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Support Alan Kuper for Sierra Club’s Board of Driectors

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Alan Kuper, a member of FAIR's Advisory Board, will be a candidate for the Sierra Club Board of Directors in the election in March-April 2000. Members of record Jan. 31,1999 will receive a ballot around March 5.

We urge Sierra Club members to single out Alan for your vote.

Alan has been broadly active in population-environment work for over a decade. In 1995 he was named the year's most effective US population/ consumption/environment volunteer by Population Communication International. He has been a devoted Sierra Club leader and activist for over 25 years. His numerous environmental citations include two prestigious awards from the national Sierra Club.

He formed Sierrans for US Population Stabilization (SUSPS) which succeeded in placing on the 1998 Club ballot a referendum on a comprehensive Club US population policy including immigration as well as fertility/mortality. Although the vote was 3:2 for continuing the Club's no position on immigration, the publicity surrounding the debate was a public information success. In 1999 he led a petition campaign again. In response, the Sierra Club for the first time explicitly stated its resolve to advocate reduction in US population.

Alan is endorsed by SUSPS, David Brower and Dave Foreman along with numerous other prominent Club leaders. We have worked closely with Alan for many years. He has our warmest endorsement.

He can be contacted at 216/229-2413, FAX -9431, , or visit www.susps.org/info/kuper.html.

Is Immigration the Answer to a Labor Shortage?

By Joseph L. Daleiden

Journal of Social, Political and Economic Studies, Summer, 1998

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Abstract

As the nation reaches the peak of a business cycle, labor shortages inevitably appear and pressure on wage rates increases, especially in the fastest growing industries. Businessmen frequently seek to increase immigration to obtain additional labor. The Federal Reserve Board also is inclined to increase interest rates to curb the possibility of inflation. Both short term fixes interfere with the natural workings of a market economy and can only create severe problems in the long term, including slower productivity growth, greater income inequality, and, ultimately, overpopulation and all of its related problems. In the final analysis, the use of immigration to solve a labor shortage is, in effect, an intergenerational Ponzi scheme.

Much of current talk about a labor shortage in the U.S. is reminiscent of the concern expressed by slaveowners who argued that if the U.S. abolished slavery there would be no one to pick the cotton. Today we hear that without immigrants there will be no one to pick lettuce, or cut lawns, or work in restaurants or perform the million and one other low skilled tasks. In the high tech variation of the same theme, the software industry argues that there is a shortage of programmers and Information technology specialists. Some economists warn that the specter of labor shortages will result in lower national growth and higher inflation.

To understand whether there is any truth to these arguments, we have to review some basic economic and demographics tenants. Few persons other than economists realize that the only way a nation’s per capita wealth can increase is through increased productivity (more output using less input). In the absence of productivity growth, individuals can only increase their wealth through reallocation, i.e., the transfer of income from one individual or group to another individual or group.

A nation’s total wealth or annual output (Gross Domestic Product) can also increase through simple population growth, since there are more hands to produce things, but total wealth is largely irrelevant as a measure of changes in human well-being. China’s total output (GDP) is 8 times larger than that of Switzerland, but on a per capita basis the GDP of the Swiss is 20 times that of the Chinese.

In the normal business cycle, increases in productivity are shared by the providers of labor and the providers of capital (investors). Their respective shares are determined by the relative scarcity or abundance of each. During the 1950s and early ‘60s, the shortage of labor resulted in labor being able to improve their bargaining position and wages rose rapidly. During the 1970s and 1980s, the labor force swelled due to the baby boom and the growing labor force participation rates for women. The increased supply of labor relative to demand weakened the competitive position of labor. The growth of international markets and, hence, competition from low wage countries resulted in further downward pressure on wages.

The net result was that inflation adjusted hourly wage rates declined steadily from 1973 until 1993. Productivity grew 1.2% annually over this 20 year period, the total increase in productivity amounted to 24%. Therefore, if labor had maintained their bargaining power, real wages might have increased about 24%. Instead, real average weekly earnings dropped by 19%, a net difference of 43%. Some of this decline was offset by increased benefits, but total compensation adjusted for inflation remained unchanged over this period.

