The rise of household wealth and of global mobility

Voluntary migration, which is undertaken primarily for economic improvement, is abetted by households having enough private wealth to afford the migrate. One form of migration that is almost entirely dependent on household wealth is international education at the college and even high school level. Vacation travel abroad is almost entirely dependent on household wealth.

The chart below shows the growth of global houseold liquid assets (such as bank accounts) and home ownership since 1990. Home ownership is in part an investment with potential to fund other spending by home loans. Note the huge growth of  household assets, driven by the entrance of Asians into the middle class and the global rise of home ownership and home prices. Note that this trend greatly exceeds the trend in global gross domestic product.

The growth of household assets and GDP was interrupted by the COVID pandemic. Today, with the reduction in inflation and expected reduction in interest rates, we should expect a high rate of growth in discretionary temporary migration and demand for permanent migration (the latter severely constrained by immigration caps).

 

Japan struggles with finding workers

In the U.S, 7% of workers are 65. Or over; in the UK, 4%. But in Japan, 14% are 65 or older. (The same in Korea: 13%).  Why this huge difference?

Aging: The population of people aged 65 and over accounts for 29.3% of the country’s total population. This is expected to reach 35% by 2040. In the U.S.. they account for 18% of the population. By 2054, they 23% of the population.

Absence of a large foreign-born population: in 2000, about 1.2% of the population was foreign-born. Today, after a decade of targeted but discreetly revealed governmental policies, 3.3% of the population is foreign-born.  Immigration tends to concentrate is early-mid working age (20 – 45 years). In the U.S. foreign-born persons are 14%; in Germany, 19%. OECD countries average 10% of their population as foreign-born.

In the U.S. some 30% of the entire workforce will in the next five years be either first or second generation foreign-born. It is hard to see how this percentage in Japan will be over 5%. (I’ve posted in tbis here.)

The largest sending countries of foreign-born persons in descending order are China, Korea, Philippines and Vietnam. (There are a good number of Brazilians as well, stemming from immigration in the pre-WW 2 period; there are currently 2 million Brazilians of Japanese descent.)

According to an OECD study, eligibility conditions for permanent residency in Japan are strict. Migrants usually need to live ten years in the country to be eligible. Attracting talent is also hindered by low job mobility in the Japanese labor market.

International students are a key resource targeted by Japan’s strategy to attract and retain global talent and have been traditionally the main way for foreign-born persons to settle in the country.  But the numbers are tiny. The number of international students grew from about 140,000 in 2010 to over 300,000 today and the government aims that number to grow.   Compare 300,000 with the size of Japan’s entire workforce of 69 million. In Canada, there are one million international students and a total workforce of 22 million!

Dairy workers with no legal immigration pathway

America’s dairy workers do not fit into existing categories for legal immigration. They are year-round, rather than seasonal farm workers, and thus cannot be accommodated by H-2A seasonal work permits. These permits hav surged in use, associated the a relative decline among produce farmers to depend on unauthorized workers. Diary workers have no formal modern day skills thus will not be given employment-based green cards.  Yet they fill a gap in the farming workforce created by the decline in population in rural areas and the relatively unattractive compensation and working conditions.

In 2015, hourly wages averaged $11.54, which aligned with wages generally in farming. These wages have surged due in part to labor scarcity, and today both diary and farming in general are $18-$20 an hour. As foreign-born dairy farmers are often provided housing, the comparison with non-farming compensation is not straightforward.  It is worth noting that 31 states do not provide special authorizations for persons without formal legal status to drive a vehicle, thus housing for many may be an absolute requirement. (Go here about special drivers licenses.)

Rural exodus of the U.S. born population, poor attributes of a 24/7 work demand, and low wages compared to cleaner and safer work have created a chronic shortage of workers.

Hence the high use of unauthorized workers to fill diary jobs. 79% of of foreign-born workers in diary farms are estimated to be unauthorized. A national survey of dairy farms was conducted during Fall 2014 produced these insights:

foreign-born labor accounts for 51% of all dairy labor. Dairies that employ immigrant labor produce 79% of the U.S. milk supply. Eliminating immigrant labor would reduce the U.S. dairy herd by 2.1 million cows, milk production by 48.4 billion pounds and the number of farms by 7,011. Retail milk prices would increase by an estimated 90%.

