldn't have grown and achieved high rates of productivity. This would've led to slower growth, stagnant corporate profits and a less vibrant stock market. Could the Dow have risen above 10,000 without workers to keep our economy growing?
In recent years, a strong economy, increasing demand for workers and growing ranks of U.S. voters from Asia, Latin America, and elsewhere has fostered a more welcoming atmosphere for immigrants. In the past, immigrants often met with derision from Americans fearing a loss of jobs and the squandering of government benefits. Today, however, they're courted by employers seeking workers and politicians looking to win supporters in immigrant neighborhoods.
"People used to think immigrants couldn't meet the American work ethic, but that idea is changing quite rapidly," says Ruth Laterza, president of Rita DeSilvio Associates, a minority-owned recruitment firm in New York. Amid robust growth in the U.S. economy and rapid expansion of companies into the global marketplace, Laterza has seen a dramatic rise in demand for non-native workers. Furthermore, the need for foreign workers should only increase.
Indeed, immigrants' impact on the economy is no longer academic. Had U.S. immigration been stopped at the end of 1990, notes Stephan-Goetz Richter, president of the TransAtlantic Futures Research Institute, the unemployment rate would've dropped to 1.1% by 1997. Given that employment growth has remained brisk in the two years since, the rate would be close to zero, rather than 4.3%. The irony, of course, is that without help from immigrants, the Fed would've raised rates aggressively and choked off the nation's longest peacetime expansion.
Contrary to the conventional wisdom that foreigners take jobs from those already here, the alternative to immigration wouldn't have been more jobs for U.S. citizens, but fewer. The supply of foreign labor also helped keep wage costs down because the newly-arrived are far more willing to take minimum-wage positions than are natives. If this dynamic hadn't tempered wage inflation, the Fed would have slowed the economy. On the other side, if the labor force hadn't grown due to immigration, national growth would have been less vibrant. Immigrants have played -- and will continue to play -- a vital role in the nation's remarkable economic performance. As Richter points out, the "giant sucking sound" onetime Presidential wannabe Ross Perot spoke of may be having the opposite effect. Perot figured trade liberalization moves like the North American Free Trade Agreement would be disastrous for U.S. workers, sucking jobs to Latin America and Asia.
But it's other countries, not the U.S., that are hearing the sucking sound as more and more of their citizens contemplate moving to America. Tired of cumbersome regulation, high taxes and impediments to entrepreneurial pursuits, a growing flow of young Asians, Latin Americans, Canadians and Europeans are heading to U.S. shores. This solid contribution from foreign workers may be a key reason why economists' fears of higher inflation haven't been realized. Consider that of the 12.7 million new jobs created since 1990, immigrants have filled 38%.
"I've always thought that under conditions that we now confront, we should be very carefully focused on the contribution which skilled people from abroad [as well as] unskilled people from abroad can contribute to the country, as they have for generation after generation," Greenspan told Congress in late July. But as is often the case, what's good for Wall Street may not necessarily be good for the nation at large. "We are importing people whose skills are not conducive to this 21st century, high-tech economy of ours," contends Mark Krikorian, executive director of the Center for Immigration Studies, a Washington think tank. While he understands the economic arguments, Krikorian worries that the U.S. is "importing poverty" and "Brazilianizing" our labor force by increasing the gap between rich and poor through immigration.
Dan Stein of the Federation for American Immigration Reform, meanwhile, draws attention to recent studies by the Washington-based Urban Institute and the General Accounting Office that poverty among immigrants is higher than that of the native born. The studies also suggest that new immigrants rely more on government handouts than the native born.
Yet most economists think the pluses outweigh the negatives. One intriguing side effect of tight labor markets is that the proper conduct of immigration policy is becoming an important complement to monetary policy. On a policy level, very little needs to be done to fine-tune the immigration process. The U.S. already has been recalibrating its system of selective immigration. One example is the so-called H-1B visa for professionals in short supply to help eliminate serious shortages in certain professions like computer programming. Currently, Congress is being asked to expand the program.
In a recent study, TransAtlantic Futures examined three sources of foreign labor supply: legal immigration, illegal immigration and workers on the H-1B visa program. The research shows that immigrants from Mexico, the largest supplier of both legal and illegal workers, had the biggest impact on U.S. employment, followed closely by India. Residents of India have received 46% of all H-1B visas issued so far in 1999, while China has accounted for 10%. In addition, workers from Russia, the Philippines and Vietnam have done much to boost the U.S. labor force.
What makes the topic particularly timely is that it may be an important election issue in 2000. By most indications, immigration isn't the hot-button issue it used to be. Yet Democrats and Republicans alike may retreat from tough immigration laws both to import workers and to boost their standing with new American citizens. And the fact that Texas Gov. George W. Bush has been vocal about the contribution of immigrants may encourage other aspiring Presidents to be the same.
A sea change in popular views of immigration has been apparent. The antiimmigration rhetoric of just a few years ago has all but disappeared. States and municipalities are under less pressure to ban public services and assistance to immigrants. Now, the call is to attract more highly skilled foreigners and accelerate the naturalization process. Congress, for instance, has stepped back from some of its 1996 legislation to limit the rights of immigrants.
The shift may be related in part to the role U.S. educational institutions play in arming foreign students to compete against Uncle Sam. Alison Cleveland of the U.S. Chamber of Commerce thinks that with American colleges and universities graduating non-resident aliens in all disciplines, it's pointless to bar U.S. companies from capitalizing on that knowledge.
Demographics offer an equally compelling argument. According to the Chamber's WorkForce 2020 project, the U.S. labor force is likely to grow "very slowly" in the years ahead. In fact, chances are that the bulk of 2020's workers have already been born. Cleveland notes that without steady immigration flows, even substantial changes in U.S. birth rates won't be enough to provide an ample labor force 20 years from now.
Houston immigration attorney Charles Foster adds that the tremendous growth in high-tech jobs throughout the economy, combined with decreasing enrollment by U.S. students in high-tech fields, has resulted in an increased demand for foreign professionals in many specialty occupations. As Foster sees it, "Our current inability to satisfy this demand will harm both our economy and our ability to compete globally."