(What’s Left of) Our Economy: Industries Claiming Labor Shortages are Productivity as Well as Wage Laggards

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compensation, Labor Department, labor productivity, labor shortages, productivity, restaurants, trucking, wages, {What's Left of) Our Economy

The labor shortage claims from American businesses keep filling the media (even though wages, which are supposed to rise sharply in such circumstances, are improving only sluggishly). So it was more than a little interesting to look over the latest statistics on labor productivity released by the Department of Labor.

After all, companies and industries really facing dire labor shortages, and unwilling or unable to raise wages, are supposed to boost their productivity (generally by introducing labor-saving devices and practices). But the new Labor Department numbers show that they’re doing surprisingly little on this front, either.

Let’s examine two sectors of the economy that say with special vigor that they’re running out of workers: trucking and restaurants.

According to a typical account (from yesterday’s Washington Post), American trucking companies are facing “an extraordinary labor shortage” and their CEOs (including industry veterans) are saying things like “I’ve never seen it like this, ever….It doesn’t matter what the load even pays. There are just not drivers.”

The sector does appear to be raising pay. But not until the last two years have its overall employment costs been rising faster than those for the private sector overall – and the latter’s increases have hardly impressed. These data cover the entire transportation and warehousing sector, but after shooting up from a 2.1 percent annual pre-inflation pace to four percent (between the fourth quarters of 2011 and 2012), total compensation advances slowed to 2.3 percent annually during the next two years, and then to 2.2 percent in 2015 before accelerating.

Moreover, trucking industry productivity growth hasn’t been world-beating, either. The Labor Department reported last week that its overall gain in labor productivity (the narrower of two productivity growth measures tracked by Labor, but the one whose data is more up to date) in 2017 was 0.8 percent. A comparable figure for services industries in general isn’t available, but the Department does track labor productivity for non-farm businesses and for manufacturing.

Since labor productivity productivity for the former increased by 1.3 percent in 2017 and only 0.4 percent in manufacturing, it seems safe to conclude that services sector labor productivity grew by more than 1.3 percent – and therefore much more than trucking’s 0.8 percent. Nor does this picture change much going back to 2013.

Further, a remarkably similar pattern emerges upon examining the restaurant business. Labor shortages are widely claimed and reported, along with examples of the industry starting to improve compensation practices. New technologies are also apparently being tried to improve efficiency in the sector. But according to the data, these responses to the purported shortage of workers have been belated at best.

For example, as with trucking, annual total compensation gains in the accommodation and food services sectors (no restaurant-specific numbers are available) trailed those for the overall private sector for several years until 2016. And their owners and lobbyists have been making labor shortage claims for at least that long.

Data for restaurants (and bars) specifically are available for their labor productivity, and their performance here is only roughly comparable to the dreary results for non-manufacturing non-farm businesses.

Industries like trucking and restaurants may indeed not be able to choose their employees from as many applicants as they would like, or from numbers to which they’ve become accustomed. But if they haven’t been doing anything special, at least until recently either to hike pay, improve productivity, or both, then several explanations are possible. Maybe they’re waiting for another wave of wage-depressing legal and illegal immigrants to save their days without the need to fatten paychecks of invest in new plant and equipment. Maybe they’re don’t know how to improve productivity in particular, in which case, their businesses simply may not be viable, or they’re simply lousy managers.

But unless the Labor Department figures are completely off-base, one explanation we can rule out completely is that, as groups, they’re utterly desperate for workers.

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(What’s Left of) Our Economy: Historic Labor Shortages and Few Wage Hikes?

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Jobs, labor shortages, wages, {What's Left of) Our Economy

Share of American companies with job openings amid “worst” skilled labor shortages in a decade: c. 90%

Share of these companies responding by “increasing pay”: c. one-third

(Source: “Open jobs, few takers: Good help hardest to find in a decade, hiring survey shows,” by Jeffry Bartash, Marketwatch.com, April 23, 2018, https://www.marketwatch.com/story/open-jobs-few-takers-good-help-hardest-to-find-in-a-decade-hiring-survey-shows-2018-04-23)

(What’s Left of) Our Economy: The Dubious Labor Shortage Claims Keep Coming

Tags

BLS, Bureau of Labor Statistics, healthcare, Immigration, labor shortages, nurses, nursing, Reuters, wages, West Virginia, {What's Left of) Our Economy

Perhaps some day we’ll find out when it apparently became mandatory for journalists to write articles about supposed labor shortages in the American economy without once mentioning the word “wages.” For now, RealityChek will have to settle for citing yet another example of this phenomenon that contains an interesting twist: The reporter in question did look at some data from the Bureau of Labor Statistics (BLS), the U.S. Labor Department division that gathers and publishes employee compensation figures. But she still left out BLS numbers on wages and salaries.

