Tag Archives: policy

Supply and Demand: Workforce Edition

Pete, a frequent commenter to this blog, recently sent me a link to a truly thought-provoking Ted Talk. Aided by charts displaying the birthrates of his and subsequent generations, a German economist predicted a significant worldwide labor shortage by 2030.

Economists have been making these predictions for some time. Perhaps this one struck me so forcefully because of the graphics, or because he emphasized the fact that the size of the available workforce in coming years is not a matter of conjecture; after all, the people in that cohort have already been born. The numbers, as he explained, “are set in stone.”

Nor is it likely that technology will bail us out. It has become abundantly clear that technology creates nearly as many jobs as it replaces. What technology will do, however, is exacerbate the “skills gap” that is currently a major factor in the income disparities we are experiencing.

So—we have an emerging disconnect between the workers we will need and those we will have. Can we speculate about the consequences of that widening disparity?

  • It is likely that people who are highly skilled in areas of economic growth will do extremely well.
  • It is plausible that increasing numbers of older workers—especially in countries where healthcare has extended lifespans—will stay in the labor force longer than is currently the case.
  • The business community (which is already deeply concerned about education and job training) is likely to press those concerns even more vigorously. Many larger enterprises may increase their on-the-job training efforts.
  • Wages are likely to increase across the board. (Whether this will translate into significantly higher prices is an open question; this is where the ability of technology to increase productivity comes into play.)
  • Battles over immigration policy will change dramatically. Countries will compete for workers willing to take the jobs unfilled by declining native workforces.

There are probably many others. But if many or most of these speculative outcomes are correct, the economic, social and cultural consequences will be significant.

On the one hand, it is easy to envision a time in the not-so-distant future when workers are more valued and respected—and better compensated– than is currently the case. The market for labor is not appreciably different from the market for widgets, in the sense that value is set by supply and demand. Companies that fail to recognize the extent to which their employees are assets don’t compete all that well now; it is likely that they will go the way of the dinosaur in a brave new world of worker scarcity.

On the other hand, the need to address our currently self-defeating policies on immigration and to actively encourage an influx of people willing and able to work is likely to create new and unpleasant cultural conflicts. Efforts to resolve the skills gap are likely to increase the growing (unfortunate) tendency to confuse education with job training. The failure to distinguish between the two is already wreaking havoc with our universities, the liberal arts and the humanities.

An older lawyer for whom I used to work had a favorite saying: “There’s only one legal question, and that’s ‘what should we do’?” I think that bit of wisdom goes beyond the practice of law.

If the planet is facing an imminent shortage of workers, what should policymakers do?

And what will it take to make them do it? After all, we also know that climate change will wreak havoc, but our lawmakers have largely dismissed the threat and ignored the need to act. Will they be equally incapable of addressing the coming shortage of labor?

Stay tuned.

About Those “Illegals”

The Economic Policy Institute recently released a comprehensive report on immigration and the economy. The report was massive, and it included reams of information on both legal immigrants and the undocumented persons often labeled “Illegal.”

In one section of the report, researchers addressed a common accusation–that undocumented workers are a burden on government, and a net cost to taxpayers.

Unauthorized immigrants are a net positive for public budgets because they contribute more to the system than they take out. Unauthorized immigrants generally cannot receive benefits from government programs, except in some cases, such as when unauthorized immigrant children receive public education, and in some states that allow unauthorized immigrants to attend state colleges at in-state tuition rates. Nevertheless, most of these unauthorized immigrants will still pay taxes. The vast majority pay sales taxes in states with sales taxes, and property taxes through properties that they own or rent. Additionally, most unauthorized immigrant workers also pay payroll and income taxes. The Social Security Administration estimates that 75 percent of unauthorized immigrants are actually on formal payrolls, either using fraudulent Social Security numbers or Social Security numbers of the deceased. Unauthorized immigrants pay into Social Security via automatic payroll deductions, but they can never claim Social Security benefits. In 2005, it was estimated that unauthorized immigrants paid about $7 billion per year in Social Security taxes that they will never be able to reclaim.

Unauthorized immigrants are also unlikely to receive any income credits available through the tax code, or to receive a tax refund if they overpaid in their regular payroll withholdings. The Tax Policy Center estimates that 78 percent of American households that earned less than $33,000 owed no federal income taxes in 2011.19 Many low-income taxpayers only paid marginal amounts if they did owe. Because of their low income levels, most unauthorized immigrants would likely fall into either of these categories. A significant portion of unauthorized immigrants file taxes using Individual Taxpayer Identification Numbers (ITINs); however, many unauthorized immigrants don’t file because they fear deportation. If they don’t file, they are never refunded money that was automatically withheld from their paychecks.

