Archive for the ‘Economics’ Category

The economics of dreamers

Sunday, December 17th, 2017

The Congressional Budget Office released on December 15 an analysis of the fiscal impact on the federal government if the DREAMERs were to be given full permanent legal status. An anti-immigration group, the Federation for American Immigration Reform (FAIR), immediately said that the report justifies denying the dreamers the dreamers legal resident rights.

The CBO report is a woefully incomplete profile of the economic and federal fiscal impact of dreamers. Here is why: it focuses on incremental federal outlays for the healthcare of these now legal workers without taking into account their contribution to economic production and to federal income tax payments.

It’s sort of like saying that hedge fund managers living in Greenwich CT. are a net cost to the city because they demand a higher public school budget.

The report, after analyzing a bill submitted in Congress in 2018 to give permanent legal status to dreamers, estimates that, with some expansion of the dreamer population by this bill, two million persons are covered. The analysis does not address the workforce contribution of these persons, and thus leaves out their financial contribution in federal, state and local taxes.

A rough estimate of their income tax payments is as follows. It is reasonable to assume that at least 75% of these two million persons, when they are of working age, will be in the workforce. The median annual wage in the U.S. is about $37,000. Let’s assume that the average annual income of these 1.5 million workers is $28,000. Federal taxes on an individual earning that amount is about $3,400. This totals to $5.1 billion annually in federal income taxes.

The CBO report pretty much assumes that these persons prior to legalization do not receive Medicaid benefits or Affordable Care Act (Obamacare) premium subsidies. It estimates these costs after legalization to average, over the first ten years after legalization, at about $1.05 billion a year. The CBO lists other federal expenses but they are minor compared to these healthcare benefits.

This roughly one billion a year incremental cost is (1) less than one fifth of their annual federal income tax payments, and (2) consistent what legal American workers are receiving right now in health subsidies. These costs are the result of making 1.5 million workers legal, allowing them to progress in their work, during their early working years, towards higher wages.

Biggest settlement ever for hiring undocumented workers

Tuesday, November 21st, 2017

The government settled in September with a company for $95 million over past used of undocumented workers. This is the largest settlement ever with an employer over illegal employment.

The Trump administration is, in effect, going after employers with the threat of huge fines, and avoiding the worksite raids which, around 2006, caused terrible press. This strategy is consistent with my prior comments that this administration will drive as far as possible to throttle immigration through Executive Branch initiatives that do not require the participation of Congress.

The government’s press release includes: “Asplundh Tree Experts, Co., one of the largest privately-held companies in the United States, headquartered in Willow Grove, Pennsylvania pleaded guilty today [Sept. 29, 2017] to unlawfully employing aliens, in connection with a scheme in which the highest levels of Asplundh management remained willfully blind while lower level managers hired and rehired employees they knew to be ineligible to work in the United States.

“The $95,000,000.00 recovery, including $80,000,000.00 criminal forfeiture money judgment and $15,000,000.00 in civil payment, represents the largest payment ever levied in an immigration case.

“According to court documents, from 2010 until December 2014, Asplundh, an industry leader in tree trimming and brush clearance for power and gas lines, hired and rehired employees in many regions in the United States accepting identification documents it knew to be false and fraudulent. A six-year HSI audit and investigation revealed that the company decentralized its hiring so Sponsors (the highest levels of management) could remain willfully blind while Supervisors and General Foremen (2nd and 3rd level supervisors) hired ineligible workers, including unauthorized aliens, in the field. Hiring was by word of mouth referrals rather than through any systematic application process. This manner of hiring enabled Supervisors and General Foremen to hire a work force that was readily available and at their disposal.

“This decentralized model tacitly perpetuated fraudulent hiring practices that, in turn, maximized productivity and profit. With a motivated work force, including unauthorized aliens willing to be relocated and respond to weather related events around the nation, Asplundh had crews which were easily mobilized that enabled them to dominate the market. Asplundh provided all the incentives to managers to skirt immigration law.”