According to Jilian Mincer of Reuters:

“Hospitals nationwide face tough choices when it comes to filling nursing jobs. They are paying billions of dollars collectively to recruit and retain nurses rather than risk patient safety or closing down departments, according to Reuters interviews with more than 20 hospitals, including some of the largest U.S. chains.

“In addition to higher salaries, retention and signing bonuses, they now offer perks such as student loan repayment, free housing and career mentoring, and rely more on foreign or temporary nurses to fill the gaps.”

And as indicated above, she is clearly familiar with the BLS as a reliable source of information on the American employment picture. Later in the article, she writes that “Nursing shortages have occurred in the past, but the current crisis is far worse. The Bureau of Labor Statistics estimates there will be more than a million registered nurse openings by 2024, twice the rate seen in previous shortages.”

But for some reason, she didn’t mention the BLS wage data – a crucial omission because everything we (think we) know about economics tells us that when anything, including labor, is scarce, its price (pay in this case) will rise until the greater rewards attract an adequate supply. Common sense supports this analysis, too. If employers are scrambling to fill jobs, it stands to reason they’ll offer better pay to make sure they and not their competition attract the needed workers.

And what the BLS data tell us is that no such scramble is taking place – or at least not enough of one to bid up wages. The last year for which detailed data for occupations (as opposed to sectors of the economy) is available is 2016. The numbers say that last year, the mean (average) national annual wage for registered nurses was $72,180 before inflation, and the mean hourly wage was $34.70.

Now let’s go back five years. The 2011 numbers? An annual mean wage of $69,110 and an hourly median wage of $33.23 per hour. So pay by these key measures wages rose by 4.44 percent over those five years and 4.42 percent, respectively. And again, that’s before adjusting for inflation. Does that sound like the hospitals and other healthcare providers that employ nurses are desperate for more?

Even stranger: Nursing pay has been rising more slowly than pay overall during this period. Between 2011 and 2016, mean annual wages for all occupations were up 9.73 percent, and mean hourly wages were up by 9.75 percent. That’s more than twice as fast! (See the same links that contain the national nursing figures.)

In fairness, Reuters’ Mincer looks at an additional nursing issue – the labor situation in rural areas, which she describes as especially dire. And it does seem to make some intuitive sense that small towns and farm communities would have special difficulties staffing medical facilities. But the numbers don’t seem to back up that story, either.

The author spent considerable space reporting on West Virginia. But the BLS numbers show that, between 2011 and 2016, both hourly and average nursing pay advanced by 4.50 percent. That’s only slightly more than the national rates of increase.

Yes, Mincer’s piece did talk a lot about healthcare providers offering “higher salaries, retention and signing bonuses [and] perks such as student loan repayment, free housing and career mentoring….” It’s entirely possible that she’s right. (The government doesn’t keep detailed occupational figures on these scores.) It’s also entirely possible that the data that is tracked by BLS is way off base. But when you’re claiming “labor shortage,” shouldn’t you at least mention that the most comprehensive facts available about base pay say nothing of the kind?

Moreover, buried in the article – indeed at the end of the quote immediately above – is a clue to the apparent paradox: Mincer’s observation that the healthcare industry is relying “more on foreign…nurses to fill the [employment] gaps.”

If true, that would make clear that lax immigration policies are still enabling nurses’ employers to suppress pay by easing any shortages in the domestic labor force by hiring immigrant nurses who will work for significantly lower pay than native-born workers. And it would suggest that the Cheap Labor lobby encompassing so many American businesses is still able to keep these wage-suppressing global labor pipelines open by peddling a steady stream of warnings about bogus labor shortages to gullible journalists.