The research also addressed another common belief: that unauthorized immigrants use (abuse?) public support programs like welfare, unemployment insurance, and food stamps. The data suggests otherwise.

While it is possible that an unauthorized immigrant could benefit from a U.S. citizen or legal permanent resident family member receiving income support through a federal or state program, unauthorized immigrants themselves by and large are ineligible for such programs because of their immigration status.

In response to the repeated demands of our contemporary Nativists that we just deport the 11.7 million unauthorized immigrants, the report noted:

Aside from the astronomical costs it would impose and the fact that it’s likely to be a logistical impossibility, it would actually hurt, not help, the economy and the jobs situation…while unauthorized immigrant workers add to the supply of labor, they also consume goods and services, thereby generating economic activity and creating jobs. One way to think of this is to remember that the labor force is growing all the time due to both immigration and native-born population growth, and that’s okay, because the economy expands too. We all understand this intuitively; that’s why we don’t worry when a new graduate enters the labor force. We know those new graduates buy food and cars and clothes and pay rent. By the same token, unauthorized immigrants are not just workers, they are also consumers. We could remove them, which would indeed reduce the number of workers, but it would also reduce the jobs created by the economic activity they generate. So the right choice is to bring the unauthorized immigrants who are already here out of the shadows so they can help the country realize its economic potential.

Finally, the report also addressed the influx of unaccompanied children from Central America:

Tens of thousands of migrant children (or minors) from Mexico and Central America arrive at the Southwest border every year without a parent or guardian, but more recently, they have been arriving in increasing numbers from the Northern Triangle of Central America: El Salvador, Guatemala, and Honduras… some of the principal reasons for their arrival are violence and criminality in their home countries (El Salvador, Guatemala, and Honduras have some of the highest homicide rates in the world), including being forced to join criminal gangs under threat of violence or death; false rumors that children will receive some sort of legal status if they show up on the border and turn themselves in to immigration authorities; and the desire to reunite with family members living in the United States.

(What the dry language of a research report fails to note is that these are children–frightened, alone and desperate for safety, and that the vitriol with which they are being met is shameful, and should be a national embarrassment.)

Those of us who have a forlorn attachment to hard evidence and documented facts can continue to hope that eventually, reality will inform policy.


It’s a Lose-Lose

We all know about “win-win” situations. My husband recently pointed me to an article that epitomizes its opposite: a true “lose-lose.”

Google, Microsoft, Facebook and other silicon valley companies are heavily lobbying Congress to expand visas for foreign tech workers.

Over the objections of labour groups, these companies and their allies, including banks, IBM, Pfizer, and General Electric, have persuaded the US Senate to increase the yearly H-1B visas from 65,000 to 110,000, and as high as 300,000 under certain conditions. Foreign workers trained in science, technology and engineering are preferred to their US counterparts because, in the words of economist Ross Eisenbrey of the Economic Policy Institute, they are indentured “people who could not switch employers to improve their wages or working conditions…. Too many are paid at wages below the average for their occupation and location: over half of all H-1B guest workers [there are already 500,000 such workers] are certified for wages in the bottom quarter of the wage scale”.

Of course, bringing more workers from abroad reduces the opportunities available to America’s young scientists and engineers, many of whom, according to the article, are ” trying to find jobs commensurate with their skills.” Right now, out of the nine million Americans who have degrees in a science, technology, engineering or math (STEM) field, only three million have a job in their speciality.

Narrowing the job market for young Americans is one “lose.” The other is the brain drain on the countries from which we are importing talent.

 While the US Agency for International Development (USAID) is stressing the need for developing countries to build up their “human capital”, back in the US, the corporate powers-that-be and their political allies are undermining this tenet of US foreign economic policy.

If “human capital” means anything in the poorer areas of Africa, South America and Asia, it means civil engineers, scientists, physicians, nurses, computer and communications specialists, logistical experts, architects and entrepreneurs. They all are in short supply in these regions that have already lost so many skilled people to the West.

So let me see if I have this right: Congress has acted to reduce the options available to American young people at the same time government agencies have been encouraging them to major in STEM disciplines, in order to steal needed human capital from poor countries that desperately need to keep that talent.

In a perfect world–at least my perfect world–a more equal global economy would be characterized by open borders like those in the EU, and young people would be free to take their talents wherever they wanted. We don’t have that world, however, and this cynical policy sure won’t usher it in.

Do any of the people we elect to Congress think about what they’re doing?

