- The Washington Times - Monday, May 1, 2006

Immigrant labor — both legal and illegal — has been an important force propelling U.S. economic growth for years.

Growth in the native population has been in decline since the 1970s, so immigrant workers have filled in, providing half of the growth in the U.S. labor force since 1990. A basic rule of economics dictates that the economy in the long run can grow only as fast as the increase in the pool of workers, plus the growth in their productivity — or output per worker.

Immigrant workers, like all American workers, not only contribute their labor but further propel growth by liberally spending the wages they earn on a host of items, from food to cars to clothing. Their presence has been a significant factor fueling growth in key sectors from banking to agriculture and housing — many of which have been booming and underpinning the health of the rest of the economy.

Activists have organized a boycott, dubbed “A Day Without an Immigrant,” encouraging immigrants to skip work today to demonstrate their importance to the U.S. economy.

While the role of immigrants in the U.S. economy already is substantial, it promises to be even more important in the future as baby boomers retire and the number of American workers shrinks more rapidly.

“Immigration will be vital for long-run economic growth in the United States,” said Augustine Faucher, analyst with Economy.com. He estimates that average yearly economic growth will fall to about 2 percent in the next 30 years from 3 percent today — even with a continued flow of about 800,000 new legal and illegal immigrant workers a year — because of retirements.

The expected slowing of growth will usher in a host of other problems, most notably funding promised Social Security and Medicare benefits for retirees out of payroll taxes on a declining pool of workers.

“The problem would be a lot worse were it not for immigration,” Mr. Faucher said, adding that “allowing greater immigration in the U.S. would result in stronger long-run growth” that could mitigate many of the pension-funding issues.

In any case, as Congress considers how to reshape the immigration laws, he said lawmakers will need to “develop sensible policies that encourage immigration” if they want to keep the economy growing.

Good for the economy

Periods of high immigration have been associated with periods of high economic growth in the United States. Most recently, during the late 1990s, when immigration surged to a peak of 1.5 million new entrants a year, economic growth picked up to more than 4 percent a year and the unemployment rate fell to below 4 percent, the lowest level in a generation.

By contrast, when immigration dropped dramatically after the September 11, 2001, terrorist attacks to about 1 million a year, economic growth stagnated and the job market sank into a recession and sluggish recovery. The jobs recession finally receded in 2004 — about the time that immigration picked up again to 1.2 million, according to the Pew Hispanic Center.

“The strong performance of the U.S. labor markets during the 1990s was widely touted as the envy of the world,” said Andrew Sum, co-author of a study by Northeastern University’s Center for Labor Market Studies that found a record wave of 14 million immigrants during the decade — most healthy young men eager for work — accounted for the extraordinary performance.

Federal Reserve Chairman Ben S. Bernanke, like his predecessor, Alan Greenspan, views immigration as good for the economy, noting recently that immigrants have a “good work ethic.” Immigrant men are more likely to work than native men, often holding down more than one job. Nearly 85 percent of Hispanic men work, compared with 76 percent of native men.

Both Fed chairmen have urged Congress to provide legal accommodation for illegal aliens.

The central bank is concerned about evidence that has emerged since 2000 that the crunch on economic growth long expected as American workers retire or drop out of the labor force in the 21st century may have begun earlier than expected.

The percentage of the population participating in the labor force dropped steeply in the first half of the decade from record levels around 67 percent in 2000 to as low as 64 percent, though it has since crept back up to 66 percent because of an improving job market.

This trend has led the Fed to conclude the economy is on a slower growth track and may be unable to support average growth rates as high as 4 percent as it did during the 1990s.

Worker shortages

To prevent the economy from overheating, the Fed has raised interest rates almost four percentage points since 2004, citing concerns that inflation will pick up if not enough workers are available to fill jobs, driving up the cost of wages and benefits and ultimately the prices consumers pay.

Worker shortages already are apparent or projected in key areas that have attracted immigrants, including construction, restaurants, hotels, nursing and home care. Technology and life-sciences businesses that depend on foreign workers to fill key technical jobs also are reporting trouble finding workers, in part because of the tough new restrictions and delays imposed on legal immigration after the September 11 terrorist attacks.

Foreign-born scientists and engineers “are a critical part of the science and engineering labor force,” accounting for nearly half of all doctorate holders among engineers, life scientists, physical scientists and mathematical and computer scientists, said Rob Paral of the American Immigration Law Foundation.

“As long as the U.S. secondary and higher education systems are not producing native-born students in the sciences in sufficient numbers to meet national needs, foreign-born scientists and engineers will remain vital if the nation is to retain its leadership in technical fields,” he said.

In addition to emerging shortages of skilled workers, the Fed is concerned about escalating costs in booming sectors such as construction, where difficulty finding workers — both skilled and unskilled — along with surging material costs is causing bottlenecks, delays, cost overruns and other classic inflation pressures.

Americans are dining out more because cheap immigrant labor has helped keep restaurant prices low. But the National Restaurant Association estimates it will have trouble filling a projected 2 million jobs largely requiring unskilled workers in the next decade unless laws are adopted to allow more guest workers into the country.

The U.S. fruit and vegetable farmers would be wiped out if laws are enacted to stop the flow of immigrant workers who pick and harvest each year, taking jobs that Americans don’t want, according to the American Farm Bureau Federation. Two-thirds of America’s 3 million farm workers are drawn from farm families, but more than half of their hired hands are illegal.

Jobs Americans ‘won’t do’

Immigrant labor largely complements rather than replaces American workers, a majority of whom have high school or college educations, Mr. Paral said. While some immigrant workers are sought because they have high technical skills that American workers lack, most immigrants — particularly those who enter illegally — have less than a high school education and are willing to take jobs such as digging ditches, picking vegetables and cleaning latrines, which more educated American workers shun.

Steve Camarota of the Center for Immigration Studies contends there is no shortage of unskilled, uneducated Americans to take these jobs, though wages averaging little above the $5.15 an hour federal minimum may have to be raised by up to 30 percent to attract native U.S. citizens.

Four million adult Americans without a high school education are unemployed, he noted, and another 19 million are not seeking work. The decline in work among this group has been particularly steep since 2000, he said, as immigrants willing to work for lower wages displaced them from jobs.

Studies show that wages of the least skilled and educated Americans have been depressed by competition from immigrants, who come from countries where average workers earn wages of $5 a day or less, and are happy to take minimum-wage jobs offering eight times that much.

Harry J. Holzer of the Urban Institute said U.S. workers dropped out of the labor force after 2000 not because they were crowded out by immigrants but because the 2001 recession and slowly recovering economy provided few job opportunities and they had other options, including moving in with relatives, drawing unemployment or welfare benefits, and seeking further education and training.

Mr. Faucher said the need for low-skilled labor in the United States, coupled with the high wages here compared with Mexico and other poorer Latin American countries, are powerful enticements that almost certainly will thwart efforts to stamp out illegal immigration if Congress does not provide for guest workers.

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