Archived Newsletter (2005)
Manufacturing Employment on the Upswing at Last?
by Richard W. Judy
It’s been a long downhill slide
Manufacturing employment has trended downward for decades (see Figure 1). Already by mid-1993, we had 2.5 million fewer factory jobs than in 1980. After a modest recovery in the mid-1990s, the decline began anew in 1998. From January of that year to January 2000, the nation lost 290,000 factory jobs, and that was before the most recent plunge. Between January 2000 and January 2004, more than three million additional manufacturing jobs disappeared in the United States. Between 1980 and 2004, manufacturing slipped from 21% to 11% of the nation’s total employment.
Bad news and good news
The bad news is that 2004 was the sixth consecutive year of declining average annual manufacturing employment. Nevertheless, for the first time in a long time, we can now wax slightly bullish about the growth of U.S. factory jobs or at least some of them. Snippets of good news are finally in the wind. Last August, the year-to-year change in seasonally adjusted manufacturing employment moved into positive territory, where it has remained for every month since. That’s very important because manufacturing still accounts for a large number of good jobs in this country. A glance at Figure 1 shows that, despite the loss of millions of factory jobs since 1980, more than 14.4 million Americans are employed in manufacturing.
Can the good news last?
One swallow doesn’t make a spring and a few months of factory job growth don’t necessarily foretell a turnaround in fortunes for manufacturing employment. The big questions we address here are:
Why the long-term decline in the number of factory jobs?
What lies behind the recent nascent recovery of manufacturing employment?
Will the forces driving recovery continue into the future?
Generally, what are the short-term and long-term prognoses for manufacturing employment in the United States?
Why the long-term slide in manufacturing employment?
Any employment trend that has persisted as long as this one has must reflect powerful underlying economic forces. Those mainly responsible for the long-term slide in America’s factory jobs are these:
Rapid worker productivity growth in manufacturing. This stems from profound technological change, whose effects have been greatly magnified by increasing competitive pressures on companies to reduce costs by becoming more efficient. Obviously, the flip side of rising output per worker is that fewer workers are needed per unit of output produced.
A general shift of consumer demand from goods to services. This has brought manufacturing employment down in all economically developed nations. As Table 1indicates, many other nations have seen much larger percentage drops in their manufacturing employment than has the United States. Only recently developing countries, notably China and Mexico among them, have notched employment gains in the manufacturing sector.
Outsourcing by manufacturing companies. Much that was outsourced consisted of non-manufacturing, service-type functions, e.g., accounting, payroll and other human resource management activities. For governmental statistical purposes, this had the effect of transferring jobs previously counted in the “manufacturing” sector to firms that were classified in the “service” sector. To the extent that this occurred, it exaggerated the statistical measures of manufacturing job losses while, at the same time, exaggerating the measures of service sector job gains.
A strong and strengthening dollar vis-à-vis the currencies of our main trading partners. By mid-2002, the value of the U.S. dollar was more than 3.5 times higher than in 1980 vis-à-vis a weighted average of the currencies of a broad group of major U.S. trading partners. The exceptionally strong dollar inevitably rendered U.S. manufactured goods less competitive in domestic and foreign markets and thereby retarded exports and boosted imports of manufactured goods. The result has been a large and growing gap between U.S. exports and imports of manufactured goods.
A sharp decline in the fortunes of the most low-skill, labor-intensive manufacturing industries (e.g., clothing, textiles, toys, electronic assembly) as production moved offshore to low-wage nations.
What’s driving our nascent recovery in manufacturing employment?
Four main forces are responsible for year-on-year increases in manufacturing employment that began in August, 2004. There are:
A general cyclical recovery from the economic recession of 2001 (signs of which were quite apparent in mid-2000) that exacerbated the long-term decline of manufacturing employment for the first three years of this new century.
The nearly complete demise of American low-skill, labor-intensive manufacturing means that further job losses from these industries are greatly reduced. Having fallen so far, these industries have little farther to fall.
Many, perhaps most, manufacturing companies left standing have been forced to reduce costs and become “lean and mean” competitors in domestic and world markets.