Still the Poster Child for Stupid Policy

The most recent newsletter of the ACLU has a report on the costs of incarceration, including the staggering amounts paid to enforce marijuana prohibition. In 2010, the states spent 3.6 billion dollars and made one pot arrest every 37 seconds. And how did this aggressive enforcement work out? Marijuana use increased.

Think about that next time state governments wail about not having enough money to support public education, pave highways, or provide other necessary services.

As I have noted previously, the nation could save an amount equal to the cuts made by sequestration just by substituting sensible regulations for our disastrous drug war.

Current laws are wildly illogical for all sorts of reasons.

The biggest problem with the War on Drugs is that it is being fought on the wrong battlefield. Drug abuse is a public health issue. Behaviors connected to the use of drugs–driving while impaired, theft to support a habit, etc.–should be addressed by the criminal law, but the mere use of a substance deemed harmful is a health issue, and should be addressed as a health issue.  (Speaking of health, marijuana is actually less harmful to users than tobacco, yet we have wildly different approaches to pot and tobacco use–undoubtedly the result of a much more effective tobacco lobby. According to police officers I know, people who use pot are significantly less likely to become violent than people who abuse alcohol, yet we outlaw pot, but regulate and tax alcohol and tobacco.)

Current laws are financially ruinous. The US spends roughly 60 billion dollars annually on drug prohibition, and we get virtually no bang for those bucks because the “war” is ineffective. We also forgo collection of billions of dollars in potential tax revenues that we would collect if we simply taxed pot like we treat alcohol and tobacco. We waste criminal justice resources that would be better used elsewhere, to treat drug abuse or to deter nonconsensual crimes that actually harm others.

Drug prohibition has focused disproportionately on African-American and Latino neighborhoods, exacerbating racial tensions. Black people are almost four times more likely to be arrested for possession of marijuana than their white neighbors, despite statistics confirming comparable levels of use–and the ACLU reports that the disparity in some counties grows to as much as 30 times!

We’ve lost this war. Not that the War on Drugs has ever been effective; the percentage of Americans who use hard drugs is pretty much the same as it has always been. Pot use has ebbed and flowed over time, providing the only real changes in the numbers. Thirty plus years of research has consistently demonstrated the utter failure of American drug policy, and the error of the premises upon which it has been constructed. (Pot smokers become hard drug users in about the same percentages as milk drinkers do, and we don’t outlaw milk as a “gateway drug.”) The only thing the Drug War has done effectively is ruin the lives of (disproportionately black) teenagers who are imprisoned for non-violent drug crimes.

What is frustrating is the number of policymakers who respond to this mountain of evidence with a renewed enthusiasm for measures that have consistently failed.




Urban Life and Political Strife

Every couple of weeks, I get an email from Citiwire.net, a brainchild (I think) of Neil Pierce, the longtime observer of urban life and policy. Each email has two columns, one from Pierce and a second that “rotates” among a variety of writers. (Those of you interested in–or passionate about–cities should sign up. It’s free.)

Last Friday’s edition included a piece from Curtis Johnson, identified as the President of Citistates Group, commenting on a very prominent article from the previous week’s New York Times headlined “Republicans to Cities: Drop Dead.”

Johnson–who noted that he had worked many years for a Republican governor–said he cringed “to see the way sensible economics has been chained up, locked out and hooted over by the reigning ideology of today’s Republicans. Not that the Democrats are much better. A dear colleague of mine says ruefully that the Democrats don’t have very good answers, but Republicans don’t even understand the questions (and he’s Republican).”

Johnson goes on to report what most people who follow urban policy already know: as baby-boomers age, a huge number of them are abandoning suburbia and moving back into the cities, while the “millennials” already prefer urban life. (He shares a ‘factoid’ of which I was unaware–millennials are the first modern generation showing a decline in automobile ownership.)

Despite the increasing move to the cities–a move amply documented by demographers–those cities are struggling. Infrastructure is crumbling. Mass transit is lagging (or, as in Indianapolis, virtually non-existent). “Things that metro regions used to be able to build in a decade now take 30 to 40 years.” Yet policymakers of both parties give short shrift to these problems.

Johnson ends by pointing out something I’ve known ever since I got married, because it is my husband’s most persistent gripe: We rely upon our cities to generate the profits that pay the nation’s bills. Here in Indiana, certainly,  tax revenues generated in Indianapolis don’t stay here–along with the other cities in Indiana–South Bend, Ft. Wayne, Evansville–we pay the lion’s share of the state’s bills. We fund the priorities of Indiana policymakers–priorities that rarely include us.

It behooves us to take better care of the goose that is laying that golden egg.