Foreign temp farm workers close to 10% of farm wage workforce

Saturday, October 28th, 2017

Rural Migration News reports that temporary farm workers have more than doubled in numbers in the past few years, and are approaching 10% of the entire wage workers in farming.

The H-2A program has since 1987 allowed farmers anticipating too few farm workers to apply for certification to employ guest workers. The H-2 program was created in the 1952 Immigration and Nationality Act.

Between the 1950s and the 1990s, most H-2/A workers were Jamaicans who hand cut sugar cane in Florida and picked apples along the eastern seaboard. The number of H-2A jobs certified fell after the Florida sugar cane harvest was mechanized in response to worker suits alleging underpayment of wages. In FY1985, the US Department of Labor certified 20,700 jobs to be filled by then H-2 workers, including 10,000 in sugar cane.

In 2012, when DOL certified 85,248 jobs to be filled by H-2A workers, 5,400 certified employers offered an average 33 weeks of employment for an average 43 hours a week.

Farm employers must pay the Adverse Effect Wage Rate, which is the average hourly earnings of field and livestock workers reported to USDA by farm employers the previous year. AEWRs for 2017 range from $10.38 an hour in the south to $13.79 in the Plains states, above federal and state minimum wages. Farmers would like to end recruitment, housing, and wage requirements.

Since the 2008-09 recession, farmer requests for H-2A workers have increased, and the number of jobs certified to be filled by H-2A workers could top 200,000 jobs in 2017.

Average employment covered by unemployment insurance on US crop farms is almost 900,000, including 560,000 workers hired directly by crop farmers and 331,000 workers brought to farms by crop support services. If 160,000 H-2A workers are employed an average 26 weeks in FY17, they would be equivalent to 80,000 full-time workers, and H-2A workers would be nine percent of all workers employed on crop farms.

Ben and Jerry’s agrees to compact with dairy workers

Wednesday, October 4th, 2017

After three years of lobbying and negotiation Ben and Jerry’s agreed with Vermont-based Migrant Justice over a Milk with Dignity pact. In 2014, Migrant Justice began the Milk with Dignity campaign with large corporations, such as Ben & Jerry’s, to promote justice for dairy workers. It is modeled after the Fair Food Program in Florida a program. The agreement includes:

Farmworker-Authored Code of Conduct: Farms in Ben & Jerry’s supply chain must meet the standards defined by farmworkers in wages, scheduling, housing, health and safety, and the right to work free from retaliation;

Farmworker Education: From day one, workers in the program will be educated on their rights under the code of conduct and how to enforce them. Workers will become frontline defenders of their own human rights.

Third Party Monitoring Body: The newly-created Milk with Dignity Standards Council (MDSC) will enforce the agreement by auditing farms’ compliance with the code of conduct, receiving, investigating and resolving worker grievances, and creating improvement plans to address violations. The MDSC will work with farmers and farmworkers in order to problem-solve issues as they arise seeking to improve communication and participation in the workplace. It may suspend a farm from the program if the farm is unwilling to meet the standards in the code of conduct, creating strong market incentives to improve conditions and make workers’ human rights a reality.

Economic relief: Ben & Jerry’s will pay a premium to all participating farms in their supply chain. The premium provides workers with a bonus in each paycheck and serves to offset farms’ costs of compliance with the code of conduct.

Legally-binding Agreement: Ben & Jerry’s has signed a legally-binding agreement that defines the program as a long-term contract enforceable under law.

The agreement with Ben and Jerry’s is modeled after what the Coalition of Immokalee Workers struck with tomato growers in Florida. In 2011, CIW launched the Fair Food Program (FFP), a groundbreaking model for Worker-driven Social Responsibility (WSR) based on a unique partnership among farmworkers, Florida tomato growers, and participating retail buyers, including Subway, Whole Foods, and Walmart. In 2015, the Program expanded into tomatoes in Georgia, South Carolina, North Carolina, Maryland, Virginia and New Jersey, as well as Florida strawberries and peppers.

