When you do the calculations on births/deaths/migrant workers you get the following results:
Annual births: 4.5mm
Annual deaths:2.9mm
Net change: 1.6mm
Net new migrant workers 790,000
From this one gets the total increase in population at ~2.6mm. Fully one-third of that growth comes from foreign immigrant workers. I was surprised to see how big the migrant worker side of the equation was. That comes to 66,000 a month. If you follow the monthly Non-Farms Payroll report you know that there have been many months that we don’t create that many net new jobs.
Our friends at the Congressional Budget Office just happened to have issued a report on this subject on Friday. Catchy title:
A slide that I thought was interesting shows just how much money is leaving the country from those foreign migrant workers:
The total came to $66 billion in 2009. That is a very big number. Of the $31b that left the shores to go south of the border $20b ended up in Mexico. Asia was the beneficiary of $17b of inward money flows. Of that, $3.2b went to China. China manages to suck the blood out of the USA every which way. We send them our money for interest on our debt. We send them money for everything we buy from them. And those who come to work here send back a few billion more.
Allow me to “play” with these numbers a bit. I believe that the vast majority of the money going to Latin America (31b) is from undocumented workers. The same is true for the $5b going to Africa. I will assume a conservative estimate that only 50% of the $17b going to Asia is from illegal workers (9b). I will be generous and exclude all of the money (total 15b) going to Canada, Europe and the Middle East (there are many undocumented workers in this set). My conservative estimate is that ~$45b a year is leaving the country from undocumented workers.
A question is, “How much of an illegal workers pay is being sent back home?” My answer to that is: “Somewhere between 0 and 50%". Call it 25%. This means that a worker sends home one week of wages for every month that they are here. I actually think the percent number is lower. It is hard to get by in America with just three weeks of wages a month. The savings rate for Americans is less than 5%.
If you accept my (conservative) one week in four argument then you can conclude that the total wages being paid to these workers is ~$180b a year (4 x 45b). That is a very substantial amount of money.
The average legal worker pays 7% in Social Security and other FICA taxes. The average Federal tax rate is about 20% and the average state income tax is another 5%. It comes to about 33 cents on the dollar.
Put that together and you get lost tax revenue of ~$60b (180*.33). I think this is a pretty good estimate given that I excluded the $15b going to Europe/Canada and 50% of Asia. But I will ‘haircut’ this estimate down to $50b a year. That still is a hell of lot of money.
-A ½ Trillion over the next decade would be very welcome.
-$50b a year would solve all of the state’s problems if the money were committed to them over a long period of time.
-$50b a year would be a hell of a down payment on the energy infrastructure build out that we so desperately need.
-$50b a year would turn Social Security into a perpetual “pay as you go system”. We could forget about any funding shorts falls forever.
-$50b a year would go a very long way to bring our educational system back up to par.
What would you do with an extra $50b a year? Let’s face it, we need this money and it would be very helpful if we had it.
The bottom line is that America needs immigrant workers. We also need the tax dollars that come from the wages that are paid. We don’t need to have all this money just leak out of they system while the social costs of illegal workers stay in country.
This is America’s Black Economy. It stares us in the face every day. For the life of me I can’t figure why we don’t confront the problem. But notice that neither the Republican nor the Democrats have even raised it as an issue for 2011. They are too busy fighting over budget cuts, yet there is a big bucket of money right at their feet.
We don’t need to solve the broad immigration problem today. That is a very complex/emotive task. We should start the process by making sure that illegal workers pay their taxes. Just like the natural American workers do.
Posts
"This is America’s Black Economy. It stares us in the face every day. For the life of me I can’t figure why we don’t confront the problem. But notice that neither the Republican nor the Democrats have even raised it as an issue for 2011."
ReplyDeleteThe plan for getting the un/underbanked on the books has been in the works for about a decade, funded and managed by the Ford Foundation. They're about to run with a relatively new technology that has been implemented successfully in developing countries. A critical issue with illegals is trust, so I don't expect any waves to be made by either party until the system is fully in place and accepted.
During the Depression, the US Gov't paid the Union Pacific railroad so much per head to ship all the illegals deep into Mexico. I can see something like this happening again.
ReplyDelete"The bottom line is that America needs immigrant workers."
