Politics & Policy

Three Cheers for a Tight Labor Market

Single-family homes under construction in San Diego, Calif., April 17, 2017. (Mike Blake/Reuters)
Let’s not screw it up by importing more foreign workers.

The unemployment rate is down, and employers are howling for more immigration because they say they can’t get enough workers.

Their howling should be music to our ears.

I don’t say this out of any animus — my mom and both grandfathers were small businessmen. Heck, I run a small (non-profit) business myself. But a tight labor market means that our fellow citizens who are the least attractive to employers — and on whose support we collectively spend billions — suddenly become a lot more attractive.

In other words, a tight labor market is the best social policy. America wins when employers have to exert themselves to recruit and retain workers. The result is higher wages for less-skilled workers and more people drawn into the productive world of work.

The unemployment rate hit 3.9 percent in April, matching the lowest level since late 2000 (which was itself the lowest unemployment rate since 1970). This is great news, of course. And since “full employment” is usually defined by economists to be a rate of 5 percent, there really must not be any more workers to hire, right?

Wrong — because the unemployment rate is not what many, probably most, people think it is. The only people government statistics count as “unemployed” are those who have looked for work within the past four weeks.

But, as my colleague Steven Camarota shows in a new report, in the first quarter of this year there were more than 50 million working-age people in the United States who were not even in the labor force — i.e., they neither were working nor had actively looked for work in the past month. And that doesn’t count another 5 million–plus who are working part-time but want full-time jobs.

The share of working-age Americans who are not in the labor force — neither working nor looking for work — has risen almost without interruption, from 21 percent in 2000 to nearly 25 percent today.

The flip side of this is the “labor force participation rate” — the share of working-age people who either have a job or have looked for one in the past four weeks. Among Americans without a bachelor’s degree (who account for two-thirds of the entire native-born working-age population), the share that are in the labor force has dropped from 76 percent in 2000 to 70 percent this year. Even worse, the gap in labor-force participation between bachelor’s and non-bachelor’s has grown, from 11.7 percentage points in 2000 to 15.8 points this year.

Given the record number of working-age people who are not currently in the labor force, business claims that we’ve run out of potential workers are simply false.

The drop in the official unemployment rate means that there are fewer people actively looking for work. Given the record number of working-age people who are not currently in the labor force, business claims that we’ve run out of potential workers are simply false. But how can we stop the exodus from work and draw those who’ve dropped out back into the labor force?

Part of the solution, no doubt, is making it harder to get by without a job. A work requirement for food stamps, as proposed in the farm bill, would certainly help, as would reforms to our fraud-ridden disability system. But the most powerful way to pull people into jobs is to make the jobs more attractive. And the key to that is keeping the labor market tight by not increasing immigration — or even better, stepping up worksite enforcement and cutting back on guest-worker programs.

The tight labor market is already bearing fruit. The slew of stories airing employer complaints of a “labor shortage” inadvertently highlight the benefits of a tight labor market. For instance, a Washington Post story this week quoted a restaurateur in Hilton Head, S.C.:

He has had to raise wages to attract and keep workers.

Dishwashers earn $13 an hour instead of the $10 they earned a couple of years ago. Line cooks are paid $15 to $18 an hour, instead of $13 to $15. Additional overtime costs mean tweaking the menu to stay profitable, from switching to smaller shrimp to raising the price of a plate of fish and chips by 30 cents.

“The whole island is a disaster zone right now,” said Carb, president and founder of SERG Restaurant Group. “It’s been a nightmare.”

Amidst the comical hyperbole (Disaster! Nightmare! Smaller shrimp!) is the fact that dishwashers and cooks are earning $2 to $3 more per hour — and not through “Fight for $15” coercion but through the workings of the market.

The positive fallout of the tight labor market is seen all over.

• A freight railroad is addressing its staffing issues by offering “signing bonuses up to $25,000 for hourly workers, including electricians, boilermakers and pipefitters.”
• A Denver firm “has removed requirements, such as a bachelor’s degree and a decade of experience, from some job descriptions to tap new pools of workers.”
• A trade publication reports that “the increases in pay appear to be attracting more people with prior construction experience back into the workforce.”
• An electrical firm in Virginia “is scouring high schools, jails and refugee processing centers for trainees.”
• Employers are taking chances on prisoners and ex-cons.
• Teenagers are being snapped up.
• The disability rolls are shrinking.

In the words of one construction executive, “If you’re trying to court them, you’ve got to get the checkbook out.”

Does anyone think this would be happening if the Schumer-Rubio Gang of Eight bill had passed, with its doubling of green cards and guest-worker visas?

And even those limits were merely a way station; the avowed goal of the corporate/libertarian Right (and the multicultural Left) has always been the unrestricted flow of foreign workers. When President Bush relaunched his immigration push in 2004, after it had been derailed by 9/11, he described his core goal: “If an American employer is offering a job that American citizens are not willing to take, we ought to welcome into our country a person who will fill that job.” Had Bush gotten his way, every one of the employers described above who are raising wages, offering benefits, and scouring the countryside for workers would be attesting that “American citizens are not willing to take” their jobs, and so foreign workers are needed. Under a market-driven immigration policy, instead of signing bonuses and prison work-release, we’d see staffing firms bringing in planeloads of Bulgarian pipefitters, Peruvian dishwashers, Pakistani landscapers, and more. Blue-collar wage increases would be smaller or non-existent, and the growth in non-work would continue uninterrupted.

Despite his tough talk (and action) on other immigration issues, such as the border and crime, President Trump shares Bush’s view that a tight labor market is a problem to be solved through importation of foreign labor. At a Michigan rally last month he said: “Our unemployment picture is so good and so strong that we’ve got to let people come in. . . . But we’re gonna let them in because you need them. . . . Guestworkers, don’t we agree? We have to have them.”

While the Department of Homeland Security is tightening up on certain work visas and (belatedly) ramping up worksite enforcement, at the same time Secretary Kirstjen Nielsen is set to announce any day now an increase in H-2B visas for non-agricultural seasonal workers. What’s more, “Trump and the GOP leadership have gone quiet on mandating E-Verify, draining momentum from a top policy goal of grass-roots Republicans.”

Maybe the president should rename his executive order “Buy American, Hire Foreign.”

I’ll give Senator Tom Cotton the last word. In a recent tweet he said: “Tight labor markets = higher wages for working-class Americans. A key reason to get immigration levels under control.”

NOW WATCH: ‘Trump Rejects Push For Moderate Immigration Deal’

Mark Krikorian — Mark Krikorian, a nationally recognized expert on immigration issues, has served as Executive Director of the Center for Immigration Studies (CIS) since 1995.

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