EDITORIAL The Missing Sixteen Percent

"Fifteen percent" seems seared into the collective brain of corporate America. This was said to be the proportion of labor force entrants through the year 2000 who would be white and male. But the oft-quoted Hudson Institute's Executive Summary of Workforce 2000 is wrong.

The correct figure for white male entrants into the labor force is 31.6%--more than twice as large as the figure originally stated and au- thoritatively quoted by any CEO worth his salt. The error stems from inad- vertent omission of the word "net." The Summary intended to convey that 15% more white males are expected to enter the labor force than retire from it by the year 2000 (A Second Look, 1990).

The correction to the Executive Summary caused barely a ripple. Exec- utives and government planners continue to believe "fifteen percent." The additional sixteen or seventeen percent has yet to figure into most people's calculations.

Chiefly, the incorrect number gave rise to predictions of labor short- age, skilled labor shortage in particular. Reactions to this business alert have not been all bad. For example, broad-based efforts to upgrade lan- guage and technical skills and expand childcare facilities (for working mothers) benefit both the economy and workers.

But the Executive Summary error also caused mischief. It prompted the business community to support passage of the 1990 Immigration Re- form Act (S.358), a body-blow to the American people if ever there was one.

The 1990 legislation not only increased legal immigration by 40% but also granted amnesty to two new categories of illegal immigrants (see Ta- ble I).

This flow plus refugees and asylees combine for a total of about 1,000,000 arrivals annually. Illegal immigration adds as much as one-half million more. Approximately 160,000 persons voluntarily leave each year.

Population and Environment: A Journal of Interdisciplinary Studies Volume 13, Number 2, Winter 1991 © 1991 Human Sciences Press, Inc. 97

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TABLE 1

Expected Flow of Legal Immigrants under Current Legislation

Immigration Reform Act of 1990, S.358, which took effect October, 1991

Regular visas 700,000 The so-called cap. The cap is

XX,XXX

185,000

"pierceable" because it includes an unrestricted number for immediate family members (spouses, minor children, and parents) of citizens. 1 Competing visa categories include:

460,000 immediate family of citizens and permament residents

216,000 nonimmediate families of citizens and permanent residents

55,000 family members of newly legalized-formerly illegal (IRCA) 2 immigrants (new amnesty)

40,000-55,000 residents of countries "adversely" affected by earlier law. A special pro- vision reserves 16,000 of these for Irish immi- grants.

140,000 skilled workers.

Negotiated annually.

A one-year amnesty for El Salvadorans currently residing in the U.S. illegally.

Agricultural workers

Temporary protected status

II. Refugee Act of 1980

Refugees 131,000 (in 1991)

Number determined annually by the President (142,000 are projected for FY 1991-1992).

Asylees XX, XXX

1When competing preferences and guaranteed minimums reach 700,000 the cap rises auto- matically to accommodate the unrestricted category of immediate family of citizens. 2The Immigration Reform and Control Act of 1986 gave amnesty to persons illegally in the U.S. who could prove uninterrupted residence in the U.S. for a period of years.

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Thus, net immigration will cause at least 0.5% population growth annu- ally, half of the total growth in U.S. population.

Immigrants combined with young Americans (both sexes and many- hued) just entering the labor market may strain the economy's capacity to create jobs. Even in a nonrecessionary economy, it is difficult to imagine anything but a buyer's market ins labor.

During periodic downturns, job opportunities can dwindle alarmingly. For example, hundreds (out of fewer than 1000) new Ph.D.s in mathema- tics appeared unable to find jobs in spring, 1991. They are competing in part with Chinese students seeking asylum and professionally established Russian mathematicians: In the latter class, "as many as 300 have sought employment in the United States in the last 2 years" (Math Ph.D.s, 1991, p. 502).

It cannot bode well for Ph.D.-granting programs or the country that skilled graduates are unable to find work. The human as well as economic cost of underemployment may be felt for years to come.

At lower educational levels the effect may be greater, because most immigrants have few skills. The competition is arguably more fierce until, at the bottom, discouraged workers do not search for work at all.

A too-plentiful labor supply is the source of a second drag on the economy. It lessens the incentive for industry to maximise output per worker-hour (productivity). Specifically, industry becomes less likely to up- grade jobs through capital investment.

Consider that investment in sophisticated technology makes jobs more productive arid the country more competitive internationally. Higher pro- ductivity makes it possible to raise wages without starting an inflationary spiral.

But industry is tempted to forgo the expense of investment, even though it raises productivity, when labor is cheap. America is moving to- ward this trap.

On the contrary, Japanese demographics--the result of low fertility and closed borders--have a positive effect on industrial strategy. With a nongrowing labor force, the Japanese compete by investing heavily in technology:

A key motivation for Japan's current spending spree is a pop- ulation trend. For the first time in the century, some economists predict, the country's working-age population will decrease later this decade as more and more people reach retirement age. If its economy is to continue growing, the smaller labor

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pool must be more efficient than international rivals. The way to get productivity is to spend. That the rest of the world may get left behind in the process is an almost accidental result (Ja- pan Slows But, 1991).

Perhaps Japan is an economic powerhouse today because scarce labor promotes a technological response. The post-World War II U.S. economy reached new heights with a constant-size labor force (which resulted from a small generation born during the Depression and virtually no immigra- tion).

Contrarily, the U.S. entered a period of low growth in productivity and stagnant real wages in the early 1970s, when baby-boomers, women, and immigrants began to enter the labor force on masse.

The transformation of housewives and baby-boomers into workers has passed its peak. Were it not for high immigration, the labor market could now be coming into healthy balance, stimulating industry to raise capital investment. After two decades of stagnation, the buying power of average Americans would begin to pick up.

The U.S. is not and never, since the closing of the frontier, has been threatened by labor shortage. Even if the Executive Summary of Workforce 2000 had been right, immigration was not the answer.

What would be wrong with educating American youth in order fill the (high-tech, more productive) jobs of the future?

--Virginia Abemethy

REFERENCES

A Second Look at America's Workers. (Nov. 19, 1990). US News & World Report, p. 19. Math Ph.D.s: A Bleak Picture. (April 26, 1991). Science, 252, 502. Japan Slows but Firms Still Invest Heavily. (April 22, 1991). Wall Street Journal, p. I .