The piece on immigration glosses over the issue of illegal and legal immigration. The data used comes from census and census has a policy:
They (respondents) are not asked about their legal immigration status.
The Department of Homeland Security has a number of 10.8mm illegal immigrants currently. I doubt that that DHS has a real handle on this number. They are just guessing. But absent something better it is a decent number to use. Consider this from CBO
I will go out on a limb and say that the number of people here illegally from the group “Canada/Europe” is statistically small. Therefore the 11 million illegal aliens come from either Mexico/Central America or Asia. Fully 50% of the people in that group. I have no statistical evidence to support it, but it is my belief that the % from south of the border is much larger than the % of Asians. For the purpose of coming up with a number I use 60-40. I think that is understating the percentage. That would imply there are 5mm illegal Mexicans in the US work force.
Before you race off to the comment section to rip me up for that conclusion, read the CBO report. This is the CBO/DHS numbers, not mine. 15.5% of our work force is made up of non-residents. 7% of our workforce is comprised of illegal aliens.
-The CBO marks the report “An Update”. I don’t believe that anything in D.C. is a coincidence. To me it is impossible to look at this report and not conclude, “Something is very wrong, and Mexico is central to the issue”. The President is suing Arizona over its laws. ABC is doing a big special. This topic is coming front and center. And the CBO releases a report that highlights just how big this problem is? Nice timing Mr. Elmendorf. Thank goodness we don’t have to worry about politics getting in the way of analysis at the CBO.
-There was a time in our country when we needed immigration to meet demand for labor and fuel economic growth. Today we have 15 million unemployed and 24 million foreign workers. That ratio jumps out at you. It is easy to conclude that the US is going to move in the policy direction of much more restrictive immigration (legal/illegal). Over a period of years this probably will be beneficial to the employment numbers. But it would absolutely kill growth. Japan has had zero immigration and zero population growth for twenty years. They also have had zero economic growth. Just another of those signs that point our future in Japan’s direction.
The other report on the Social Security DI fund is a historical review of the program and a discussion of the financial status. The DI fund is a well-known shipwreck waiting to happen. The CBO says it crashes in 2018 based on very rosy economic assumptions. I think the actual sinking of the DI will be in 2016. Any shortfalls have to be eaten by the SS retirement fund. So this needs to be fixed or the retirees have to take a hit.
I read the report as a plea for help. DI paid out $120b in 2009. Nearly 1% of GDP. There are 10 million people getting benefits. It is a big deal and a fix must be found. It must be found quickly. It can’t wait until 2018. It will be impossible to fix it then, we have to do something now. Yada, yada.
Here is a graph of expenditures. Note it doubled from $60b in 2000 to $120b in 2009. A 100% increase in just ten years.
What is the cause of this explosive trend in disability payments? According to the CBO the answer is simple. Women are at fault on this one.
The increased number of women who are employed have resulted in more disabled beneficiaries and a rise in outlays for the DI program.
For the heck of it I looked up the 2000 SSTF projections for the DI fund. Their forecast was correct to a fraction. In other words we have know that the DI fund would blowup for at least the last ten years. Nothing was done about it. It has been politically too easy to just push this type of problem off to another decade. Unfortunately we don’t have another decade left to deal with these mega problems. They are all just a few years away.
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Hey Bruce,
ReplyDeleteIt is easy to conclude that the US is going to move in the policy direction of much more restrictive immigration (legal/illegal).
When and where have you heard any talk whatsoever of doing anything to limit legal immigration? As you point out, AZ cannot even do anything about illegals without getting sued by Washington.
The number of people disabled (per OASDI) as a percentage of the population (not the workforce, the entire population) has almost doubled in the last twenty years--from 1.67% in 1989 to 3.15% last year. No wonder they're having funding problems. What confuses me is why this percentage should have increased so much--given the drop in manufacturing, mining, etc. where the risk of workplace injury is presumably higher. My best guess would be the aging workforce, but data in this regard would prove interesting. . .
ReplyDeleteAZ's new immigration laws will likely have a cascading effect. Illegal aliens are fleeing the state in droves (see the recent news on the slew of AZ's garage sales). But they are not headed for Mexico. They will take refuge in California and other illegal-friendly states. The result is further depressed wages and employment rates, with an increased burden on welfare services.
ReplyDeleteState legislatures will follow suit to guard their economies (with the exception of most ideologically liberal). From its passage, AZ's laws have held the popular support of its citizens and the nation. Bruce is absolutely right about the direction of immigration policy in the US.
On a separate note, I'd like to see a study about the long-term effects of abortion on the economy. My intuition says we wouldn't need immigration to drive growth sans abortion rights.
Here's a nice mental exercise for everyone.
ReplyDeleteLet's say there's a magical way for the bulk of illegal immigrants to be removed from the labor force. What are the consequences?
-Food prices explode. I do mean explode. Agriculture is a good employer for the least educated immigrant to work. A couple of produce segments have entire crops left in the field because there's no one to collect the harvest. Consequent shocks to the food manufacturing like meat packers and agribusiness to follow.
-Restaurant labor costs explode. The bottom-end of the restaurant kitchen is another good employer for the least educated immigrants.
-Construction costs explode. Yet another fertile industry for the uneducated immigrant. Big box retail hardware collapses as a result.
-Cleaning costs explode sending a shockwave through commercial real estate and Hospitality businesses.
I'm not sure the people advocating strong immigration controls really understand the consequences.
I think the only things exploding are your exaggerations.
ReplyDeleteThe problem is simply that social benefits are tied to previous earnings. If it had not been, but a flat rate for everyone, then the cost of social security programs would not be as high as they are and secondly the amount being retained from the working population would have been much less, allowing more to be available for consumption or saving for more legitimate reasons.
ReplyDeleteUnfortunately, no politicians in the US or elsewhere understand or accept this argument.
tigwelded:
ReplyDeleteYou say that there would be a shortage of labor. That there would be inflationary cost to this.
That would be correct. But that is exactly what Ben Bernanke wants. That is what the administration wants. Everyone wants inflation and 6% unemployed. So the forces that are out there are working against those working here illegally.
This issue is going to come to a head this fall. We will unemployment rise back up above 10% as the census workers lose their jobs. As this happens the pressure to blame our problems on illegal aliens will rise.
There is no good outcome for anyone to this story.