(What’s Left of) Our Economy: And the Labor Shortage/Immigration Beat Goes On

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CNN.com, fake news, illegal immigrants, illegal immigration, Immigration, labor shortages, productivity, wages, {What's Left of) Our Economy

Here’s yet another Open Borders- and amnesty-friendly article from the Mainstream Media that simply doesn’t add up – this time from CNN.com. In this story about a small San Francisco-area manufacturer who claims that he lost a tenth of his employees due to a 2011 government raid in search of illegal immigrant workers, one whopping inconsistency in particular stands out. It concerns the wages paid by the employer Emerald Packaging of Union City, California.

Emerald’s owner, claims that the company is still suffering from the personnel losses because he can’t find adequate replacements. And the CNN reporters’ sympathy for his supposed plight – and the obvious difficulties encountered by his illegal workers – was made clear by the article’s melodramatic headline: “RAIDED: Immigration agents showed up at Kevin Kelly’s factory and he lost his star workers.”

RealityChek regulars know by now that such claims of labor shortages due to restrictive immigration policies are usually open and shut tip-offs that the business in question is paying inadequate wages, or has refused to automate and become more productive. As I’ve noted repeatedly, mainstream economic theory teaches that when the demand for anything – including labor – exceeds the supply, the price of that commodity (in this case the wage and/or non-wage benefits) tends to rise until a new equilibrium is restored. Alternatively, businesses tend to substitute capital (typically in the form of technology) for what they view as overly expensive labor.

Kelly emphatically denied to the CNN reporter that he’s been skimping on wages by using illegal workers: “When people say these companies are hiring illegal labor because they want to keep their costs down… in our case that argument is complete bulls–t.”

In fact, according to Kelly, the jobs that illegals were filling – and that in some cases have remained unfilled – “aren’t cheap positions.” He added that “They range from $15 an hour entry-level jobs to $35 an hour for experienced mechanics. ‘With overtime of $27 to $35 an hour, you can make pretty good money of $75,000 to over $100,000 a year.’”

But his claims started to fall apart – not that CNN picked up on this – the instant he started discussing in detail the employee whose departure he felt most keenly – an assistant foreman named Miguel Gonzalez.

As the CNN article tells it, “Gonzalez had worked for Emerald Packaging for over 20 years. He started as a box handler, moving and storing product pallets and factory supplies, and worked his way up to assistant foreman. He was a gifted mechanic and Kelly relied on him to help keep the factory running.” Further, he could:

>”walk into my office and tell me what’s going on in the facility.”

>Gonzales was “Keen to learn and move up the ranks [and] routinely took on extra work and hours. He also rarely missed work, even returning to the factory floor just two days after his first child, Casandra, was born.”

>Soon after Gonzalez’ hiring, “he showed initiative by tinkering with and fixing up the machines on the factory floor on his own time to help them operate better. Two years into the job, he was promoted into a role where he learned to set up, repair and maintain the factory equipment.”

>”Over time, [he] taught himself every aspect of the business, including payments and shipping.”

>In Kelly’s words, “He was the single best machine mechanic we had.”

>”Losing him had an immediate impact on production because there just wasn’t anybody of Miguel’s caliber to replace him. There just wasn’t,” said Kelly.

And what was this supremely talented “star worker” making in 2011, after twenty years of superlative performance? Twenty-two dollars per hour. (He also received healthcare and retirement benefits.) According to the Labor Department’s data, that wage is somewhat ($2.50 per hour) more than the average hourly wage (before inflation) for all workers in the plastics packaging manufacturing sector that year, and a little over six dollars an hour more than non-supervisory workers alone make. (It’s not clear whether an assistant foreman qualifies in the Labor Department’s eyes as a supervisory or a non-supervisory worker.) But that $22 per hour is also about $13 dollars an hour less than what Kelly said he pays “experienced mechanics” nowadays (five years later).

There’s no doubt that some businesses that hire illegal immigrants need every body they can get, and there’s no doubt that some illegal immigrants are earning good wages largely as a result. But when a news organization plainly convinced of the desperate need for illegal workers touts a single alleged example of this dire situation that’s so full of gaping holes, Americans are more than entitled to start wondering whether this narrative as a whole is fake news.

