How I Almost Lost My Left Nut on Facebook

Subtitle: A Layperson’s "Take" on Recent Jobs Data and the Role of Immigration in the U.S. Economy

This past week I shot from the hip in response to a friend’s political post on Facebook. A civilized back-and-forth ensued. In due course I looked stuff up and walked back some of the things I originally asserted. This is part of the eternal search for truth, and, thus, a good thing.

This piece rambles a bit. In the best of all possible worlds, I would break it into several posts. I don’t live in that world. Anyway, the Republican candidates rambled on for three hours last night. I only ask for equal rambling time. Part I of this post looks at the recent jobs report and reaction thereto. Part II explores the role of immigrants in the U.S. economy. Part III speculates on the reasonableness of immigrants getting 40% of new jobs. Part IV posits some consequences of draconian immigration policies. WARNING: the following post contains statistics.
 
Part I After this month’s (September 4, 2015) generally positive jobs report, a Tea Partyite Facebook friend posted an article from an organization called CNSNews.com (“The Right News, Right Now”) with the provocative headline:

Record 94,031,000 Americans Not in Labor Force

Implication was all is going to hell in a hand basket. Stupid me thought things were getting incrementally better with 173,000 new jobs for August and a drop in the unemployment rate to 5.1%.

I posted a snarky reply inquiring whether my friend and I were living on the same planet as we didn’t seem to be getting the same news.

In fact, we were getting the same news, just prioritizing it differently. Buried under Other Notes, eight paragraphs into the CNSNews.com article, I located the aforementioned “173,000 new jobs” and “5.1% unemployment rate.”

Still it seemed a bit odd to lead with the number of people not working.

Then I noticed that Rush Limbaugh and his arch-conservative brethren were latching onto this 94 million unemployed figure like it was their last drop of mother’s milk. During his August 20, 2015 show, Limbaugh pontificated:

"94 Million Americans not working, but they're all eating. Let's just not stop there. They probably all have transportation. Many of them, we know, have air conditioning. Many of them have big screen or some kind of TV. Many of them have cable…(garbled) a lot of Obamaphones out there."

It doesn’t appear Limbaugh understands what this statistic means. His comment implies it represents all the unemployed people on welfare, a group he regularly deprecates. It doesn’t.

94 million Americans not working translates into a statistic called the U.S. labor force participation rate. It only makes sense expressed as a percentage of the potential U.S. workforce, defined as the number of non-incarcerated civilians over the age of 16, of which there are currently about 251 million.

Today the U.S. labor participation rate is 62.6%. This is a 38-year low. To be fair, it is a cause for concern. This statistic has dropped steadily since 2000 when it reached a historic high of 67.3%.

There are legitimate reasons why people are unemployed and yet not looking for work. The “Baby Boomer” generation is now retiring in droves. Many young people attend school well into their 20s. Older adults return to school to prepare for second and/or better careers. Recently I fell into this category, and now, I’m happy to say, I’m gainfully employed. Many working-age adults are disabled (I’m a nurse. I take care of them.). Many are stay-at-home parents. Stay-at-home parents work, they just don’t get credit for being in the work force. Finally, there are people who would like to work, but have become discouraged at finding a job and essentially dropped out of the labor market. These folks won’t be counted in the official unemployment rate. But this is not a new phenomenon. There have always been “discouraged workers,” and counting their number and analyzing their drag on the economy has always been a dicey proposition.

So the sky-is-falling cry of "94 million Americans not working!" is a bit disingenuous. Especially when the positive trend in the unemployment rate is simultaneously ignored. To do otherwise would be to give credit to President Obama’s economic policies, and the 1st rule of Tea Partydom is never credit President Obama with anything positive.

U.S. Unemployment Rate (Bureau of Labor Statistics, September 8, 2012)

The graph above shows the steady drop in the unemployment rate starting one year after President Obama took office.

To help me get a better idea what a reasonable labor force participation rate might be, I checked the statistic for two other major economies: Japan’s is 59.6% and Germany’s is 59.9%. In comparison, the U.S. number doesn’t look bad. 

National economies are complex. No single statistic tells the whole story. So, if any talking head fixates on one number, ignores everything else, and tells you either the apocalypse is near, or roses are blooming in winter, be wary, be very wary.