Under the FFP:

CIW conducts worker-to-worker education sessions, held on-the-farm and on-the-clock, on the new labor standards set forth in the program’s Fair Food Code of Conduct;

The Fair Food Standards Council, a third-party monitor created to ensure compliance with the FFP, conducts regular audits and carries out ongoing complaint investigation and resolution; and

Participating buyers pay a small Fair Food premium which tomato growers pass on to workers as a line-item bonus on their regular paychecks (Between January 2011 and October 2015, $20 million in Fair Food premiums were paid into the Program).

English language skills of low skilled immigrants

Wednesday, August 16th, 2017

The English language proficiency of immigrants has increased, most notably in the past ten or so years. This upward trend is seen in important groups such as Mexicans. But English language proficiency of Mexican immigrants declined in the 1990s. What was the impact of that, and why did it happen? The explanation has to do with demographics of immigrants and job growth in the 1990s.

Researchers looked at the impact on earnings and education when immigrants learn English. English proficiency helps in getting better paying jobs. It also enables the immigrant to obtain more formal education. Another study found that the benefits of English proficiency were primarily in becoming more educated. Young persons with English were more inclined to complete high school.

Demographic trends actually caused English proficiency among low skilled immigrants to decline. In 1990, 80% of individuals from non English-speaking countries said that they spoke English very well. In 2000, 70% said so. The decline is due to the large increase in immigrants, many unauthorized, in the 1990s.

During that decade, an hourglass profile of workers and jobs enlarged. There was a sharp increase in demand for service workers such as food preparation, janitors, gardeners, security guards, housekeeping ,cleaning and laundry workers. These low skilled jobs require limited language skills.

The English language skills of these jobholders declined in the 1990s. On factor in lower English proficiency is that with larger numbers of non-English proficient residents, these individuals were more able to find work that did not require English proficiency. This led to great linguistic and cultural isolation.

One researcher, writing in 2015 (Cassidy) found a large decline in the earnings of childhood immigrants in the U.S. between 1990 and 2010, and in particular during the 1990s. This drop in earnings has occurred across all age at arrival groups, but has disproportionately impacted lower-educated immigrants. A large decline in English language proficiency can explain much of this trend. A concentration of source countries (largely, through not entirely, due to an increase in Mexican immigration) has also contributed, mainly through the negative impacts it has had on English language proficiency and education levels.

See: Language Skills and the Earnings Distribution Among Child Immigrants, by Wang and Wang

The Decline in Earnings of Childhood Immigrants in the U.S., by Cassidy

American farms hire more Mexicans on temp visas

Tuesday, August 8th, 2017

The Wall Street Journal reports that “Demand in America for Mexican farmhands, landscapers and other temporary workers is surging as the Trump administration moves to curb immigration and renegotiate its trade relationship with Mexico.” The amount of non-skilled temporary visas issued in FY 2017 may exceed the peak reached in 2010, which was about 325,000.

In the first nine months of fiscal 2017, which began Oct. 1, the U.S. Labor Department certified more than 160,000 temporary workers—the bulk of them from Mexico—to harvest berries, tobacco and other crops in the U.S. under the H-2A agricultural visa program. That was up 20% from the period a year earlier.

The annual issuance of H-2A visas nearly doubled from 85,248 in fiscal 2012 to 165,741 in 2016. The U.S. doesn’t cap the number of these visas.

Outside of agriculture, use of another type of seasonal-work visa also has surged in response to increased U.S. demand for unskilled laborers such as hotel housekeepers. The Department of Homeland Security in July raised the annual cap on H-2B visas by more than 20% to 81,000. The majority of workers receiving this type of visa also are from Mexico.

In 2015, farmers in California’s Santa Barbara and San Luis Obispo counties, which grow roughly 30% of the strawberries in the U.S., reported $13 million in losses because they lacked enough labor to harvest their crops in a timely manner.

Last year, vegetable farmers in the two counties reported they had 22% fewer workers than needed on average, while berry farmers put the worker shortage at 26%, according to a survey conducted by a local growers association.

