Sunday, June 20, 2010

How much immigration is too much immigration?

"He [David Ricardo] posited that the growth of population and capital, pressing against a fixed supply of land, pushes up rents and holds down wages and profits." (Wikipedia: Economics)

After decades of employment growth at above 80 percent of labor force growth, employment growth has fallen below 5 percent for working age adults entering the labor force. Yet, 600,000 skilled temporary workers are added to the labor force annually, and the Bureau of Census reports that there were 12.88 million foreign born non-citizens employed in the U.S. in 2007.  In the first decade of the 21st century, only 1 million jobs were added to the working age population.

Immigration has deleterious and advantageous effects to the U.S. economy, nobody is suggesting that the U.S. should have a zero immigration policy, but how much immigration is too much immigration?

Just like the native born, the foreign born require employment, housing and government services. Most of the immigration debate is at the macro level because Congress reserves right to set immigration policy, this paper takes a look at the levels of foreign-born employment by each State and how those States are performing economically.

Displayed in the images below are the "Worst 10" States and the "Best 10" States, by ranking, based upon the following criteria:

Highest percent of foreign-born employed in labor force by State
Highest foreclosure rate by State
Highest unemployment rate by State
Highest percent state spending over budget by State
(For these columns the worst score is 1 (1st) -- the best score is 50 (50th))
(In the "Score" column, the four grades are aggregated for scoring, a perfect score would be 200)

click images to enlarge

10 Worst performing States in U.S.

10 Best performing States in U.S.

Sometimes, the best way to evaluate policy is to see which States are doing the right things and which States are doing the wrong things. The states doing wrong things financially have pervasively high rates of foreign-born in the labor force.

10 worst performing States: Employed Foreign born in labor force (ranking)
Nevada = 4th
California = 1st
Florida = 5th
Arizona = 8th
Illinois = 9th
New Jersey = 3rd
Georgia = 17th
Rhode Island = 13th
Oregon = 16th
Idaho = 26th

On the other hand, the states with the least financial difficulties have predominately lower percentages of foreign-born employment.

10 best performing States: Employed Foreign born in labor force (ranking)
Oklahoma = 28th
Louisiana = 40th
Iowa = 37th
Nebraska= 29th
West Virginia = 49th
Vermont = 42nd
South Dakota = 48th
Wyoming = 44th
Montana = 50th
North Dakota = 47th (the most fiscally responsible state in the nation)

If you are inclined to disagree with me, you could stop reading and label me a racist, but try to understand that the needs of the foreign-born population are different than population growth through birthrate. Migrants arrive with employment and housing needs on the very first day. It’s as if we had another baby-boom, except all of those kids needed employment and separate housing on the day they were born. With native children, the economy has 18 years to adjust to their growing needs; with migration the economic equilibrium is shocked, housing cost spiral upward while demand for labor wanes.

Similarities to the Great Depression:

The only hiccup in the growth of the home ownership rate in the entire last century was during the Great Depression. In the 1940 Census, the home ownership rate fell to 43.6% from 47.8% listed in the previous census (-4.2%).  Since 2005, the home ownership rate has fallen 2 percentage points nationally.

Home Ownership rates 2005 Q1
United States 69.1

Northeast 65.4
Midwest 73.1
South 71.1
West 64.9

Home Ownership rates 2010 Q1
United States 67.1 (-2.0%)
Northeast 64.4 (-1.0%)
Midwest 70.9 (-2.2%)
South 69.2 (-1.9%)
West 61.9 (-3.0%)

Source: Current Population Survey/Housing Vacancy Survey,
Series H-111 Reports, Bureau of the Census, Washington, DC 20233.

Home ownership Rates: 1900 to 2000

click to enlarge

Prior to the Great Depression, immigration rates to the United States doubled (see post), in 1900 and 1910, the percentage of foreign born in the labor force exceeded 20%. Since 1980, the number of foreign born in the labor force has roughly quadrupled, from 7.1 million to 23.9 million in 2007.

Much like the “DotCom” recession preceded the Mortgage meltdown recession, the Great Depression was preceded by the Depression of 1920-1921. In 2007, the year of the Mortgage meltdown, the percentage of foreign born in the labor force reached the levels of the Great Depression at over 15%.

The most productive decades in the United States
had low impact from immigration.
Click to Enlarge


2007 Foreign Born
U.S. Labor Force = 23,838,000 (15.6%)
Employed = 22,538,000 (94.5%)

2007 Native Born
U.S. Labor Force = 128,373,000
Employed = 120,050,000 (93.5%)

May 2010 (Foreign and Native born)
U-6 Unemployment = 39,424,834 (16.6%)
U-3 Unemployment = 23,037,403 (9.7%)

High-skilled temporary foreign labor, Housing and Education

I’ve documented in other blog entries that there is no labor shortage and H-1B and L-1 non-immigrant workers assume more than 100% of employment growth in Computer-related occupations. (And here)

There is no need for the H-1B, nor L-1 non-immigrant visa programs. There are enough visas in the EB greencard (PERM) program to naturalize every foreign Science & Engineering postgraduate educated in the U.S. each year. The non-immigrant programs simply create a backlog in the PERM greencard system and disadvantage the both the foreign worker and native worker.  During recessions, these foreign workers displace or disadvantage domestic workers which leads to housing foreclosures.

The dual-intent temporary foreign worker programs remove the requirement to maintain a foreign residence, which in turn, removes the employer's responsibility to pay per-Diem to the traveling worker. The employer is not contributing to the local service and hospitality industries and once again our economic troubles are related to housing.

Graph: Education Levels --Native, Naturalized citizen, Not a citizen.

As we can see from the graph above, we are not going to immigrate our way to prosperity with highly skilled immigrants in a jobless recovery, we have plenty of educated citizens.  Immigration can however cause more housing foreclosures where persons became unemployed in an ever more difficult employment market.

During the most prosperous and innovative decades (1940s - 1990s) in the history of the U.S., the levels of foreign-born in the U.S. labor force was below 10%,  and the worst decades at 15% and above.

"He [David Ricardo] posited that the growth of population and capital, pressing against a fixed supply of land, pushes up rents and holds down wages and profits." (Wikipedia: Economics)


U.S. Bureau of Census
“The Foreign-Born Labor Force in the United States: 2007”
December of 2009,

U.S. Bureau of Census
Housing Characteristics In The U.S. - Tables

U.S.Bureau of Labor Statistics
Table A-15. Alternative measures of labor underutilization

BLS Unemployment Rates by State

Data Table:

StateRank: Highest Percent of Employed Foreign BornRank: Highest Housing Foreclosures per capitaRank: Highest Unemployment rateRank: State Over budget (by percent over budget)SCORE
New Jersey315171247
Rhode Island132641053
South Carolina32247568
North Carolina2336142093
New York2392938108
New Mexico18352729109
New Hampshire31274621125
West Virginia49482548170
South Dakota48444934175
North Dakota47495050196

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