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Sustainable Society:  A society that balances the environment, other life forms, and human interactions over an indefinite time period.

 

 

 

 

 


 

Immigrant Economic Impact Poorly Estimated in Mankato Study

Joseph Daleiden
December 2003



The recent study by James Kielkopf, “Estimating the Economic Impact of the Latino Workforce in South Central Minnesota1 is more than the usual propaganda for continuing the flood of cheap foreign labor.

It is deficient and misleading in a number of respects, primarily:

1. Any meaningful analysis has to be estimated on a per capita basis; otherwise an increase in output due to population growth might erroneously appear to be beneficial when quite the reverse is true.

Many years ago Mao Tse-tung made this classic error when he encouraged the Chinese to have more babies to increase output.  They had more babies and total output did increase even as output per capita plummeted.  The Chinese have been paying the price of this horrible mistake for generations.  Similarly, increased population in the US can increase output while destroying living standards.

2. As any economist knows, relying on increasing population to increase economic activity is ultimately a Ponzi scheme.  It can never end each generation would need to be supported by an ever increasing population.  The only way to achieve true economic growth and improved living standards for all Americans is by increasing productivity, i.e., output per worker.  Historically increased productivity is best stimulated by a labor shortage, as it was in the 1945 -1970 period.

Businesses will not want to risk investment in major innovation with its inherent risk if they can rely on cheaper labor to increase profits.

This has been the case during the period 1973-2001 when real average hourly earnings dropped 6.5% compared to an increase of 75% over the period from 1947 to 1973.2  Part of the difference of the two periods can be explained by lower productivity growth.  Productivity during the 1973 - 2001 period increased only 59% compared to 118% growth during the 1947 to 1973 period.3  Nevertheless, if businesses had to share the gains of productivity growth, instead of beating down wages by relying on cheaper labor both here and abroad, wages should have risen by anywhere between 30% and 60%.3

Exporting jobs abroad while importing labor has been devastating to the American worker.

3. The study fails to factor in any wage suppression or job displacement of American workers.  For example, it fails to account for substitution of jobs occupied by Blacks for cheaper and more compliant Hispanic workers.  My own studies of the Midwest states show that during recessions Blacks are first to be laid off and last to be rehired.  While Hispanics added 139,000 jobs between 1983 and 1995, Black employment grew by only about 5,000 jobs.4  A more recent study found the same trend in the 2000 recession.

The reason is simple: employers don't want to hire Blacks.  They would far rather recruit in Mexico City or along the border than America's inner cities.  With about 7 million unemployed in the US (and an untold number of discouraged workers who have dropped out of the labor force), there is no labor shortage.  The problem is that the unemployed are in the inner cities while the jobs have moved to suburban and rural areas.

The US should implement the Swedish system, i.e., have a nationwide jobs data bank and offer a relocation allowance to move inner city people to where the jobs are.  Those unwilling to move to take an available job would become ineligible for any kind of welfare.

4. The study does not provide a break down of additional state and local government costs so I can't evaluate the results, but I strongly suspect it doesn't reflect all the costs of immigrant children, including health care, education (including bilingual education), housing, additional police and fire, and additional infrastructure necessary to accommodate a growing population e.g., school buildings, highways, water and sanitation, etc.  Every school district in Illinois that is increasing population is running a huge deficit.

5. The study obviously does not account for environmental costs, especially urban sprawl.  Not only does additional population increase sprawl directly, but without an ever growing supply of cheap labor to build the houses and maintain the lawns, garden and housing repairs, people would not opt for their acre of land.

6. Of course, the study places no value on the loss of farmland, wetlands, open space wildlife etc.  Failures such as this earn economists the rightful criticism as “knowing the price of everything and the value of nothing.”

Any meaningful study has to be forward looking, measuring the impacts of demographic trends over the next 50 - 100 years, because it takes about 50 years to reverse the impact of a rapid increase in population as we learned from the post-WW2 population boom.  Assessing the socio-economic impact 50 years on the future is difficult but not impossible.  For example, back in the 1960s economists began forecasting the impact baby boom would have on schools, employment, wages rates and, eventually, social security and health.  Unfortunately, their forecasts were largely ignored by policy makers.

Any study that measures only current costs and benefits isn't worth the paper it’s printed on.

I will conclude by pointing out that the goal of slavery was to perpetuate an underclass of cheap labor.  Even slave owners had to incur the cost of buying and maintaining slaves.  However, modern businesses have found a more economical method of gaining all the benefits of cheap labor while spreading the cost of providing housing, education, health, and welfare of that labor to the general public.  Their solution is to import an ever growing underclass to depress wages and increase profits.

Sadly, shortsighted and deliberately limited economic analyses, such as this Mankato study, are used to support the present socially disastrous and morally reprehensible policy of excessive immigration.


About the author: Joe Daleiden is an economist, demographer and public policy analyst. His latest book is The American Dream: Can it Survive the 21st Century? (Prometheus Books, New York, NY 1999). Daleiden lives in Woodstock, Illinois.

Endnotes

1. "Estimating the Economic Impact of the Latino Workforce in South Central Minnesota". James J. Kielkopf, September 2000. Center for Rural Policy and Development, Mankato State University, Mankato, Minnesota.
2. Economic Report of the President to Congress, 2002, Table B-47.
3. References to productivity change: Ibid, B-49.
4. Daleiden, Joseph L., Latin, Frank, and Pakkala, Raj; 1997. The Impact of Immigration on Black Employment in the Midwest. Meat packing firms in Iowa and elsewhere have long maintained this practice. In Chicago, Blacks on the city's south side had to picket a local Tyson Chicken plant that almost exclusively employed Hispanics.
____
Used with permission of the author.

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