Skilled immigrant workers and our economic future

Tuesday, July 18th, 2017

A lot of Trump’s economic revival ideas are “fighting the past war. What really matters is how we are faring globally in the industries of the future like: aviation, aerospace, biotechnology, semiconductors, software and the internet.” This from an interview with Robert Atkinson, an immigrant from Canada and proponent of innovation as our only real hope to prevail in the future

These industries depend on STEM workers (science, technology, engineering, and math). The core list of 46 STEM occupations are in computer and mathematics; engineering and surveying; physical and life science; and managerial. There are eight million of these STEM workers, about 5% of the entire workforce.

Nationally, about one-quarter of the nation’s STEM workforce is foreign-born, according to the report, “Foreign-born STEM Workers in the United States.” It has doubled from 11.9% in 1990 to 24.3% in 2015. They account for 47% of STEM workers with advanced degrees

In New Jersey 43% of STEM workers are foreign-born. In California, 42%.In New york, 29%. In 16 other states, foreign-born workers make up 20 percent or more of all STEM workers.

Changing the business model of seasonal business?

Friday, June 9th, 2017

The Trump administration effectively cut in half the number of temporary H-2B visas for 2017. This has caused employers to scramble to find workers for landscaping, amusement park, resort housekeepers and similar jobs. The New York Times and the Washington Post ran stories of desperate employers.

As reported by the NY Times, “Eric Haugen, who runs a landscaping company in the Denver area, regularly posts ads in newspapers, on Craigslist and on street signs for positions that pay $14 to $25 an hour, with health care and benefits. ‘We hire every single person who shows up’ for an interview, he said. We are lucky if one reports to work.’ ”

“On Mackinac, the 393-room Grand Hotel is short staff. ‘Without them, we would be looking at changing our entire business model,’ Jennifer King, general manager of the property, said.”

Daniel Costa of the Economics Priority Institute told Congress in 2016 that “Despite such claims from industry groups—other than employer anecdotes—no credible data or labor market metrics have been presented by non-employer-affiliated groups or organizations—let alone by disinterested academics—proving the existence of labor shortages in H-2B occupations that could justify a large expansion of the H-2B program.”

A labor shortage can be defined as (1) rising real wages relative to other occupations, (2) faster-than-average employment growth, and (3) relatively low and declining unemployment rates.

Wage trends: for the top 15 H-2B occupations, “there was no significant wage growth for workers; wages were stagnant (growing less than 1 percent annually) or declined for workers in all of the top 15 H-2B occupations between 2004 and 2014.”

Employment growth: “the top 15 H-2B occupations had widely varying rates of employment growth. Six experienced employment declines; seven experienced growth that was positive and above the 5.5 percent growth rate for all occupations; and two experienced growth that was lower than the percentage change for all occupations.”

Unemployment rates: The average annual unemployment rate for all workers in the United States in 2014 was 6.2 percent. During 2013–2014, none of the 15 H-2B occupations was at or below the overall U.S. unemployment rate for 2014.

Thinking of African Americans as an immigrant group not well assimilated

Monday, May 29th, 2017

A comparison is worth drawing between two populations that have not assimilated well economically in the U.S. – Mexican immigrants and post-slavery African-Americans. They had common barriers to economic assimilation: racial/ethnic prejudice, relatively low formal educational attainment, and what I call socio-economic isolation. American slavery is the extreme form of socio-economic isolation of an immigrant group.  Isolation makes it difficult to exit bad situations and enter new job opportunities.

Hispanics and Mexicans

In 1970, there were 7.8 million native born Hispanics in the United States, and 1.8 million foreign born Hispanics. Between 1970 and 2014 the percentage of the entire American population that were foreign-born Hispanics rose from 0.8% to 6%.

During this 44 year span, the educational attainment of Mexican immigrants worsened due to the sharp rise of immigrants with poor formal education. Then, after about 2000 generally Hispanic educational attainment improved both absolutely and relative to native-born Americans.

Look at Hispanic vs. white high school graduation failures. In 1970, 55% of whites and 32% of Hispanics (24% of Mexican immigrants) had finished high school. The white to Mexican gap was 31%. In 1998, the white to Mexican gap had increased to 36% (84% vs. 48%). And, the gap between whites and Mexicans for college graduation also increased. Thus, looking only at education, Mexican assimilation worsened.