After the baby boom was absorbed into the labor force, the slowing in the growth of the labor force would normally have resulted in real wages rising again, but probably not as much as in the 1950s because the U.S. now faces far more competition from international markets. Nevertheless, since international exports account for only about 12% of total U.S. output, wage rates would still be primarily affected by the supply and demand for labor in the U.S.

Corporations understand that the supply and demand for labor determines wage rates and that is why they successfully lobbied Congress to increase immigration in 1990. Unions do not appear to understand the law of supply and demand, or else care more for attracting additional dues paying members than increasing their member’s wages. Hence, they did not oppose the increased immigration; in fact, they supported it!

Of course, given the huge increase in the labor force due to the post-war baby boom, the increase in immigration will not be sufficient to entirely offset the decline in the labor force as the post war baby boomers retire. However, the shortage is temporary since we will soon have the children of the baby boomers entering the labor force. Remember, the baby boom lasted from 1945 until 1957. Since many of the baby boomers started family formation much later than their parents, the bulk of children of the baby boomers range in age from 10 to 25. Therefore, most have not yet entered the labor force.

Can immigration fill this temporary job market shortfall? Certainly, but then there will once again be a labor surplus when the bulk of the baby boom children enter the labor market. Moreover, wage earners will be unable to increase their share of the productivity pie. A far better solution is to allow the free market to work. In this case, the labor shortage will result in increased wage rates making up some of the lost ground since 1973.

Tighter labor markets will also result in increased productivity as businesses seek to avoid higher labor cost by becoming more efficient or developing new methods of mechanization. The lemon growers of California are a good example. From W.W.II until 1964, lemon growers depended upon temporary workers under the Bacero program. When the Bacero program ended, fear of increased labor costs caused the growers to invest in mechanization and higher-producing dwarf trees. But when immigration increased again in the 1970s, the growers stopped innovating and increased their dependence on cheap labor.

Won’t higher wages result in inflation? Not if the Federal Reserve Board keeps its head and avoids pumping up the money supply as they did beginning in 1965. It works like this: the tight labor market results in increased wages. If wages rise faster than productivity, businesses will seek to maintain profits by increasing productivity (often by replacing labor with mechanization) or raising prices. But either reducing employment or increasing prices will cut aggregate demand for business products. The drop in demand means that inventories will increase and businesses will reduce production; this leads to decreased prices or layoffs. Layoffs will result in still less demand and further downward pressure on prices. Hence, inflation is curbed without the need for active government intervention.

One of the benefits of a market economy is that, for the most part, it is self- regulating. In fact, government intervention often does more harm than good by interfering with the normal adjustment processes. Importing millions of additional workers is one of those ill-advised interventions.

Initially, a high level of immigration will be viewed as an economic benefit as it results in higher levels of economic growth. The reason for increased economic growth will be in part simply due to the increase in population. However, as mentioned, only per capita GDP, not total GDP is a relevant measure of social welfare. When the National Research Council reported in 1997 that immigration increases economic output $1 to $10 billion annually, they were being disingenuous not to note that adding in the population of immigrants actually reduced GDP per capita. When the additional social costs of the immigrants are included, such as more schools, police and fire protection, water and sanitation, highways and streets, etc., not only is the per capita cost far greater, but the economic loss was estimated at $10 to 14 billion annually.

Nevertheless, it is entirely possible that in the short run increased immigration will have a net positive per capita benefit. The downward pressure on wage rates, and the resulting increase in return on investment, will attract additional capital from abroad. Furthermore, providing investors with a larger share of total national income will increase the average propensity to save and invest. As a consequence, productivity and, hence, average per capita GDP might increase. However, since the providers of capital will not share this output equally with the providers of labor, it is problematic whether labor will be better off. The NRC study found that even in the short term, immigration decreased the per capita income of the poorest 10% of society by 5% while increasing the income of the rest of society by a mere 0.2%.

In the long run, to be competitive other nations will have to either increase their productivity or, if they are unable to sufficiently increase productivity to offset the lower wages of the U.S., they will have to reduce their wage rates as well. The net result will be increasing worldwide inequality of income between the providers of capital and providers of labor.