(From Texas A & M, The Economic Impacts of Immigrant Labor on U.S. Dairy Farms, by Flynn Adcock, David Anderson, and Parr Rosson. August 2015)

Also go here.

 

 

How the Manhattan Institute looks at profit and loss from immigration

A Manhattan Institute report estimates the fiscal impact on the federal budget if a “selectionist” program of immigration were imposed. The study attempts to estimate how the lifetime of an immigrant affects the federal budget, summing some two dozen types of tax revenues and disbursements.  I have a feeling that with Republican control the federal government this study will be widely cited.

Also, the Congressional Budget Office has released a forecast of the impact on the federal budget for 2024-2034 which dramatically shows the opposite of the the Manhattan Institute study. The CBO, by taking into account the total impact on the economy including increased productivity overall by recent Biden-era surge of immigration, projects that the net effect on the federal budget during these years will be a positive $0.9 trillion.  The Manhattan Institute study ignores second effects or externalities. (For instance, in an economy with labor shortages in certain industries, by filling open jobs immigrant workers can boost total employment.)

The study ends with what might be called a Dr. Strangelove Scenario whereby we deport half of unauthorized persons who are a net drain, keep the rest as they are not a net drain, at least as much; push up the relative number of young and educated, and thereby move the total net fiscal impact to the positive. I’m not here going to analysis the steps the author takes, but rather hits the high points.

The study was prepared by a Venezuelan immigrant, Daniel Di Martino, a PhD candidate in economics at Columbia University and a graduate fellow at the Manhattan Institute. The study includes many useful facts about the formal education attainment within key classes of immigrants, by age category.

He concludes: “If all the recommendations made in this report are implemented, the U.S. could reduce the debt and grow the economy by potentially $2.4 trillion over the long run, rising by over $200 billion every year that these selectionist immigration policies remain in place. Selectionist immigration requires taking a strategic approach to immigration that prioritizes young and highly educated immigrants over older and less educated immigrants.”

The author writes that the average native-born citizen is expected to cost over $250,000 to the federal government. (All lifetime figures are net present value.) Thus we start with a situation of net fiscal drain without yet considering immigration.

Immigrants without a college education and all those who immigrate to the U.S. after age 55 are universally a net fiscal burden by up to $400,000. (Grandma coming in at age 65 has imposed a lifetime fiscal drain of $406,000). The large positive fiscal impact of young and college-educated immigrants pulls up the overall average. Each immigrant under the age of 35 with a graduate degree reduces the budget deficit by over $1 million during his lifetime. As for those coming to the U.S. to study, the fiscal impact of the average graduate degree holder who entered the U.S., aged 18–24 is outstandingly positive, which is why the author strongly favors keeping STEM students here to live.

For 18 – 24 year old immigrants without a high school degree, the lifetime net fiscal impact is negative $314,000. The author looks at the impact of a U.S. born person with the same profile and estimates negative $256,000.  This is an interesting comparison as it shows that persons with poor formal education of a fiscal net loss, regardless of birth place.

The author’s desired scenario it to reduce annual immigrant from about one million to 850,000, and to tilt every class of legal immigrant towards a young and educated profile. This includes deporting 5 million unauthorized persons who do not meet certain criteria and legalizing another 5 million. The fiscal impact of seven other changes is relatively modest, yet still substantial.  The scenario envisions doubling the share of new immigrants using economic criteria and lowering total immigration.

 

Poll on high-skilled immigration

This by the Economic Innovation Group, which supports high-skilled immigration (HSI), so the poll results need to be taken with a grain of salt. I anticipate that in the next administration there will be enacted an immigration bill which includes more high-skilled immigration, in the eontext of an explicit strategy to boost economic investment.

:Definition of HSI: “immigrants with a high level of educational achievement or specialized professional skills, such as scientists, medical doctors, computer programmers, engineers, or business finance professionals.”

