October 24, 2006

National Data, By Edwin S. Rubenstein

Furchtgott-Roth vs. Malanga On The Economics Of Immigration

In this corner: Diana Furchtgott-Roth, labor specialist at the Hudson Institute. [Send her mail] In that corner: Steven Malanga, Senior Fellow at the Manhattan Institute. Ms. Furchtgott-Roth writes disapprovingly of Malanga’s recent City Journal article, " How Unskilled Immigrants Hurt the Economy":

"The City Journal article is worth a look because it reflects an attitude becoming more common these days in the debate. The article speaks approvingly of immigrants from Portugal, Asia, China, India, Haiti, and Jamaica. But it also makes it clear that we have too many Mexicans, a ‘flood of immigrants’ who cause high unemployment rates among the unskilled. They work in shrinking industries, drive down wages of native-born Americans, cost millions in welfare, and retard America's technology.

"These are serious charges indeed…..But are they true?" [The Case for Immigration, Diana Furchtgott-Roth, September 22, 2006]

Ms. Furchtgott-Roth (surprise!) thinks they are not—and presents data that, to her mind, discredits Malanga and his ilk. (Malanga defends himself here.) But are her factoids relevant?

 "Annual immigration is a tiny fraction of our labor force….Annual immigration in 1999 equaled 1% of the labor force—by 2005 it had declined to 0.8%. Hispanics, including undocumented workers, peaked in 2000 as a percent of the labor force at 0.5%, and by 2004 accounted for only 0.4% (0.3% for Mexicans) of the labor force."

One percent may indeed be a "tiny fraction" of the total U.S. labor force. But it represents more than half annual labor force growth. Just compare the growth rates of foreign versus native-born persons in the U.S. labor force from 2000 to 2005: (Table 1)

Between 2000 and 2005 immigrants accounted for 51 percent of U.S. labor force growth—and an even larger share (82 percent) of employment growth. (See Table 1.)

Furchtgott-Roth again:

"Mr. Malanga writes that America does not have a vast labor shortage because ‘unemployment among unskilled workers is high—about 30%.’ It isn't. In 2005, according to Bureau of Labor Statistics data, the unemployment rate for adults without a high school diploma was 7.6%. Last month it stood at 6.9%."

I think this misunderstands Malanga. Ms. Furchtgott-Roth notes, correctly, that unemployment among adult High School dropouts in the labor force was a relatively benign 7.6 percent last year. But she ignores that fact that only 45 percent of them were actually in the labor force. The rest were too discouraged to even look for work.

With dropouts dropping out of the labor force at such rates, their unemployment rates are meaningless. A truer measure of their ability to find work is the proportion of the total dropout population that is employed.

Here are employment-to-population ratios for High School dropouts in 2005: (Table 2.)

By this measure, 58 percent of all dropouts—and a whopping 65 percent of native dropouts—were unemployed last year.

Malanga’s assertion that 30 percent of unskilled workers were out of work last year seems way too optimistic.

More Furchtgott-Roth:

"Mr. Malanga cites a 1998 National Academy of Sciences study to say, ‘The foreign-born were more than twice as likely as the native-born to be on welfare.’ Yet this study contains estimates from 1995, more than a decade ago, and mentions programs such as Aid to Families with Dependent Children that no longer exist. Even so, the NAS study says that foreign-born households ‘are not more likely to use AFDC, SSI, or housing benefits.’"

But more recent studies on the fiscal burden of immigration, of which neither Furtchtgott-Roth nor Malanga seem aware of, support the view that immigrants are disproportionately involved in government transfer programs.

An analysis of state and local governments in Florida finds that immigrant households are 50 percent more likely to receive Medicaid than native households, have more than twice as many high cost elderly in the program, and account for a disproportionate share of K-12 enrollment. [David Denslow, "Tough Choices: Shaping Florida's Future," University of Florida, October 2005. Pages 373-387.(PDF)]

Published in 2005, and using data for years 2000 to 2004, the report finds that the average immigrant household pays $426 less tax and receives $1,385 more state and local government services than the average native household.

Bottom line: "Compared to a native household, the net effect of an immigrant household on the state and local budget is roughly a $1,800 loss."

Put differently, each immigrant household in Florida receives a net payment from U.S.-born Floridians averaging nearly $2,000 per annum.

Steve Malanga is a journalist who has only just begun to write on immigration, but Furchtgott-Roth should know better: She was chief economist at the Bush Department of Labor, 2003 to 2005.

Then again, the Bush Administration is the last place to look for economic truths on immigration.