A Brief Digression About Obamaphones  Rush Limbaugh enjoys belittling folks who aren't members of his country club. It's his shtick. After an inarticulate African American woman blurted out on camera in 2012 that she would support Obama because he "gave" her a cell phone, Limbaugh wept with joy knowing he had found the perfect means to keep his listeners perpetually angry--just throw out the occasional "Obamaphone" on the air.

As it turns out the "Obamaphone" was likely provided by an FCC program, called Lifeline Assistance, started under Ronald Reagan. It's a means-tested program that provides a pre-paid cell phone to help poor folks call 911 when ill, enroll their kids in daycare, find and keep a job, etc. It helps elderly poor, rural poor, urban poor, white poor, black poor...basically it helps poor people manage already difficult lives. 

 
PART II My social media conversation did not end there. My friend conceded that maybe the unemployment rate was better, but all the new jobs were going to immigrants. I was skeptical. I boldly announced that I would “bet my left nut they (immigrants) make up less than 5% of new jobs for the month.”

Good thing he didn’t take the bet, or I’d be a one-nutter, or, at the very least, asking a judge to rule on whether I lose the nut. According to a 2012 Brookings Institute study, 41.5% of new jobs went to foreign born workers between 2005 and 2010; somewhat less than the 45.7% of new jobs that went to foreign born workers between 1995 and 2000, perhaps reflecting more restrictive immigration policies after September 11, 2001. A separate 2012 PEW Research Center study put the number of new jobs to foreign born workers at 35%. So let's say the real number lies between 35% and 41.5%.

It seems the truth lies somewhere between me and my Facebook opponent. Less than a majority of new jobs go to immigrants, however, the number is far greater than the “less than 5%” I originally speculated. I leave it to you, dear reader, to determine whether I won or lost this bet.

PART III For better or worse, we are a nation that is not replacing itself. The Los Angeles Times reported this month that the U.S. birth rate rose slightly to 62.9 live births per 1000 women. This translates into approximately 1.9 live births over each woman’s lifetime. Here’s the rub, In order to keep our population stable, we need 2.1 live births per woman. The only reason the U.S. population keeps increasing today is immigration—legal and otherwise.

When economists discuss economic performance, they (should) separate what portion of growth is fueled by population growth and what portion represents the increasing productivity of the work force, known as per capita growth. Usually what is reported every month is change in the gross domestic product (GDP), corrected for inflation but otherwise combining the effects of population growth and worker productivity.

  So here is my back-of-the-envelope estimate of the effect of immigration on the economy and by extension job growth. There are four pieces to this argument:

• Over the past ten years, the U.S. economy has had ups and downs. In 2008 and 2009 it had negative growth, the so-called Great Recession. The average annual growth in GDP over this period was 1.58%. The average per capita growth was 0.71%. The difference, theoretically attributable to population growth, was 0.87% (1.58%-0.71% = 0.87%).
• Between the years 2010 and 2014, the Census Bureau reported that the U.S. population increased from 309 million to 319 million, about 0.8% per year. This more or less matches the figure arrived at above for population-related economic growth (0.8% ≈ 0.87%). In other words there is a 1 to 1 relationship between population growth and the associated portion of economic growth. Makes sense, right? Population growth generates its own economic activity. If we assume, for the reasons stated above, that a large chunk of population growth comes from immigration, then it follows that an equivalent portion of population-related GDP growth is due to immigrants.
• A Brookings Institute study estimates that immigrants make up 16% of the labor force as compared to 13% of the population. In other words immigrants are slightly over-represented in the work force.
• Economic growth leads to lower unemployment, i.e., new jobs. The empirical relationship between the two things is a bit complicated. Google Okun’s Law for more details.

To summarize...Immigration leads to population growth leads to economic growth. As immigrants are over-represented in the work force, I assert as reasonable that immigrants are hired at a rate roughly equivalent to their contribution to economic growth, i.e., the 35%-41.5% of new jobs to immigrants cited above makes sense. This will likely remain true as long as immigration is the prime driving force behind U.S. population growth.

PART IV For Americans who oppose immigration, there is some bad news here. Curtailing future immigration would significantly slow U.S. economic growth. Deporting the 11.3 million unauthorized immigrants (assuming this was practical) would likely cause a major recession. 

In order to stabilize the U.S. population without immigration, we would need to persuade native-born women to have more children. I speculate that to do so would require some major social legislation re-jiggering, making it cheaper and easier to have children, e.g., tax incentives, better child-care options, family-friendlier workplace rules, etc. Things neither Rush Limbaugh nor any Republican presidential candidate advocate.