The U.S. dollar has, at long last, begun to weaken against the currencies of many of the world’s other manufacturing nations. Since May 2002, the U.S. dollar has weakened by about 9% in comparison to a weighted average of U.S. trading partners. Most of this recent decline of the U.S. dollar has been due to an appreciation of the Euro and, to a lesser extent, the Japanese Yen. Between mid-2002 and the end of 2004, the Euro rose by more than 40% and the Yen by 16% against the dollar. That obviously makes the U.S. manufacturers much stronger versus European competitors and also somewhat against Japanese producers.
Will these forces continue in the future?
Prospects are mixed for the four forces just listed.
Economic recovery should continue during 2005. Expectations are that the U.S. and world economies will continue to expand, albeit at a somewhat slower pace than in 2004. That continuing recovery should strengthen domestic and foreign demand for manufactured goods, especially capital goods.
Some remaining labor-intensive industry, especially in clothing and textiles, will be hit even harder than in the past by the expiration of the international Multi-Fiber Agreement. This is sure to boost textile imports from China and other countries and to drive another nail in the coffin of U.S. textile and clothing manufacturers.
U.S. producers of capital goods, e.g., Caterpillar, are enjoying huge success in both domestic and foreign markets. Competing in the face of a strong U.S. dollar has left survivors well positioned to do well if the dollar continues to weaken against European and Asian competitors.
Given the continuing gigantic and growing U.S. current account deficit, the dollar must certainly fall much farther than it already has to play its part in rectifying a situation that is, in the long run, unsustainable. In particular, the dollar remains greatly overvalued against both the Japanese Yen and the Chinese Yuan.
The gigantic U.S. trade imbalance generates correspondingly huge net inflows of dollars to these two Asian nations. So far, both of these nations have followed mercantilist policies of keeping their currencies weak against the dollar with the aim of keeping their exporters competitive in U.S. and world markets. Such a policy means that the Japanese and Chinese central banks must regularly buy billions and billions of dollar-denominated securities (mainly U.S. Treasury bills). China's foreign exchange reserves jumped to US$609.9 billion by the end of 2004. Sixty to seventy per cent of the money is estimated to be held in US dollar-denominated assets.
How long the Chinese and Japanese central banks will continue to keep their fingers in the dike, by buying dollar-denominated assets to stoke the U.S. appetite for cheap foreign goods, is anybody’s guess. Neither nation seems to know how to keep its economy moving ahead without the stimulus of large export surpluses. At a minimum, it seems safe to say that over the long term, the dollar will depreciate in value against both of these Asian currencies. How much of that depreciation will occur in 2005 is impossible to say. It is reasonable to expect that the U.S. dollar will slip by at least another 5% against the weighted average of currencies of its major trading partners. Most of this slippage is likely to come vis-à-vis the Euro and Yen with little change coming in the Yuan to dollar rate.
U.S.Manufacturing is a many-splendored thing
It’s important to note that health of U.S. manufacturing varies greatly among the many industries that comprise it. Not surprisingly, employment in those industries is highly variable as well. Some industries have been in steady decline for years (e.g., Apparel, Paperboard mills) and show little or no promise of recovery. Others have gone from strength to strength (e.g., Dental laboratories, Surgical and medical instruments, Pharmaceutical preparations). Many others saw job growth in the mid-1990s followed by a drop beginning sometime between 1998 and 2000 and recent strong recovery (e.g., Wood products, Fabricated metal products). Still others have followed entirely different trajectories.
The significance of this variance for particular communities and worksheds is that local manufacturing employment depends critically on the specific clusters of manufacturing and allied industries within them.
Prospects for manufacturing jobs in the United States
On balance and over all, the stars appear to be aligning themselves favorably for many U.S. manufacturers in domestic and foreign markets in 2005. That will translate into modest job growth overall and very significant growth in specific industries. But different manufacturing industries - and therefore, different communities - will fare very differently in this environment.