Im-Politic: A Surprising Source (Unwittingly) Explains Need to Keep Tight Immigration Curbs

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Im-Politic, immigrants, Immigration, labor costs, labor shortages, productivity, Ryan Avent, technology, The Economist

I’ve long argued that one of the main reasons for Americans to oppose mass immigration policies (including sweeping forms of amnesty for the current illegal population) is the devastating impact such labor inflows are likely to have on productivity growth. (Just FYI, here’s my latest take.) One of my main reasons? The relative scarcity of labor throughout American history deserves considerable credit for the nation’s emergence as a global productivity and technology leader. And since robustly improving productivity is a major key to boosting national living standards on a sustainable basis, that’s always struck me as a pretty strong argument to keep labor in short supply by limiting immigration – which of course brings in more workers. 

As a result, imagine my surprise to see that this view has just been supported by a leading writer for the British magazine The Economist – which has long loudly advocated for wider Open Borders.

The case for immigration as a productivity growth killer is solidly grounded in conventional economics. In that 2006 Congressional testimony linked above, I noted “When businesses conclude that the price of scarce labor has become excessive, powerful incentives emerge for them to substitute capital and technology for labor. And that means innovation.”

I then pointed out that “Our country owes much of its longstanding world leadership in most technology areas to this genuinely chronic scarcity and thus relatively high price of labor. Preventing shortages with immigration policy could weaken this proven spur to technological progress and all the benefits it brings.”

If you’re skeptical, here’s a link to the leading scholarly work connecting outstanding U.S. productivity performance and a chronically inadequate American labor supply. In fairness, not everyone agrees. Here’s a link to the most prominent rebuttal.

But I was understandably heartened to see the importance of scarce labor to productivity growth supported in this post by Ryan Avent, a senior editor and economics columnist for The Economist. According to Avent:

“Economic historians often explain divergences in patterns of industrialisation by pointing to differences in labour costs. British workers were expensive relative to workers on the continent and relative to British energy. British firms therefore had an incentive to develop and deploy new technologies that economised on labour and used a lot of energy: industrialisation! There’s more to the story than that, but that’s a pretty big component. Later something similar happened in America, where workers were even more expensive and resources even more abundant, and where the phenomenally productive ‘American system’ of manufacturing therefore emerged.”

Avent doesn’t explicitly make the immigration policy connection. But it’s glaringly obvious to all except the ideologically blinkered (or the hired guns of the American cheap labor lobby). Needless to say, I’ll be awaiting his next offering on the immigration policy debate with more than the usual interest. You should, too.

(What’s Left of) Our Economy: Wages Data Still Belie Amnesty Advocates’ Labor Shortage Claims

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illegal immigrants, Immigration, Jobs, labor shortages, productivity, wages, {What's Left of) Our Economy

The Pew Research Center is out with its latest estimates of the role played by both immigrants and illegal immigrants in the American job market. So that has enabled me to crunch some reasonably reliable numbers to find out whether illegals-friendly immigration policies like some form of amnesty are, as often claimed, desperately needed if the nation is to avoid a crippling labor shortage.

When I performed this exercise roughly a decade ago, I found that similar claims being made in that period were wildly overblown at best. Why? Because the data showed that real wages in the industries employing the most illegal immigrants were generally stagnant or going down. That’s exactly the opposite of what should happen if economists (and common sense) are right in contending that when anything – including workers – is scarce relative to demand, the price of that thing should go up.

And the verdict for 2014 – the year for which Pew’s latest statistics come? Labor shortage claims are still mainly hokum.

According to Pew, the sectors where illegal aliens make up the greatest share of workers are (in order of the total immigrant share of their workforces: private households; textile and apparel manufacturing; agriculture; accommodation; food manufacturing; computer and electronics manufacturing; personal and laundry services; administrative and support services; construction, and miscellaneous manufacturing.

Are there many signs of the kinds of labor market tightness that should be sending pay soaring out of sight? I couldn’t find data for domestic workers, but here are the current-dollar wage figures for the other sectors during the current recovery so far. That means from June, 2009 through February, 2016, except where noted. They cover non-supervisory workers, on the assumption that few illegal aliens are finding managerial jobs in these parts of the economy:

Private sector overall: +17.78 percent

Construction: +15.93 percent

Computer and electronic manufacturing: +12.55 percent

Miscellaneous manufacturing: +16.55 percent

Food manufacturing: +17.31 percent

Textile mill manufacturing: +14.93 percent

Textile products mill manufacturing: +24.76 percent

Apparel manufacturing: +18.05 percent

Administrative and support services (through January): +14.33 percent

Accommodation (through January): +7.56 percent

Personal and laundry services: +21.61 percent

Farm workers: +24.53 percent

I sure don’t see any broad-based wage explosion in these statistics. In only four of the eleven illegal alien-heavy sectors have wages even been rising faster than those in the overall private sector – which hasn’t been terribly fast given that the current recovery is more than seven years old. Two of them, moreover, are in labor-intensive manufacturing industries that have been so decimated by foreign competition for so long that what’s left of them might indeed be facing labor shortages. The reason? Who in his or her right mind would assume they have much of a future in this country?