Seventy-four percent of voters support “allowing more legal, high-skilled immigration to the United States,” versus only 18 percent who oppose it.

Support for HSI is overwhelmingly bipartisan: 71 percent of voters who plan to support President Trump in November and 86 percent of those who plan to vote for President Biden favor increasing HSI.

More than two-thirds of voters in every swing state (Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin) support increasing HSI.

Most Americans do not believe the U.S. immigration system is designed to benefit them. Only 37 percent agreed that “the U.S. immigration system is currently designed to benefit the U.S. economy, its workers, and its communities.”

Four-fifths of voters believe the American immigration system needs “major changes” or “a complete overhaul.”

Voters overwhelmingly see the economic and competitive advantages of HSI; 70 percent say it benefits the U.S. economy.

The voters least likely to compete with high-skilled immigrants—rural Americans with a high-school degree or less—are those most likely to oppose more HSI.

Higher education: the white advantage as declined and will continue to do so.

The annual wage between four-year college degree holders and others was about $20,000 in 2000 and $35,000 in 2020.  When a group in American society increases its attendance at four-year college, it is not only increasing its average household income but also potentially gaining a larger share of the total college educated population. In 2000, some 45 million persons 25 and older had a four-year college degree. In 2020 about 90 million had a four-year college degree. During these 20 years, the non-white population grew faster than whites and they were increasingly attending four-year college.

Thus, over these 20 years, non-whites significantly narrowed the gap between their college degree attainment and that of whites. I believe that as the white population declines and non-white population continues to grow, the non-white college attainment track record will continue to improve relative to that of whites. Result: whites will have a distinctly lower overall advantage in formal education. By 2040 or so the graduating class of four-year colleges are increasingly likely to be over 50% non-white.

Obscuring this picture is that educational and population statistics do not consistently distinguish non-white from white Hispanics, and do not recognize mixed race. But the overall trend is undisputable.

Detail:

In 2000, about 25% of all white persons 25 years or older had a four-year college degree. This share rose to 33% in 2020. Compare that with non-whites:  in 2000, among non-whites over 25, about 12-14% had a four-year college degree and the share rose to about 23-25% in 2020. Thus, while non-white college rate was about 50% below whites (13%/25%=52%) in 2020, the gap declined to about 30% (24%/33%= 73%) in 2020.

This narrowing of the gap in a key socio-economic credential was due largely to a big jump in college completion by Hispanics, the rise in total Hispanic numbers, and the rise in the Asian population, which always had a college completion rate of over 50%.  Among foreign-born persons 25 years or older, the college graduates rose from 29% to 49% (which reflects the rise of Asia as the source of immigration in the 21st Century).

Between 2000 and 2019, the Asian population grew by 81%, Hispanics by 70%, Blacks by 26%, and non-Hispanic whites by 1.2% (including slight declines in 2016- 2019).

In other words, there are both more non-whites and their college attendance has grown.

Percentage white: Silent Generation ( first year 1928): 79%; Baby Boomers (1946): 72.2%; Generation X (1965): 61.5%; Millennials (1981) : 58%; Generation Z(1997) : 51-52%; Generation Alpha (2012): Less than 50%. Generation Alphas will be entering college in 2030.

 

Do countries whose workers migrate to advanced economies lose or gain?

When less wealthy countries send workers to work in advanced countries, do they suffer or gain in the long run? There is no definitive answer to this question that could be generally applied.

Among the sources of internationally migrant workers have made a point of supporting their citizens working abroad are Kerala State in India, and Philippines.

On the plus side, remittances sent by its migrant workers can make up a significant share of the source country’s economy. These remittances can stabilize foreign exchange. Some returning migrants bring back skills and capital, which can be invested in local businesses and industries. This can lead to economic diversification and development in the region.

On the negative side, emigrating workers may be relatively valuable workers (across the range of formal skills) due to having superior personal work attributes. Thus the source country may lose a disproportionate share of its better workers.  A recent research paper (here) points in this direction.  Also on the negative side, the source country’s political and economic policy may settle into to a chronic state of low expectations for domestic growth, knowing that so much for their country’s economic well-being is dependent on other, much larger, economy.

