The Corner

Economy & Business

The Problem with Expanding Guest-Worker Programs

(Jose Luis Gonzalez/Reuters)

There’s a worker shortage looming. Take construction. A Reuters story from January relates the travails employers face in that industry: “62 percent of firms are already complaining they cannot fill key professional and craft worker positions” and “many firms report having a hard time finding qualified workers to fill project manager or supervisor positions, equipment operators, carpenters and laborers.” The economy is hot hot hot, and a lack of new workers could be a serious drag on future growth.

Oh, wait — that Reuters story is from January 2014. Six years later, over a million and a half new construction jobs have been added — and without a giant new guest-worker program. According to the Bureau of Labor Statistics, the annual growth of hourly income in the construction sector has usually bounced somewhere between 2 and 3 percent in recent years (though it was a bit higher in 2018), and there’s some evidence that this income growth has slipped over the past year. Annual hourly income growth in this sector remains below where it was before the Great Recession. That is not exactly the sign of a labor market without enough workers.

The perpetual shadow of a “worker shortage” provides a context for the efforts of some Republicans — including potentially in the White House — to push for an expansion of guest-worker programs to remedy a supposed “shortage.” White House chief of staff Mick Mulvaney lamented in England that the U.S. is “running out of people to fuel the economic growth that we’ve had in our nation over the last four years,” and Politico reports that Lindsey Graham, Thom Tillis, and others are involved in talks to expand guest-worker programs. (The Politico story even includes dire warnings from, yes, construction groups about labor shortages.)

There are both empirical and strategic problems with arguments for the need for expanded guest-worker programs.

While the economy is fairly solid, it is not — campaign press releases to the contrary — white-hot. Inflation-adjusted annual GDP growth in 2019 was 2.3 percent, which is a respectable number but well below the 3+ percent growth rates of the expansions of the Eighties and Nineties. Nor can this slump in overall economic growth be blamed on lower population growth. Real per capita GDP growth is also significantly lower than it was in prior expansions.

There is also some evidence to suggest that there is still more slack in the labor market. The employment–population ratio is down considerably from where it was prior to the Great Recession (let alone the early 2000s). The employment rate for prime-age males (25–54) was 89 percent in 2000; it was only 86.4 percent in 2019, which suggests that there are many prime-age men who could still be added to the workforce. While wage growth has improved since the depths of the Great Recession, it still lags behind the rate of the 1990s.

Then there’s the question of policy strategy. President Trump has portrayed himself as the champion of “forgotten Americans.” A tight labor market helps the paychecks of individual workers and their families, but it also provides other civic benefits. This demand for labor encourages an expansion of the labor pool, providing opportunity to those whose resumes might be otherwise ignored. Criminal-justice reform is a chic topic in the Beltway right now, and one of the biggest ways of helping those with criminal records integrate into American society is to have a tight labor market. Such a labor market will encourage employers to invest more in training their workforces, expanding opportunity for those with and without college degrees. Conversely, guest-worker programs can often be vehicles for undermining the bargaining power of American workers.

If the GOP wants to help secure its support among working Americans, expanding guest-worker programs would seem a step in the wrong direction.

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