But what about more recent developments? Can signs of widespread labor shortages be seen in the current stage of the recovery? You be the judge, based on these February (or January, where noted above) year-on-year developments:

Private sector overall: +2.48 percent

Construction: +3.38 percent

Computer and electronic manufacturing: +2.73 percent

Miscellaneous manufacturing: +3.13 percent

Food manufacturing: +3.70 percent

Textile mill manufacturing: -1.07 percent

Textile products mill manufacturing: +8.04 percent

Apparel manufacturing: -3.02 percent

Administrative and support services (through January): +4.13 percent

Accommodation (through January): +1.50 percent

Personal and laundry services: +3.88 percent

Farm workers: +3.00 percent

Bottom line: The illegal immigrant-heavy sectors have seen some wage acceleration since last year. But two of the manufacturing sectors where wages had separated themselves from the pack are now experiencing wage decline. And it’s important to keep two other considerations in mind for many of the rest: First, their wages have been boosted artificially during this period by numerous sizable minimum wage increases in major states and localities. That’s not to say that such hikes per se are undesirable in any way. Indeed, I personally don’t see any reason why they shouldn’t be much more tightly linked to inflation nationwide than they’ve been till now.

When it comes to the labor shortage claims, however, they greatly distort the picture – because they represent wage developments based not on the labor supply and demand situation in these parts of the economy, but on political decisions.

Second, if the relatively strong wage increases that have taken place continue much longer, expect the sectors in question to start automating fast — or faster. That’s been a major feature of American economic history. And if economists are right, the resulting technological progress will wind up simply being delayed (perhaps partly accounting for the economy’s recent sluggish productivity growth?), rather than stopped, by the continuing easy availability of illegal immigrant labor.

(What’s Left of) Our Economy: About Those “Jobs Americans Won’t Do”

Tags

agriculture, automation, Bryan Caplan, Center for Immigration Studies, farm workers, illegal immigrants, illegal immigration, Immigration, Jobs, labor shortages, Mark Krikorian, Michael Dukakis, minimum wage, Open Borders, productivity, Ron Unz, technology, wages, {What's Left of) Our Economy

As “everybody knows,” one of the main reasons that the U.S. economy desperately needs a huge population of low-paid immigrants (whether legal or soon-to-be legalized) is that these workers do crucial jobs that the native-born population snubs. And with the immigration policy debate continually intensifying in this presidential campaign cycle, expect this claim to be trotted out again and again by champions of Open Borders-style approaches to the issue. (Here’s a good post indicating just how often it’s been made by major political and chattering class figures.)

What a surprise, then, to keep discovering evidence showing that the “jobs American won’t do” contention to be completely bogus.

As should be clear to anyone familiar with standard economic thinking, the idea underlying all such claims – of chronic labor shortages that can only be eased with big new influxes of foreign workers – is nonsensical theoretically. The reasons have to do with time-honored concepts of supply and demand. When they’re out of balance – which in this imperfect world happens all the time – actors in free markets adjust in several ways, all involving the price mechanism. Employers facing such labor market mismatches will either raise wages, in order to attract the workers they need, or they introduce labor-saving machines or other efficiency-enhancing improvements if the former option isn’t appealing. Of course, in the real world, responses are often some combination of these alternatives.

But whatever business’ choices, the implications for the economy as a whole are the same. “Jobs that Americans won’t do” will before too long be filled by better paid workers or by the proverbial robots.