There is yet another problem to be considered: the fate of those immigrants who fail to compete for jobs in the U.S. During the last great wave of immigration (1900-1914), 40% of the immigrants went back home when they couldn’t find jobs in the U.S. Now they, or the Americans they displace, will end up on welfare or struggling to survive on low paying jobs. Coming at a time when we are also seeking to push millions of welfare recipients into the workforce will make the problem that much worse.

The W.W.II baby boom created temporary problems when they entered school and the labor force, and will create some problems at the other end of their lives when they leave the labor force and retire. It is like the bulge in a python that swallowed a goat. It has to work its way through the digestive system. n the case of the baby boom, swallowing this huge increase in the labor force h as caused some economic heartburn, but you don’t treat indigestion by eating more food.

Finally, some policy makers have suggested that we increase the supply of labor to generate additional tax dollars to pay for the benefits of the baby boomers as they retire. But of course this would require adding still more immigrants to cover the benefits of the first wave of immigrants when they retire. Like any pyramid scheme requiring ever larger numbers, it must ultimately collapse. The answer to providing increased benefits is to increase productivity and, hence, per capita wealth. The primary way of increasing productivity is to increase investment per worker, not to simply increase the total number of workers.

Joseph Daleiden is a business economist, demographer and author who has worked in both the private and public sectors. Most recently he served as the Director of Long Term Planning for Ameritech. His latest book, "The American Dream: Can it Survive the 21st Century?"is to scheduled for release by Prometheus Books in February, 1999.


Immigration's Impact on African-American Job Opportunities

By Joseph L. Daleiden

Headway Magazine

February, 1998

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Frequently, politicians and the media try to frame the immigration debate in terms of whether or not the United States should continue immigration. Put that way, the answer seems self-evident. Few Americans wish to halt all immigration. However, the real issue regarding immigration today is the same as it always has been: how many immigrants should be permitted. Throughout our history the number of immigrants has fluctuated from about 14,000 annually during the first 60 year's of our republic to today's record high of 1,000,000 legal and between 300,000 to 500,000 illegal immigrants a year. To put today's immigration in perspective, the average number of immigrants since our nation's founding has been about 250,000 annually.

Many of the studies examining the consequences of immigration focus on the aggregate impact on the economy. However, such aggregates frequently obscure how immigration affects various socioeconomic groups. The conclusion from a review of immigration studies, including the most recent study by the National Academy of Science (NAS) is that in general investors have benefited while many wage earners have suffered. This is not surprising, since basic economic theory tells us that whenever the supply of labor increases faster than demand real wage rates will decline. This has been the situation in the U.S. or the last 25 year. After adjusting for inflation, the average weekly earnings declined 19% between 1973 and 1996.

The decline in wages is due to more than just the increase in immigration. Greater international competition, increased mechanization, and the influx of the baby boom in the work force have all had substantial impacts. Nevertheless, immigration has played a major role in depressing earnings in professional occupations (particularly for college teachers, scientists, mathematicians, and physicians) and even more so for entry-level jobs. The NAS study concluded that 44% of the decline in real wages of high school dropouts from 1980 to 1995 was due to immigrants competing for entry level jobs.

The high level of immigration in recent years has even negatively impacted immigrants themselves. Roughly 20% of immigrants are highly skilled and educated; they make out quite well. However 80% of immigrants tend to be low skilled and poorly educated; they have not done well. For instance, despite all of the efforts to unionize farmworkers and put pressure on growers through boycotts and strikes, the annual earnings of farmworkers have declined 20 to 30% over the past 20 years. The reason is simple: the constant supply of new immigrant farmworkers continues to outstrip demand. In California today there are approximately two farmworkers for every job.

America's Black communities have also been particularly hard hit by excessive immigration. Most persons do not realize that the fastest increase in earnings for African-Americans occurred during the period 1940 through 1960, before Affirmative Action programs were introduced. The reason is that during most of this period there was a shortage of workers, and millions of Blacks migrated from the South to get good paying jobs in Northern factories. However during the last 20 years, many of these jobs have left the country for cheaper labor abroad.