Next month we will discuss future employment prospects in different industries and clusters of them. Beyond that, we will be happy to assist local workforce and economic development boards to judge the implications for their own specific areas and they should feel free to contact us for that purpose.
Previews of coming attractions
Following our survey of employment prospects in various U.S. manufacturing industries, we’ll move on to tackle some key workforce questions relating to the future of this important sector of our economy. Among the questions we’ll address are these:
What workforce does America need to remain a major manufacturing nation in the years ahead?
How does this translate into the demand for specific skills and occupations?
What challenges confront the nation in building that workforce?
What are the implications for education and training?
The Manufacturing Jobs Outlook: Different Outlooks for Different Industries
By Richard W. Judy
Last month we observed that, early in 2005, the stars appear to be aligning themselves favorably for some U.S. manufacturers. For that, the main reasons were identified to be these four:
- Business cycle recovery from the economic recession of 2001.
- Many industries have little farther to fall since they have already fallen so far.
- Many manufacturing companies left still standing have become extremely “lean and mean” competitors.
- The U.S. dollar has, at long last, begun to weaken against the Euro and also against the currencies of some of the world’s other manufacturing nations. .
Last month’s article concluded by noting that different manufacturing industries - and therefore, different communities - will fare very differently in this more favorable environment. And we promised this month to discuss future employment prospects in different industries and clusters of them. It’s time to deliver on that promise.
A fearless (or foolish) forecast
I’m taking a deep breath, ignoring Yogi Berra’s famous warning about the perils of prediction (especially about the future), and going out on a limb with some fearless guesses about employment changes to expect in major manufacturing industry groups. And now, after those protective clichés, here they are:
I won’t bore you with how these projections were made. Suffice it to say that they are based on the BLS’ projections for 2002 to 2012 after taking account of what happened from 2002 to 2004. In any case, I consider the estimates of change for individual industry groups to be the mid-points of ranges that could vary as much as 25% in either direction. Despite this inexactitude, I’d argue that the projections have value insofar as they indicate the direction and order magnitude of change that we can logically expect. Here endeth the apologia.
Commentary: Words to go with the numbers
If you’ve made it this far, some comments on the projections for specific industry groups may interest you.
A million more factory jobs in total. Over the next eight years, it is reasonable to expect the addition of more than a million jobs in the U.S. manufacturing sector. That may not seem like many but it compares quite favorably with the loss of more than three million manufacturing jobs over the eight year period ending in 2004.
Just one word: “Plastics.” Actually, it’s “Plastics and rubber products,” but it seemed better not to push the Graduate allusion too far. Anyhow, employment in this group of industries grew briskly from 1992 to 2000, fell back down to its 1991 level by 2003 and staged a modest comeback in 2004. Some industries in this group have been growing so strongly in recent years that they seemed to defy the Recession of 2001. Those would include industries catering to the construction and shipping industries. We’re looking for job growth over 20% in this group between now and 2010.
Make more machines. Machine manufacturing employment began to sag as early as 1998 and plunged from 2000 to 2003. We attribute this sharp decline to two factors: (1) weaker machinery exports and more imports due to the strengthening U.S. dollar, and (2) faltering domestic and international demand for capital goods during the economic slowdown that began in 2000. In 2004, things improved noticeably as the dollar weakened and global economic expansion gathered steam. U.S. capital goods exports strengthened very noticeably as 2004 and we expect that to continue in the years immediately ahead. Some major machinery manufacturers reported major sales gains last year, e.g., Caterpillar Corporation’s sales were up by a third, Rapid productivity gains in the machinery sector will continue in the years ahead but some of the expansion will translate into demand for more workers. Look for more than 220 thousand more U.S. jobs in the machinery group by 2012.
Bend more metal. Fabricated metal products manufacturing is benefiting from the same forces behind the recovery of machinery manufacturing. Here is another industry group whose fortunes are closely linked to the capital investment cycle and relative exchange rates. Therefore, a continuing global economic recovery from the recent years’ recession and doldrums coupled with a weaker U.S, dollar augurs well for this industry. Job growth in the fabricated metal products industries was encouraging in 2004. We expect that to continue and for the group to add more than 180 thousand jobs over the next eight years.