Both options, moreover, contain ample potential to strengthen the economy to everyone’s benefit. The pluses of higher wages (up to a point, of course!) are self-evident. But although the labor-saving technology strategy sounds like a formula for mass unemployment, centuries of history teach that automation ultimately creates many more, and better, jobs than it displaces. (Will this record continue in an unfolding age of more and more sophisticated robots and artificial intelligence? I sure as heck don’t know. But that’s a medium-term challenge, not an imminent one.) Moreover, more use of machines is typically a sign that the economy is becoming more productive. And that’s as good as it sounds – including for wages and broader living standards.

There is an important caveat: Not all companies, or even whole industries, are capable of making these adjustments (whether they want to or whether they’re confident that immigrants will keep flooding to their rescue). But that doesn’t mean that labor shortages need to or should be dealt with by new government measures like opening borders even wider. Instead, it mean that these companies and industries have lousy, and even completely non-viable business models. Why should they be bailed out with immigration policy at the expense both of native-born workers and greater efficiency?

It’s true that theories can be and often are wrong. But not this one. Exhibit One has to do with technology. Immigrants both legal and not comprise a big share of America’s agricultural workforce, and the farm sector has long insisted that the depressed wages that result from immigrant-fueled labor surpluses are crucial to keeping food affordable. Further, they and their supporters argue, few native-born Americans would want to toil in the fields even if pay was raised.

As it turns out, however, meager wages ultimately were making workers harder and harder to find throughout the ag sector. And rather than close up shop – and let entire crops go unplanted, immense harvests rot on the vine, and widespread hunger to emerge – guess what American farmers have started to do? Yep. They’re spreading mechanization beyond the grains and other commodity crops for which its use has been commonplace for decades!  (Thanks, by the way, to Mark Krikorian of the Center for Immigration Studies for a recent tweet that first alerted me to this development.) 

In fact, thanks to ever more sophisticated robots and similar devices, they’re even mechanizing the picking of fruits and vegetables long considered to be too delicate to be handled by machines, like strawberries and blueberries. And it’s pretty reasonable to suppose that these machines will keep getting cheaper, better, and able to perform an ever wider range of tasks. .

Exhibit Two isn’t a real-world development yet. Instead, it’s a proposal that dramatically shows how higher wages could slash the nation’s supposed need for illegal immigrant labor. According to folks ranging from former Democratic presidential candidate Michael Dukakis to reform-minded California Republican multi-millionaire businessman Ron Unz, a healthy increase in the minimum wage would draw many legal U.S. residents back into the nation’s workforce and reduce the attractiveness of hiring illegals – many of whom are poorly educated and speak limited English. And of course, businesses that hired only legal residents would have no law enforcement worries. Even George Mason University economist Bryan Caplan, an unabashed supporter of completely Open Borders (seriously!) has acknowledged the “logic” of the proposal.

So the next time you hear the “jobs Americans won’t do” argument, you can be pretty sure that it’s coming from someone who just doesn’t know their basic economics, whose ideologically committed to completely unfettered immigration, or who has a big political or economic self-interest in importing poverty on a huge scale into the United States.

Im-Politic: Angry Voters May Not Know the Half of It on High Tech Immigration

Tags

Center for Immigration Studies, Center for Investigative Journalism, Donald Trump, federal contracting, H-1B visa, Im-Politic, Immigration, Jobs, John Miano, KeepAmericaatWork.org, labor shortages, Mainstream Media, Norman Matloff, Obama, skills gap, technology, Virgil Bierschwale, wages

It’s now become commonplace for establishment politicians and their Mainstream Media enablers to acknowledge that so-called “insurgent” presidential candidates – especially Republican Donald Trump – have “tapped into” public anger against their performance. Far less common are signs that the establishment is prepared to take even the most obvious steps to respond constructively to this anger, and Virgil Bierschwale’s excellent “Keep America at Work” blog has just turned up a great and oh-so-revealing example.

As Virgil and many others (including me) have noted, the H-1B program under which the U.S. government hands out temporary work visas to foreigners supposedly with special skills has long been abused by employers, especially in the technology sector. Claiming that they can’t find the talented workers they need in the American workforce, tech companies have frequently hired H-1Bs – and continually lobbied for more – simply in order to drive down wages and therefore boost their profits.

And in the first sentence of this paragraph, I used the word “noted,” very deliberately. For even though expanding the H-1B program enjoys strong bipartisan support among the many American political leaders who receive handsome campaign contributions from the technology industry, the U.S. government itself over the years has charged numerous tech firms with violations of the central H-1B requirement that they pay these workers prevailing wages.