Other factory owners find that they can recruit lower cost Latino labor from Texas and California rather than turning to the inner city for employees. A recent analysis of labor force trends in the Midwest by race and occupation indicates that immigration has resulted in lost job opportunities for Blacks particularly in construction and manufacturing. During the 1990-91 recession, Blacks lost far more jobs in these two industries than Hispanics, and Blacks added far fewer jobs during the recovery.

In construction, Black contractors have seen steady erosion of jobs because their pay scales of $8 to $10 and hour cannot compete with contractors hiring immigrant labor for minimum wage. In manufacturing, which employs five times as many workers as construction, Hispanics almost doubled their share of jobs while the Blacks share declined significantly. In 1983, Blacks held 280,000 more manufacturing jobs than Hispanics. But while Hispanics added 139,000 jobs between 1983 and 1995, Black employment grew by only about 5,000 jobs.

Of particular concern for the future of Black employment in the Midwest - as in other areas of the country - is that in terms of the rate of growth, Hispanics are outpacing Blacks in every major occupation group. This should not be surprising since the growth rate of the Hispanic population in the Midwest is far higher than that of Blacks. Between 1980 and 1995 the Black population grew only 16.1% while the number of Hispanics soared 63.5%. As Hispanics gain fluency in English, we may find trends similar to construction and manufacturing, i.e., during recessions Blacks are first to be laid off and last to rehired.

To make matters worse, as a result of expanding Affirmative Action programs to other minority groups such as Asian and Hispanic, employers can now effectively discriminate against African-Americans by hiring non-citizen immigrant minorities. While such an action violates the 1964 Civil Rights Act, it is widely practiced since the EEOC has rarely, if ever, prosecuted a minority employer for discriminating against Blacks, nor have they prosecuted any employer for discriminating against Blacks in favor of another minority.

The result of the way Affirmative Action is administered has resulted in a new insidious pattern of discrimination. Consider the following:

* In New York, whose population is 25% Black, only 5% or the employees who work in Korean owned stores are African-American, while more than 1/3 are Mexican and Latin American immigrants. Even in Harlem, the percentage of Hispanic employees outnumbers Blacks. (By the way, it isn't true that Blacks will not accept low paying jobs, as often alleged - it is estimated that in Harlem there are 14 job applicants for every minimum wage job.)

* In Los Angeles, which is 17% Black, only 2% of small Korean-owned businesses hire Blacks.

* Nationwide, one-half of the SBA set-aside contracts go to firms owned by immigrants or children of immigrants.

* In California during the 1980s, the employment of African-Americans as bank tellers fell 39% while jobs for foreign-born tellers increased by 56%. Similar displacement has been found among janitors, hotel maids, waiters, and hospital nursing assistants and orderlies.

* A study of EEOC records of large firms revealed that during the 1990-91 recession, Asians and Hispanics gained 55,104 and 60,040 jobs, respectively, while Blacks lost 59,479 jobs. In almost every state Blacks lost jobs. Ironically, only in Alabama, Arkansas and Louisiana - states most noted for past discrimination against Blacks - did the employment of Blacks increase significantly. The reason is that there has been a minimal amount of immigration into these states.

History has a way of repeating itself, with often tragic consequences. Prior to the great wave of immigration at the turn of the century, Blacks were moving up the economic ladder, getting jobs in the various trades. But with the huge influx of immigrants, Black job opportunities quickly dried up. Leaders such as Frederick Douglass and Booker T. Washington objected to a trend that they knew would be devastating to their people. Douglass wrote, "Every hour sees the Black man elbowed out of employment by some newly arrived immigrant whose hunger and whose color are thought to give him a better title to the place."

It is at least arguable that had America employed its Black population at the turn of the century, Black Americans be far better off socially and economically than they are today. Additionally, all Americans would have benefited enormously by avoiding the billions of dollars expended trying to use welfare and Affirmative Action to solve a problem that a market economy would have resolved two generations ago. The answer is a job eligibility verification system to prevent employers from hiring illegal immigrants, and a reduction of legal immigration to the historic level of 250,000 annually.