Fed chair calls slow wage growth ‘a puzzle’
In its new study, “Tapping the Skills of Highly Skilled Immigrants in the United States,” the Migration Policy Institute stated that, according to economists, by the end of this decade, the nation will have a 5 million shortage of job-qualified persons with postsecondary educations. Immigrants’ rising education levels might, wrote MPI, represent a great opportunity for the U.S. economy. Yet, MPI noted, one-quarter of immigrant college graduates in the U.S. – nearly 2 million people – are either unemployed or work in jobs that require no more than a high school degree.
MPI supports higher immigration, and the integration of immigrants. Nevertheless, MPI found that 2 million college-educated immigrants are unemployed or underemployed. The logical conclusion to draw from MPI’s research would be to cut migration until the existing foreign-born population reaches full employment, or close to it. Until then, adding immigrants only makes job competition more challenging for new migrants, American workers, and already present lawful permanent residents.
For years, immigration activists have argued that with alleged labor shortages looming, the appropriate strategy is, in anticipation of the inevitable crunch, to import workers immediately. The more prudent approach, however, would be to wait until the predicted shortage becomes reality, and then adopt an as-needed immigration policy. Scare tactics – the labor shortage wolf cry – never come to fruition because, among other reasons, there are millions coming out of our high schools and colleges and entering the labor pool. In 2018, 3.6 million students graduated from high school, and in 2017, 1.29 million received associate degrees, 2.03 million graduated with bachelor’s degrees, 982,000 with master’s degrees and 209,000 earned doctorates.
Truth be told, labor shortages are good news for American workers, and for those recent graduates just beginning their job searches. Shortages translate into an easier path for unemployed people to find jobs, a stronger employment market for people who previously quit the workforce, and a greater incentive for businesses to pay higher wages to attract the employees they need.
Another positive outcome to workers’ rising incomes: they get a larger share of the economic pie, a benefit that has been denied to them in the cheap labor era. Federal Reserve Board Chair Jerome Powell acknowledged as much when he said at a Washington, D.C. news conference last month the meaningful pay hike elusiveness was a “puzzle.” But Powell offered up one strong possibility: American workers aren’t generating enough additional value for each hour on the job.
Despite the outcry about labor shortages, corporate-promoted and media-endorsed, the facts belie the claim. National wage growth for the last few years has been tepid, about 2.7 percent, and not an indicator that employers have reached the desperate stage. Realized wage gains still aren’t strong enough to offset the losses suffered after the Great Recession.
Returning to the MPI study, if 2 million postsecondary-educated immigrants are unemployed or underemployed, then the conclusion must be that higher immigration levels would hurt all.
Census Bureau data shows that 1.03 million legal and illegal immigrants settled in the U.S. in the first six months of 2016. Based on historic patterns, a total of 1.8 million immigrants likely came during the entire 2016 year. Newly arrived immigrants included work-authorized green card holders, and long-term temporary visitors, such as guest workers and overseas students, many of whom eventually become permanent residents.
Simply stated, immigration, especially immigration that includes employment authorization, is too high. To keep upward pressure on wages, and to keep labor markets tight, immigration should be reduced.