So you’d think that this same federal government would at least refrain from rewarding these crooked companies by denying them federal contracts. As Virgil has just shown, however, you’d be wrong. His August 20 post reported on a study by the Center for Investigative Journalism that found:

“The federal government has awarded contracts and other benefits worth nearly half a billion dollars since 2000 to tech labor brokers cited for violating laws related to the temporary visa program known as H-1B.

“Since 2000, nearly 20 percent of the technology labor brokers and tech firms cited for violating the H-1B visa program have received federal contracts, payments and other government support.

“The Department of Homeland Security and Department of Labor are among the agencies that have looked past H-1B violations or failed to check the record.

“Even labor brokers facing the ultimate penalty for H-1B labor violations – debarment from the temporary visa program – found ways back in.”

And what about President Obama, the self-styled champion of the American worker? This summer, he signed an executive order requiring anyone seeking significant federal contracts to notify Washington if they’ve recently broken labor laws. “Our tax dollars shouldn’t go to companies that violate workplace laws. They shouldn’t go to companies that violate worker rights,” Mr. Obama said.

But H-1B violators have nothing to fear. They’ve been expressly exempted from the new order.

So although I usually shy away from predictions, I feel pretty confident in believing that, throughout this presidential campaign and beyond, establishment politicians in both parties and their media enablers will continue to bemoan the troubles of the American workforce and hail technology industries as a big part of the solution. Federal contracting practices like those described by Virgil will continue to be a big part of the problem (along with other job- and wage-killing measures like amnesty-friendly overall immigration policies and offshoring-friendly trade agreements). And establishment politicians – along with the Mainstream Media which missed this H-1B scandal and keeps ignoring it – will keep pretending that they get it on voter anger.  

FYI, for other terrific sources of information, analysis, and coverage re H-1B and many other immigration issues, check out Norman Matloff’s “Upon Closer Inspection” and the work of the Center for Immigration Studies, notably John Miano’s blog.   

(What’s Left of) Our Economy: Tech Labor Shortage My…Foot

Tags

compensation, ECI, Employment Cost Index, immigrants, inflation, inflation-adjusted wages, labor shortages, skills gap, tech workers, wages, {What's Left of) Our Economy

So many myths were busted in today’s Employment Cost Index (ECI) report from the Labor Department, which should put the kibosh on wage inflation claims until…the next Employment Cost report. One of the most important is the longstanding notion that America is experiencing a scary shortage of high tech workers, and will fall hopelessly behind the rest of the world in the innovation race – with dangerous implications for national security and living standards – if the “skills gap” isn’t filled pronto with zillions of brainy immigrants.

The ECI data – which doesn’t adjust for inflation when it comes to detailed occupational and industry data – lacks information on technology workers per se. But it does provide statistics on pre-inflation total compensation (including non-wage benefits) for workers in the “professional, scientific, and technical services” field, which includes engineering and computer services.

Remember that textbook economics and common sense both tell us that when businesses can’t find the workers they want, they tend to react in one of two ways. They either increase pay to become more attractive to existing workers they need, and over the longer- term to draw more people into their field. Or they figure out a way to get the necessary work done by becoming more efficient – say, by buying or developing some gizmo that can replace human beings, or make their current employees more productive. (The textbooks, incidentally, don’t teach that businesses facing labor shortages typically lobby governments to boost immigration levels in order to create labor gluts and suppress wages – which seems to be the strategy of choice in Corporate America nowadays.)

Of course, economics also teaches that employers urgently needing more workers will try various mixes of both approaches over time. But those facing genuine shortages usually can’t afford to skimp on pay. Why, then, do the data on total compensation for “professional, scientific, and technical services workers” show that that’s exactly what’s happening to compensation?