Other industries with job growth. Several other durable goods industries are also on a bit of an upswing. The wood products industries have benefited by the housing construction boom of the past few years. That boom may not have much air left in it but the weakening of the U.S. dollar vis-à-vis the Canadian currency helps this industry. Furniture and related products manufacturing is very vulnerable to increased Asian imports but things could turn more optimistic if the Chinese would ever agree to let their currency strengthen vis-à-vis the dollar. We’re much less certain about future job prospects in any industry or industry group that faces strong Chinese competition.
Where not to look for job growth. Unfortunately, the downward slide seems destined to continue for some manufacturing industry groups. Here come some gloomy expectations.
Employment in the primary metals group has stabilized over the past year, but this set of industries has been sliding or stagnant for years. The year 2004 saw some stabilization in metals industry employment. There may be some modest job growth between now and 2012 but we wouldn’t be the ranch on it.
Silicon Valley and all the other silicon look-alikes around the country once held the computer and electronics manufacturing as the apple of their eys . The group has long endured growing foreign competition but, even so, it enjoyed modest job growth during the IT boom of the late 1990s. That expansion ended very abruptly when the IT bubble burst and the group lost more than 25% of its employment base between December 2000 and December 2003. Group employment stabilized a bit in 2004 and may show some growth in the years ahead but don’t count on it. Companies in the computer and peripheral equipment as well as the electronics instruments industries have become the world’s most accomplished practitioners of the art of outsourcing. If you work in these industries, you’d better be prepared to compete with the globe’s lowest cost producers. Many developing nations in Asia and elsewhere loom out there. Still, a further deterioration of the U.S, dollar would help.
Who doesn’t realize that the textile mills, apparel, and leather industries have been on life support for years? These are mainly low-skill, low-wage industries that compete head-on with the first industries to gain a toehold in low-cost developing countries. The expiration of the Multifibre Arrangement this year means that these industries in the United States are now in extremis. There is no job future in these industries. Nothing short of a miracle could resuscitate them.
It’s hard to generate much optimism for the paper and paper products industries, either. This is another group where employment has been on a long downward slide. Even in the 1990s, there was no job recovery in these industries. Last year brought what we think will be a temporary pause in the group employment. The skid is likely to continue and last at least until 2012.
Aw, cheer up. If you’ve found this glimpse into the crystal ball of manufacturing employment to be discouraging, let me conclude it with some words of cheer. Here are a few U.S. manufacturing industries that have shown impressive job growth in recent years and ford which we are optimistic for the future.
The surgical and medical instruments industry (NAICS 339112 and a part of the larger miscellaneous manufacturing group) shows an upward trend that we expect to continue in the future. The industry expanded more or less steadily in the 1990s, fell off modestly from 2001 to 2003 and recovered very well in 2004.
If they aren’t smiling more, Americans are at least smiling better. Or so it would seem from the strong and uninterrupted job growth in the dental laboratories manufacturing industry. This industry grinned through the Recession of 2001 that devastated so many other industries. Furthermore, it’s an industry that hasn’t had to face devastating foreign competition...at least not yet and maybe never. Having your next false tooth crafted in Shanghai or Bangalore is probably feasible but it probably won’t happen unless FedEx gets even faster.
Finally, job expansion in the pharmaceutical and medicine making factories has been very impressive over the past fifteen years. In fact, employment in these industries continued to grow throughout most of the 1990s and into this new century. While job growth here paused somewhat in 2004, we expect it to resume its upward trend in the years ahead. People are getting older and taking more pills. The further growth of biotechnology and bio-engineering will be good to these industries.
What distinguishes the sheep from goats?
American manufacturing companies that prosper in the early 21st century will most likely produce goods that display one or more of the following characteristics:
- They are high-tech, high value-added products that are competitive in global markets.
- They are knowledge-intensive in the sense that a large portion of their value stems from their intellectual property component.
- They target niche markets that are less vulnerable to off-shore competition.