After 2000, the gaps declined. Hispanics gained greatly in high school graduation rates and in college education (mainly through community college). Mexican-origin persons still have a markedly lower rate of educational attainment then other Hispanics and then whites (see table 1 here). Still, in 2013 Hispanics accounted for 40% of high school dropouts compared to 13% in 1970

Black males

Now turn to black male mobility in the United States since the late 19th Century thanks to this May, 2017 article. By mobility, the authors mean the movement of sons up or down the percentiles of the national income distribution of similarly aged men relative to the position their fathers held in the distribution of all fathers decades earlier. They report:

“For those with the lowest earning fathers, between 72% (1880-1900) and 90% (1910-1930) of whites exceeded their father’s status compared to only 51% (1880-1900) or 68% (1910-1930) of blacks. The basic pattern is similar for cohorts of men observed in 1962 and 1973 surveys. White sons exceeded black sons in upward rank mobility by about 20 to 30 percentage points at the bottom of the fathers’ rank distribution. From this perspective, there is no clear evidence that the first cohort of post-Civil Rights era black sons (measured in 1973) fared substantially better in terms of intergenerational mobility than those that preceded them.

“Our results suggest that racial differences in intergenerational mobility have been the most important proximate cause of black-white income inequality from the Civil War until today. Analyses for the early and late 20th century suggest that weaker human capital accumulation in black children, conditional on parents’ economic status, has hindered the pace of intergenerational convergence in labor market outcomes.

“Even after school desegregation in the 1960s and 1970s, residential segregation continued to limit black children’s exposure to high social capital environments and their access to high-quality educational opportunities.”

The authors stress the role of education in economic mobility. Had they been able to measure the effect of racism, they would likely have introduced that. Another approach is to look at the degree of socio-economic isolation. In the early part of the 20th Century. Black men were somewhat more likely to be geographically isolated on farms than were whites, and far more likely to have lowest status farm work. During the middle part of the Century, their numbers grew in non-farm work, mainly unskilled and semi-skilled blue-collar jobs. These jobs have languished in the past few decades.

The authors prepared a weighted ranking of fathers’ income for black and white male children. Between 1990 and 1990 the white score rose from 38 to 56, having leveled off in the last decades. The gap between white and black fathers was, in 1900 was 32; it rose to 44 in 1962; and decreased slightly in 38 in 1990. The gap widened even while the rates of high school completion for white and blacks converged in the second half of the 20th Century.

Portrait of an immigrant from Africa

Thursday, May 18th, 2017

Claude Rawagenje is one of the 1.7 million sub-Saharan Africans in the U.S. He coaches immigrants on managing household finances in Portland, Maine. He meets every year with fellow Banyamulenges, from the eastern part of the Democratic Republic of Congo. “There are five thousand of us in America,” he told me. “At our annual national meetings we talk about how to get a job and work your way up, how to be a success without losing your culture, avoiding mistakes such as touching a co-worker.”

The sub-Saharan African immigrant population roughly doubled every decade between 1980 (starting at 130,000) and 2010 and in 2015 reached 1,700.000. Over 80% come from sub-Saharan Africa.

The largest sources are Nigeria, Ethiopia, Ghana, and Kenya. Roughly half come from English-speaking countries. New York City, Washington, DC, and Atlanta metropolitan accounted for about 27% of sub-Saharan Africans in the United States.

39 percent of sub-Saharan Africans (ages 25 and over) had a bachelor’s degree or higher, compared to 29% of the total foreign-born population and 31% of the U.S.-born population. Nigerians are 57% with college degrees. They are much higher high in the labor force (75%) than the native born population (62%).

They sent $5 billion in remittances in 2003. In 2015, over $5.5 billion was sent from the U.S. to Nigeria alone. American remittances accounted for 31% of GDP in Liberia and 22% in the Gambia.

Source of data: Migration Policy Institute