ReplyDeleteFuck you, you fat, rich bastard. You just want to save a few bucks getting illegals to do work for you as the middle class is disappearing. You're a smart man, look at the redisrtibution of wealth from the middle class to the moneyed elite over the last 35 years. Look at the average length of unemployment for workers currently unemployed. And your answer is more illegals or to legalize the ones that are here now illegally? You're just a cheap, fat fuck who wants the country's financial burdens to be shifted away from you and those like at you and placed on the bottom 80%. Fuck you Krasting.
Hi Bruce.. a question. You have said a few times that QE3 will not happen. Since we know that Bernanke is buying about 60% of all new bond issuance, who will buy the bonds ? If rates were to jump up to say 5% on the ten year to attract buyers, would'nt that trigger some serious CDS's, nevermind blowing an even bigger hole in the Federal budget ? For the life of me I don't see how he can stop. Would they even find enough borrowers given the size of these deficits ? IMO there will come a day when Bernanke walks into Big O's office and says "no more"
ReplyDeleteAnon at 9:37
ReplyDeleteThanks for the kind words. For the record, I'm not fat.
We do need immigration.The indigenous population is not producing enough babies. We run the risk of looking like Japan. That outcome would not work for the US.
America has been the beneficiary of immigrants for 300 years. There is no denying that.
We don't need illegal immigration. We need legal. That was my point. I'm sticking to it.
By the way, how long your family been here?
Your picture makes you look fat. Sorry for the mischaracterization. How about jowly? Jobs, jobs, jobs are needed before immigrants. Don't you bitch about laws not being followed by the financial sector and others, yet you hope that current laws regarding illegal immigration continue to be not enforced or changed to allow those here illegaly to remain? What's the other side of the illegal immigrant balance sheet? What cost do they extract?
ReplyDeleteMy fathers side of the family arrived at Ellis Island from Italy over 100 years ago. They played by the rules established at that time, learned to speak english and assiimilated into the society as my grand father fought for the US in World War I. My mothers side of the family date back over 200 years ago from the farms and coal mines of Southern Illinois, legally.
You can't have it both ways Krasting.
Do you believe the growth in the immigrant labor force is to blame for the poor Non Farm payroll growth?
ReplyDeleteHow does the money leak from illegals compare with the leakage from the $40 billion monthly trade deficit, a lot of which must be due to (1) importation of fossil fuels from Canada, Mexico, etc. and (2) the dramatic reduction/elimination of manufacturing capacity. You could just as logically make the case that America loses much more from the transition it has made from a dominant producer to to fat, arrogant and lazy consumer nation. I would much prefer that this fundamental be fixed first, but the wingnuts would much prefer to blame the illegals.
ReplyDeleteThe other point I want to make is that foreign students, of which there were about 670,000 in 2009 and growing at about 8-10% per year, provide at least $20,000 per student in money that would otherwise never show up on the US doorstep.
My father came to America in 1936. He also came through Ellis Island. My mother's family came from some part of England late 1800. They were farmers and went to Wisconsin.
ReplyDeleteWhat is your point? Mine is that we are all immigrants. You too.
mr k, your understanding of the economy is disappointing.
ReplyDeleteyou don't need immigrants because they make babies to be plugged as batteries into the future gdp Matrix. thats a sideshow to the problem.
you need them to do all the manual labour that technology can't be thrown at yet, so that you don't pay $10/lb of onion etc. and intelligent anonymous commenters are able to throw vitriol at yourself from their "on the go" ipads, while enjoying the output of the illegals.
and what's the difference between the trade deficit, your buying your leaf blower made in china, vs. the "leakage"? where do you think those dollars end up? i'm starting to understand krugman's frustration.
and btw when i (legally) worked in the land of the free, i paid my 7% into your and anon's SS w/o having a claim on it. can i have my money back sir?
"What is your point? Mine is that we are all immigrants. You too."
ReplyDeleteBruce,
I have a question for you, but before I ask you that, let's agree on a few facts:
1) Whether your parent's came from an immigrant background is not really relevant in the immigration debate -- it's the racial/religious identity that matters.
2) Typically, hyphenated-Americans, and/or those from none-Christian backgrounds are pro immigration -- especially from none-European white countries.