- They are produced at a total cost that enables their producers to compete successfully in national and international markets;
- Recently developed intellectual property is especially important in their design and/or production.
- They are produced in close proximity to customers or suppliers.
- Their production requires intimate customer knowledge on the part of the producer.
- The companies that develop them are near to and interact with a major university or other research center.
- They are subject to rapid innovation, i.e., the time cycle from product conception, through design and manufacture, to replacement is short.
- Political factors dictate that production should be within the U.S. (e.g., this is one of the reasons why Japanese auto manufacturers locate in this country).
- It is uneconomical to import them because international transportation costs are too high.
- Strong brand loyalty exists among consumers or other users.
- Logistics and/or customer service by the manufacturer are so closely associated with the physical product that the customer sees them as a joint value proposition.
What’s next?
Next month, we’ll move on to tackle some key workforce questions relating to the future of this important sector of our economy. Among the questions we’ll address are these:
- What workforce does America need to remain a major manufacturing nation in the years ahead?
- How does this translate into the demand for specific skills and occupations?
- What challenges confront the nation in building that workforce?
- What are the implications for education and training?
Will Tomorrow’s Workforce Match Tomorrow’s Jobs in Terms of Education and Training?
By Richard W. Judy
Every two years, since 1960, the Bureau of Labor Statistics (BLS) has compiled and published a set of employment projections for the United States. The last set, which appeared in early 2004, projected job changes in the nation for the decade 2002 to 2012 (see them by clicking here). As usual, those latest projections are divided into two major sets, projections by industry and projections by occupations.
Since 1966, these BLS projections have provided the foundation for the Occupational Outlook Handbook which also is published every other year. The Bureau’s crystal ball has often proven murky and sometimes has generated projections that appear hilariously funny in retrospect. Nevertheless, the passage of decades has brought an improvement in the skill of analysts and the models they use (as you can see by clicking here). For this we can be grateful since the BLS projections are the best guesses we have about the future developments of our workforce as well as the industrial and occupational structure of the nation’s jobs. Indeed, when it comes to comprehensive projections of future workforce and employment, the biennial BLS numbers are the only game in town.
For the past decade or more, BLS has identified the most significant single source of postsecondary education or training for each occupation for which employment projections are estimated. For the most recent set of projections that identification is based on statistical studies of the educational attainment of 25- to 44-year-old workers in each of the 725 occupations for which employment projections were estimated for the 2002–12 period. On that basis, BLS analysts estimate the “typical” educational level of workers for each occupation as they fall into eleven categories:
1. First professional degree
2. Doctoral degree
3. Master’s degree
4. Bachelor’s or higher degree, plus work experience
5. Bachelor’s degree
6. Associate degree
7. Postsecondary vocational award
8. Work experience in a related occupation
9. Long-term on-the-job training
10. Moderate-term on-the-job training
11. Short-term on-the-job training
Working with both BLS occupational job projections and “typical” educational/training levels for each of those occupations, it is possible to calculate the percent of all jobs that fall within each of those levels. With that, we can ask questions such as these:
- Does the educational/training profile of occupations whose numbers are projected to grow over the period 2001-2012 (call these “tomorrow’s jobs”) differ from the profile of occupations whose numbers are projected to shrink (call these “yesterday’s jobs”)
- To what extent does the educational/training profile of “tomorrow’s jobs” resemble the profile of America’s actual workforce now?
Having asked those two questions, we may as well supply the numbers that purport to answer them.
To answer the first question, (i.e., do the educational/training profiles of “tomorrow’s jobs” differ from those of “yesterday’s jobs?”) we divided the latest BLS job projections into two groups corresponding (1) those occupations where the BLS sees job growth (‘tomorrow’s jobs) and (2) those occupations where the BLS anticipate net job losses (“yesterday’s jobs). Table 1 displays a comparison of the educational/training profiles of these two very different sets of occupations.
From Table 1, we see huge differences between the educational/training profiles of the occupations that are disappearing from the American workplace and those that will assume an ever larger place in it. The main difference is that tomorrow’s jobs, on average, will demand much higher levels of formal education than yesterday’s. In contrast, the share of jobs that can be filled with only on-the-job training is on the steep decline.
