Wednesday, June 26, 2013

S.744 Immigration Bill is a Wage Killer

"At this time, allowing additional immigrants into the U.S. would negatively impact the wages of the 11 million undocumented workers who are already living here, which in turn, would further drive down wages for everybody else."

Yesterday Eduardo Porter wrote a New York Times piece praising the new immigration bill, but note the following passages within it:

Eduardo Porter: "The bill moving through Congress to overhaul the nation’s immigration laws, if approved, would give employers access to expanded visa programs that would admit hundreds of thousands of immigrant workers, of both low and high skills, to toil in workplaces from strawberry fields to technology companies."

Eduardo Porter: "The Congressional Budget Office issued a report this month concluding that the immigration bill would add six million workers to the American job market [over the next 10 years] by 2023, and nine million by 2033 – increasing the labor force by 5 percent."

A new Center for Immigration Studies analysis of the bill finds that, in the first year, the bill (S.744) would admit nearly 1.6 million more temporary workers than currently allowed. After that initial spike, the bill would increase annual temporary worker admissions by more than 600,000 each year over the current level. As a result, this bill would roughly double the number of temporary workers admitted each year (which was nearly 700,000 in 2012). These workers are classified as "non-immigrants" and would be in addition to S.744's large proposed increase in annual permanent legal immigrants competing for jobs (more than 30 million in the next decade). Mark Krikorian of Center for Immigration Studies says they opposes the bill.

Eduardo Porter: "Average wages would decline to a large extent because most of the new immigrant workers would be paid less than domestic laborers, pulling the average down."

Eduardo Porter: "A 50-year-old janitor with no high school diploma, for instance, will find it hard to make a transition into another job when immigrants move into the building maintenance business. George Borjas of Harvard University argues that those without a high school diploma – about 8 percent of the labor force — are easily replaced by immigrants and are likely to suffer a noticeable drop in wages if low-skill immigration increases."

Eduardo Porter: "Unskilled American workers – who never completed high school, or maybe got an equivalency diploma — would do relatively poorly. So would highly educated workers, who would face more competition from new immigrant scientists and engineers with H-1B visas."

The Congressional Budget Office claims that "employment would increase as the labor force expanded, because the larger population would boost demand for goods and services and, in turn, the demand for labor". But the Congressional Budget Office also admits that average wages would be lower because the "capital/labor ratio" would fall.

And the Congressional Budget Office also makes the assumption that more people (a larger population) will automatically equate to more jobs, and therefore, translate into more tax revenues. But it would primarily increase payroll taxes for Social Security and Medicare, not federal income taxes. Most of these people will be low-paid workers, and therefore will be exempt from any federal income taxes. They won't earn enough money in an already saturated job market (just as 47% of the current population doesn't pay federal income taxes.).

And a larger population would mostly just create a higher demand for rents, utilities and food (the very basics), because most of these low-wage workers won't have enough left over for any notable increases in discretionary spending (the problem our economy is presently experiencing).

People who have good paying jobs will have money to spend to drive the economy, thereby creating any additional demand. But many, if not most, of these new immigrants will most likely be added to the 46 million Americans who are currently relying on food stamps --- because they don't earn enough money. And adding more people to a labor market (with 11.7 million Americans already unemployed) will only drive down wages further, and further increase job competition. Read: U.S. Wages in a Global Race to the Bottom

Bruce Bartlett (also in the New York Times) has already noted that the share of national income going to labor in the form of wages and benefits is already declining --- while a rising share is going to the very top. He points to the latest Economic Report of the President (see Pages 60-61) discussing this phenomenon and suggests that it results from changes in technology, increasing globalization, changes in market structure and the decline of labor unions.

Bartlett says the report notes that labor’s falling share is even more pronounced in other developed countries. Among the key points made in the O.E.C.D. report is that the share of income going to highly paid workers has increased in many cases, while at the same time, that which is going to low-paid workers has fallen. Thus income inequality has increased.