3) WASPS, northwestern Catholics (especially from Irish/Polish background) tend to be the most restrictive.
4) All others are typically somewhere in between, but generally leaning slightly towards restriction, as longs as the debate doesn't get too racialized.
Would you agree with the above assertions?
What the above means is that from a statistical point a view, most Americans would favor immigration restriction if they had a choice, and in the long run, pro-immigration policies could prove to be extremely divisive to this nation.
What do you think the impact of that would be on the political discourse in America, say 10-20 years from now?
Anon 11:22
ReplyDeleteI'm not sure I agree with your points 1-4. I do agree that most people who live here don't want more coming. This is true for people who were born here and have deep roots and those who have come here recently (both legally and illegally).
It is natural to take the attitude that we should close the barn door. To some extent the new arrivals are just competition for jobs, housing etc.
But I tell you without population growth we, as a country, are screwed.
Say (by magic) we were successful in closing down illegal immigration. And the we also put in significant restrictions on all legal immigration.
If that were to happen we would be in a terrible mess in twenty years. Without growth in population there will be dramatic consequences. You won't like them. Promise.
Redford:
ReplyDeleteYou make a point about the importance of foreign students and their contribution to the economy.
I could not agree with you more. This is "good" immigration. Why? It is legal (for the most part).
I want foreigners to come here and get an education. This is very positive. Everyone "wins".
But my point again, this is legal. It is the illegal stuff that gets under my skin.
redford:"the wingnuts would much prefer to blame the illegals."
ReplyDeleteThis big lie is a staple in elitist circles. From the entire Dem party to Repubs like Senators Graham and McCain there is a belief that main street Americans are awful.
There is little or no hatred of illegals. If laws on the books were enforced the issue would evaporate. Instead, the laws and the wishes of the people are purposely flouted and denigrated.
In fact, there are people who benefit from exploiting illegals. The rest of us get to pay for the problems which arise: emergency medical care, less effective schools, an underground economy which saps the above ground one, welfare and higher taxes and on and on. Plus our kids can't get jobs, hey, our adults aren't exactly swimming in jobs. Yet protecting the position of illegals is made a priority.
Anon that has been busting my balls:
ReplyDeleteYou have been giving me some heat. So I will reciprocate - with an act of kindness. You said in you rant:
i paid my 7% into your and anon's SS w/o having a claim on it. can i have my money back sir?
Here is a tip that will put money in your pocket. All of the SS money that you put into the system with an illegal card is a credit to you. To get SS you must contribute for a minimum of months (quarters). The money that you paid in while illegal counts against the total you need to get into the system.
Follow my advice and you retire earlier. Not bad for a free consultation. And you don't owe me a thing.....
My report on this:
i paid my 7% into your and anon's SS w/o having a claim on it. can i have my money back sir?
http://brucekrasting.blogspot.com/2010/09/ss-to-pay-100s-of-billions-to-illegal.html
I just read this NeoCon open border propaganda on ZH and found your blog by Googling your name.
ReplyDeleteOpen border stuff is better suited for NeoCon hasbara websites like the Weekly Standard, not ZH. Please stop posting this stuff at ZH.
Just maybe young families might have more or any kids if jobs were plentiful along with adequate health insurance. Can't imagine what babies cost without insurance! Bring back American Manufacturing, dial down the financial sector and increase wages maybe some of that would filter into an increase in population. Also ship out the H1B visa crowd and replace with American workers, lots America can do to increase American birth rates!
ReplyDeleteHi Bruce,
ReplyDeleteInteresting post, I can't see any fault in the argument that everyone who lives in the country should pay their taxes. I've always assumed that the reason that congress hasn't taken any action to fix the immigration issue (despite serious political pressure) is because there is a very entrenched group of beneficiaries from this 'black' economy. Specifically companies that benefit from paying a sub-minimum wage, or don't pay any benefits to full time workers.
What I'd like to know, is the net gain to the US economy realized through the exploitation of illegal immigrant labor? I'd be interested to see some stats on this because I'm skeptical if the U.S. is currently running a loss on the question of illegal immigration. I wonder if the new tax revenue you suggest would cover the costs of legal employment.