Edwin S. Rubenstein Archive

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December 02, 2009

National Data, By Edwin S. Rubenstein

The Employment Case for an Immigration Moratorium

Too many people. Not enough jobs. This, in a nutshell, is the dilemma facing the United States economy.  On Thursday Barack Obama convokes a Who’s Who of business, labor, and academia to brainstorm the problem at a “Jobs Summit”.

So far policymakers have focused exclusively on the Not Enough Jobs part of the problem—with dismal results.

The $787 billion stimulus package passed in February was supposed to generate 3.5 million jobs within two years. Last month, the Obama Administration released a report claiming that just 640,000 jobs were saved or created by the program so far. But more than 7 million people have lost jobs since the start of the recession in December 2007.

Although the President said that 90 percent of the new jobs created by the stimulus program would be in the private sector, the data suggests that well over half of the jobs claimed so far have been in the public sector. They include 325,000 jobs in education, including teachers, administrators and support staff, and 73,000 other jobs paid for with education grants, many of them in public safety.

Even if accurate—and many reports claim the Administration’s job creation tally is inflated—this is a bad deal. In spending $787 billion for 640,000 jobs, the government has put taxpayers on the hook for $1.2 million per job.

If, by some miracle, the stated goal of 3.5 million jobs comes to pass, the cost per job would be a still outrageous $225,000.

By comparison, the average full time civilian worker earned $44,101 in 2009.[ U.S. Bureau of Labor Statistics National Compensation Survey(PDF)]

Sure, the government can pump billions into infrastructure, but it doesn’t necessarily go beyond the wasteful, fraudulent, and abusive hands of contractors and government officials.

And big chunks of any temporary tax cut will be saved by consumers. Similarly, in the midst of the recession, large corporations are sitting on record piles of cash while small companies—the ones that traditionally generate the lion’s share of new jobs—are shut out of the credit markets.

The obvious lesson: Washington is no better at providing jobs than it is at providing health care, military equipment, or a border fence.

So what ideas will come out of Thursday’s jobs summit? We expect the same old Keynesian policies repackaged. Old moonshine in new bottles.

Conspicuously missing from summit deliberations: any discussion of the flip side of the unemployment problem—too many job seekers. Yet this clearly offers the best hope of resolving the dilemma.

The brutal arithmetic runs like this: roughly 100,000 jobs per month must be created just to accommodate the growth in the U.S. labor force.

Most people regard labor force growth as a “natural” phenomenon, the excess of young entrants over older retirees, and therefore beyond the realm of public policy.

But most people are wrong.

Once a year, the Bureau of Labor Statistics releases data on immigrant employment trends. Its latest report, for calendar 2008, shows a significant rise in immigrant jobless—both in absolute numbers and as a share of the total:

There were 1.403 million unemployed immigrants in 2008—or about 16 percent of all jobless in the U.S. More importantly, the number of foreign-born jobless rose by 376,000 in 2008, accounting for 20% that year’s unemployment increase. These are primarily legal immigrants. The illegal alien workforce shrank last year, presumably returning home when their U.S. jobs disappeared.

The implication is clear: had an immigration moratorium been in effect approximately 376,000 fewer people would have been unemployed in 2008. That is equal to more than half the jobs allegedly saved or created by the stimulus package.

And gross legal  immigration continued at near record levels. More than 1.1 million persons obtained permanent resident status, 60,1000 were admitted as refugees, and a whopping 1.1 million “temporary” workers and their families entered the country legally in 2008. The foreign-born labor force rose by 69,000 net in 2008, a sharp decline from the prior year’s 840,000 increase, probably due to illegals returning home. [2008 Yearbook of Immigration Statistics]But this slowdown is obviously only a temporary phenomenon—unless Congress enacts an immigration moratorium.

Today, with the unemployment rate nearly double what it was a year ago, a moratorium could easily cut unemployment by as much as the stimulus.

Unlike the stimulus, moreover, a moratorium could actually reduce federal spending by eliminating the cost of processing several million visa applications and tracking visa holders. Talk about bang for the buck!

Historically, the federal government is much more effective at reducing the number of job seekers than in creating jobs. Legal immigration averaged more than 1 million per year the first decade of the 20^th century and was still a lofty 700,000 annually in the early 1920s. The immigration reform of 1921 rolled back immigration to 357,000 a year. In 1924 the law was revised again, rolling back immigration to 160,000 a year. By the late 1920s—a period of rapid economic growth—immigration was down to 50,000 a year. Restrictive policies remained in place until 1965.

Liberals and people of color supported the change. The American Federation of Labor’s Samuel Gompers, himself an immigrant, saw mass immigration as an economic threat to union members. “Immigration is, in its fundamental aspects, a labor problem,” Gompers said in 1925. [Immigration Policy: The Nations Most Fundamental Labor Law, Vernon M. Briggs, Perspectives in Business, 5(1), 5-9, 2008] Black civil rights leader A. Phillip Randolph, then a Socialist, complained that the Harding-Coolidge quotas did not go far enough:

“We favor reducing [immigration] to nothing…shutting out the Germans… Italians… Hindus… Chinese… and even the Negroes from the West Indies. The country is suffering from immigration indigestion…excessive immigration is against the masses of all races and nationalities in the country.” "Immigration and Japan," The Messenger (August 1924)

Not until the Harding-Coolidge immigration restrictions and the mother of all stimulus packages—World War II—were Black Americans able to leave the agrarian south for industrial jobs in large northern cities. When mass immigration stopped native-born minorities and whites advanced, just as A. Phillip Randolph and Samuel Gompers said they would.

If only Obama’s summiteers had their insight—and their courage.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.