Table 2 addresses the second question: How does the educational/training profile of tomorrow’s jobs correspond to the educational/training profile of America workforce as it is today (actually, the most recent data we have are for 2002).
The upshot of Table 2 is that share of America’s workforce with college education will need to expand very significantly by 2012 if that workforce is to match the educational and training needs of tomorrow’s jobs. Indeed, the BLS projections suggest that more than 60 percent of the projected increase in net employment will need to be filled by workers with at least some college as their highest level of educational attainment.
Will the American workforce have the education and skill levels to meet the requirements of tomorrow’s jobs in an intensely competitive global economy? One wonders.
The Economics of Illegal Immigration
A Beacon of Light in a Foggy Debate
By Antonio Avalos
The number of undocumented immigrants to the U.S. continues to increase despite the substantial costs and obstacles they face. According to the former Immigration and Naturalization Service (INS), the estimated number of undocumented immigrants in January of 2000 was 7 million. Similarly, estimates by the Census Bureau for the same year indicate that this number was approximately 8 million. Both agencies reported an annual net growth of between 400 and 500 thousand (new illegal immigration minus deaths, legalizations, and out-migration) which, assuming the trend continued during the 2000’s, suggests that the number of undocumented immigrants in 2005 should be approximately between 10 and 11 million. Although border surveillance has increased due to a larger budget and staff of the Border Patrol, obviously the system does not work well enough.
For years, this issue has divided the nation between those who would support integration of undocumented immigrants who are already in U.S. territory, and those who favor stronger enforcement and penalties to those who illegally trespass the U.S. border.
Although both positions seem totally incompatible, they share some common ground: illegal immigration poses a treat to national and economic security. Therefore, change is needed.
The disputes over undocumented immigrants have gained intensity in the last few months –perhaps in reaction to recent speeches by the President about a proposed new guest worker program- but the discussion seems to go nowhere as it remains unclear what this change should consist of. Since the main magnet that attracts undocumented immigrants seems to be jobs, perhaps looking at the issue from an economic perspective might shed some light into this foggy debate.
A Shortage of Unskilled Workers?
As it is well documented, entire industries in the economy -agriculture, food-processing, construction- are increasingly relying on cheap immigrant labor. American workers are not being employed in low-paid low-end jobs because they are not willing to accept low wages –and in some cases, miserable working conditions. In fact, these jobs are being ‘taken away’ from American workers since, relatively to their home countries, immigrant workers are better off despite the not so attractive features of this kind of occupations. In a nutshell, many unskilled workers are being displaced by immigrant labor or forced to accept lower wages.
What about the argument that there is a shortage of unskilled workers, particularly in agriculture? Basic economics indicates that market forces would solve the labor shortage by prompting companies to pursue one of two alternatives: either to pay higher wages in order to attract more workers or to invest in labor-saving technology. The fact is that none of these are happening. The millions of immigrant workers - which represent a boost to the unskilled labor supply - prevent wages from increasing. That is, companies do not need to raise wages or to mechanize production processes when unskilled labor is abundant.
As long as potential immigrants see a realistic prospect of employment that, compared to their economic situation in their home country, represents an improvement in their standard of living, they will continue coming. Industries such as agriculture, food-processing, construction will continue employing immigrant workers in these low-paid low-end occupations.
International Labor Mobility: The Missing “Economic” Link?
Increased border enforcement, which is the standard response to illegal immigration, seems to be working against powerful market forces with important, and sometimes unintended, consequences. Here is why.
Modern approaches of labor migration use a simple proposition to explain mobility. Workers tend to move across regions -cities, counties, states or countries- responding to two basic economic incentives, the probability of finding a suitable job and the compensation for their labor services. For this reason, we see workers moving away from areas of low wages and high unemployment to areas of lower unemployment and higher wages. In the case of the U.S.-Mexico border for example, the incentive for workers to move can be so strong that some are willing to risk even their life, despite the larger numbers of Border Patrol agents or “Minuteman”.