The new ECI numbers covered the quarter ending in June, and deep in the Labor Department website, you can find statistics going back to 2001. Since that June, here’s how pay has improved over each previous June quarter:

2000-01: 3.4%

2001-02: 2.4%

2002-03: 2.1%

2003-04: 4.5%

2004-05: 2.6%

2005-06: 3.1%

2006-07: 4.7%

2007-08: 4.1%

2008-09: 2.0%

2009-10: 1.4%

2010-11: 3.0%

2011-12: 1.5% 

2012-13: 2.0% 

2013-14: 1.7% 

2014-15: 1.1% 

Do these look like the kinds of pay raises given out by businesses that are desperate to hire? It’s clear that total compensation increases slowed down considerably once the Great Recession took hold in 2008-09. But why should even that deep downturn have produced the dramatic deceleration revealed here? After all, we’re talking about the industries of the future – sectors and companies that are generating outsized growth because they’ve not only found brilliant new ways to meet wants and needs the rest of the economy already has, but because they’re great at identifying completely new wants and needs.  And anyway, the recession ended more than six years ago – remember?

But here’s a finding that’s even more stunning – and destructive to claims of tech worker shortages: For the last three years, total pay for the private sector workforce overall has risen faster than total pay for the professional and scientific etc. workers. 

Lying about the hiring picture isn’t exactly admirable behavior, but we’re talking about businesses here.  They’re supposed to be obsessed with making money in any legal way possible.  But elected officials who swallow their propaganda presumably have a different set of responsibilities.  If I can find information debunking their labor shortage claims, so can the politicians.  Why haven’t they?    

 

(What’s Left of) Our Economy: Trump’s Comments Aren’t the Immigration Story that Matters

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Donald Trump, employers, illegal immigrants, Immigration, Labor Department, labor shortages, Mainstream Media, Pew Research Center, wages, workers, {What's Left of) Our Economy

Although dominated lately by the uproar over comments about Mexican arrivals made by Republican presidential candidate Donald Trump, America’s immigration debate will surely remain fueled powerfully by business claims of severe labor shortages. With industries ranging from fruit-picking to computer services allegedly desperate for help, numerous employers insist that the only fix is admitting ever more foreign workers into the U.S. economy. It’s lucky, then, that the Pew Research Center’s Hispanic Trends staff has recently updated its estimates on where the nation’s current illegal immigrants work – because they expose the labor shortage claims as largely bogus.

Reaching this conclusion is easy: Just compare Pew’s findings on occupations with the largest share of illegals in their workforces with wage figures put out by the U.S. Labor Department. If a given group of workers has been enjoying wages rising faster than the economy-wide average, that’s a pretty good sign of a labor market that’s at least reasonably tight (though not necessarily suffering any kind of lasting shortage). If a given group of workers has experienced wage lag, chances are their employers aren’t exactly starved for employees. Otherwise, of course, they’d be offering much higher pay.

According to Pew, the broad groups that were most illegals-heavy as of 2012 were farming, fishing and forestry; building and grounds cleaning and maintenance; construction and extraction; food preparation and serving; production; and transportation and material moving. No doubt none of these categories comes as a surprise. But here’s the funny thing: All of them have seen wages rising more slowly than the national average.

The Labor Department data used by Pew also reports constant dollar (pre-inflation) wages for these occupational groups (which are different from the industry groups whose wage figures I normally report on). They show that in May, 2009 (the available data closest to the start of the current economic recovery), economy-wide median wages were $15.95 per hour. By last May (the latest numbers), they had risen 7.15 percent before inflation, to $17.09. (You can look up the raw data yourself here and here.) Now here are the rates of increase for the illegals-heavy occupations:

>Farming, Fishing, and Forestry: +3.29 percent

>Building and Grounds Cleaning and Maintenance: +4.09 percent

>Production: +5.83 percent

>Construction and Extraction: +6.76 percent

>Transportation and Material Moving: +5.50 percent

>Food Preparation and Serving: 3.49 percent

Even worse, the occupational group that features the highest share of illegal workers – that farming etc. sector – saw the most sluggish wage increases. And the building maintenance category, the second most illegals-intensive occupation, wasn’t much better. That’s the opposite of what you’d expect from mainstream economics, which would insist that the sector that used the greatest numbers of illegals should be that experiencing the most wage inflation.

Some Mainstream Media organizations reported on the Pew results on occupational concentrations of illegal immigrants. But despite the prominence of the labor shortage claims, I couldn’t find a single instance of any reporters examining these critically important wage trends. They and the pundits, moreover, have completely ignored their wage-depressing implications for native-born workers. It’s clearly more satisfying to parrot phony labor shortage claims intended to inflate the work force artificially, and pauperize masses of American citizens and legal residents further, Not to mention fulminating about Donald Trump.