I have never seen study of the circular flow when skilled workers move to advanced countries and later on invest their added skills and capital back in their country of origin.

And, we need some one to write a book on how the politics of less developed countires are impacted by their diaspora.

The lack of a consensus about how to study the issue of net gain or loss to the sourcing country has becomes more and more painful as the relative size of the international migrant workforce (now over 8% of all workers in the world) and the dependence of emerging economy countries on remittances has grown. Global remittances were $100B in 2000; they are now approaching $700B.

 

Springfield OH and Storm Lake IA: united in dependence on immigrant workers

Springfield, OH is among many towns the workforce of which is heavily immigrant-based, far more than the national workforce percentage of 18% immigrant. Storm Lake, IA, has prospered due to immigration. It is now the most diverse community in Iowa. It is a model of rural communities which have grown, not declined, due to immigration.

In the late 20th century, the meat processing industry evolved into large-scale, highly mechanized operations, with locations in small rural towns.  Small plants merged into massive facilities.  Storm Lake was one of these towns. Since the late 19th C, meat processing plants have depended on immigrant labor, at first from Europe, and in the past 30 years from emerging countries.

The city has become a major meat processing production center. Meat processing began there in the 1930s and took off with large plants in the 1990s. Tyson Foods employs around 3,200 people with wages ranging from $17 to $22 per hour.  Many farms in the region rely heavily on Latino workers. Immigrants are increasingly becoming entrepreneurs, opening retail businesses. I visited the town in 2022 and came across a good number of Latino, Asian and even Pacific Islander restaurants.

With a population of about 11,000, it grew 25% since 1990 while the great majority of rural towns in the state lost population. Today, Storm Lake residents include 40% white, 39% Hispanic, 15% Asian, and 4% Black (go here). The most common source countries are Mexico, India and Vietnam. 31% of the population is foreign-born.

(Springfield’s recent history includes losing 20,000 largely manufacturing jobs in the 1990s, and bringing in roughly 10,000 foreign-born workers in the past few years. The city’s population today is about 10,000 below that of 1990.)

The Pulitzer winning Storm Lake Times has written, “Immigration has been the story of Iowa since the mid-19th century. The Danes came to Newell, the Swedes to Albert City, the Germans to Hanover, the Irish to Sulphur Springs. Now Latinos, Asians and Africans are writing a new chapter of growth by launching their own enterprises and improving their own lot through education.”

The picture below is of the high school’s homecoming court in the Fall of 2022. The black woman on the upper right, the child of Sudanese parents, was elected homecoming queen.

The relentless rise of Hispanics in America

From the Federal Government:

The percent share of Hispanics in the total population has been trending upward for the past couple of decades and is projected to continue increasing. From the 2000s onward, this population growth was primarily driven by Hispanics born in the United States rather than those who immigrated here. Prior to the 2000s, Hispanic growth was driven mainly by immigration. The fertility rates of Hispanics are higher than those of other demographic groups – 1.9 for Hispanics vs 1.6-.1.7 for non-Hispanic whites.

This difference results in the percentage of Hispanics continuing to increase over the 2023–33 projections decade. Hispanics are projected to account for 20.2%  of the population in 2033, compared with 17.8% in 2023. The trend is more pronounced for the labor force, with Hispanics being projected to account for 22% of the labor force in 2033, compared with 19% in 2023, 13% in 2003, and 9% in 1993.

Household income of Hispanic households was 70% of non-Hispanic households in 2000, Today the ratio is 77%.

As I recently posted, in 2022, homeownership rates stood at 74% for white Americans, 46% for Black Americans and 49% for Hispanic Americans, according to U.S. census data. But between 2020 and 2040, there will be 6.9 million net new homeowners, a 9% increase, of which 4.8 million more will be Hispanic homeowners, 2.7 million more Asian and other homeowners and 1.2 million more Black homeowners, while white homeownership will dwindle by 1.8 million, the Urban Institute projects. this gigantic shift in home ownership trends is due to the relatively high rate of persons who are not white and who are entering home ownership buying age (roughly 30 years old).