But this proposition goes further. The increasing number of workers in the recipient region creates a downward pressure on wages and diminishes the probability of finding a job for potential immigrants (making the region less attractive) while the opposite occurs in the regions being abandoned. Overtime, unemployment rates and wages rates should tend to equalize across regions. Clearly, this is not happening because of the impediments to labor mobility across borders.
According to basic economics, free markets bring ‘efficiency gains’ for the countries and economies involved in the form of a wider variety of inputs, goods and services at lower costs and prices. This is why worldwide we see a significant amount of resources being spent to free international trade and capital markets. However, little is being done to free international labor markets. In fact, these markets are far more distorted than those of goods, services and capital. For example, for most goods and financial assets, price differentials between less and more developed countries sometimes exceed a ratio of 2 to 1. However, wages of similarly qualified individuals may differ by a factor of 10 or more.
Respectable economists, such as Dani Rodrik at Harvard University, argue that liberalization of trade and investment has taken place because the beneficiaries - multinationals and financial enterprises - have managed to organize and influence the global development agenda. On the other hand, freeing labor markets has not been pushed forward because the beneficiaries – perhaps some companies in the agriculture, food-processing and construction sectors - are not as clearly identifiable as those hurt by the measures –displaced workers or workers forced to accept lower wages.
It is important to realize that the expected effects of freeing labor mobility are basically the same as the effects of international trade. That is, imports from developing countries create the same downward pressure on rich countries' wages as immigration. Therefore, displaced workers in contracting (importing) industries should move to expanding (exporting) industries. Obviously, the transition between industries implies the implementation of solid training and skill upgrading programs.
Relaxing Labor Mobility Restrictions
For decades in America, efforts to relax labor mobility restrictions have taken the shape of allowing temporary labor migration. Since 1964, at the end of the “Bracero” program, the only legal temporary foreign worker program in the U.S. has been the nonimmigrant visa program known as H-2/H-2A. The program establishes a means for agricultural employers who anticipate a shortage of domestic workers to bring nonimmigrant foreign workers to the U.S. to perform agricultural labor or services of a temporary or seasonal nature. The program focuses exclusively in agriculture and its reach has been rather modest. According to the Department of Labor Report, the number of jobs certified was less than 50,000 in 2005.
In January 2004, President Bush proposed a new guest worker program which is significantly larger in scope. According to this new plan, workers must have a job offer first. The employer, which can be from any industry, must show no American wants the job and workers must return to their home countries at the end of the term. In addition, undocumented workers who gained temporary-worker status would enjoy the same rights and protection of legal workers. In fact, they could apply for permanent residence and potentially citizenship. The ideal situation would be to have a constant rotation of workers, arriving while they are young and active, leaving before they grow old and dependent.
From an economic perspective the proposal has some merits. According to worldwide calculations by Professor Dani Rodrik, even a temporary permit that allowed workers from poorer nations to work in rich nations, equivalent to 3% of the rich countries’ labor force, would easily yield $200bn a year for the developing nations. While these gains would accrue directly to workers from developing nations, producers and consumers in rich nations would also benefit from lower labor costs and lower prices for goods and services. Displaced workers in rich nations should play by the rules of market economics and find new jobs in other sectors of the economy.
Light But Not Total Illumination
The social, cultural and political ramifications of illegal immigration fall far beyond the scope of economics, making it a complex phenomenon that requires more than one science to be fully approached. Nevertheless, economic logic provides us with powerful analytical tools to understand it. After all, economics is simply the elaborated explanation of the obvious which, more than frequently, is not easy to see.
Immigration and Naturalization Service
http://uscis.gov/graphics/shared/aboutus/statistics/2000ExecSumm.pdf
Census Bureau
http://www.census.gov/dmd/www/ReportRec2.htm
Dani Rodrik
http://www.ksg.harvard.edu/news/opeds/2001/rodrik_assets_ft_121601.htm
Department of Labor Report
http://workforcesecurity.doleta.gov/foreign/h-2a_region2005.asp