As a recent report from the International Labor Organization points out, the gains to higher productivity resulting from technological innovation [such as automation and robotics] are not going entirely to workers. It says that since 1999, average labor productivity in a cross-section of countries has increased twice as much as wages.

Another new study from the University of Chicago’s Booth School of Business says companies have been encouraged to substitute technology, machinery and equipment for labor, which explains about half the decline in labor’s share of income.

Right now in the U.S. there are only 3.8 million job openings for 11.7 million unemployed Americans --- with another 3 million new high school graduates entering the work force for the very first time every single year. According to the National Center for Educational Statistics, America's schools and colleges have a record number of students attending school as the population has continued to increase and enrollment rates have continued to exponentially rise. Would increasing the population base with additional work visas help or hurt the job market?

From Reuters: "Under the proposed bipartisan legislation outlined Tuesday, the official quota of "H-1B" visas for high-skilled, foreign workers would increase by 69 percent to 110,000, but could go as high as 180,000 in future years. In addition, the number of visas for foreigners who hold advanced degrees from U.S. universities would increase to 25,000 from the current 20,000. Last April the United States awarded 85,000 H-1B visas while receiving about 124,000 applications."

Also from Reuters: "Eager to secure more visas for skilled foreign workers, tech companies have stepped up their lobbying this week in support of a comprehensive U.S. immigration reform bill. The tech industry says such a step is badly needed. Business groups have threatened to withdraw their support if senators did not loosen requirements that would have required them to recruit Americans before foreigners."

A path to citizenship is "good" for America, but the added visas and additional quotas for guestworker programs in the bill is both "bad" and "ugly" in our already over-saturated job market, which is already driving down domestic wages, because there is already a fierce competition for jobs. An over supply makes for a low demand, making it a shopper's paradise for employers.

Border security and NEW immigration (including guestworker programs) should be separate from the path to citizenship aspect of the bill, and should be voted on separately (up or down) --- without any week-end amendments being added to it at 3 o'clock in the morning --- like a "bridge to nowhere". Right now, the Democrats are giving the Republicans more H-1B visas for new immigrants in exchange for a path to citizenship for the immigrants who already living here (a promise to their voting base). This bill would be a win-win deal for businesses (importing cheaper labor and saturating the job market to further drive down wages), but it is a lose-lose deal for American and undocumented immigrant workers who already living here.

Commentary: And it's also worth noting that Rand Paul just said on Fox News today (a man I rarely agree with on a news show I almost never believe) that the new immigrants will be cheaper to hire because employers won't be mandated to provide them with ObamaCare® .

And one only needs to subscribe to the Department of Labor's newsletter to get regular reports on how U.S. businesses are already breaking the law to pay sub-standard wages to our current immigrants. So who do you think employers will hire for mostly non-skilled jobs --- an immigrant who's already here (that's on a path to citizenship) or a new immigrant that's here on a guestworker visa?

And you always have to ask yourself: If the U.S. Chamber of Commerce is FOR something (such as free-trade agreements and H-1B visas), is it usually good for workers, or is it usually much better for big businesses?

With such a dramatic increase in the size of the labor force, where will all the part-time and low-paying jobs come from? McDonald's and Walmart had better start doing a lot more hiring...and soon! And it also wouldn't hurt if Congress got up off their lazy asses and passed a decent minimum wage bill that paid a real "living wage" (say $20 an hour) and indexed it to inflation, just like their overly generous congressional salaries and perks.

The business group, the U.S. Chamber of Commerce (who favors free-trade agreements and the offshoring of jobs), represents a slew of lobbyists and is closely allied with GOP leaders. The Chamber favors the H-1B and other guestworker programs --- as does Fwd.US, who represents the tech industries and likes to "in-source" jobs. Members include Mark Zuckerberg of Facebook, Eric Schmidt of Google, Reed Hastings of Netflix and Marissa Mayer of Yahoo (just to name a few). Also read: CBO Report on Immigration: Impact on Jobs, Labor Force regarding Senate bill S. 744 (the Border Security, Economic Opportunity, and Immigration Modernization Act).

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