• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Texas A&M Forest Service
  • Texas A&M Veterinary Medical Diagnostics Laboratory
  • Texas A&M AgriLife Extension Service
  • Texas A&M AgriLife Research
  • Texas A&M College of Agrculture and Life Sciences
Ellison Chair in International Floriculture
Ellison Chair in International FloricultureTeaching, Research, Extension and Service
  • Menu
  • #1593 (no title)
  • Benefits of Plants and Greenscapes
  • Plants, Nature, and Health Initiative
  • Marketing & Economics
  • Water Resources
  • Sustainability
  • Executive Academy for Growth & Leadership (EAGL)

Immigration Policy and Its Possible Effects on U.S. Agriculture

June 8, 2012 by Charlie

Source:  http://www.ers.usda.gov/AmberWaves/June12/Features/ImmigrationPolicy.htm

Changes being considered would affect the market for hired farm labor.

Photo: Farmworkers in field

Policymakers are considering changes to U.S. immigration law that would affect the market for hired farm labor—including mandatory use of an Internet-based employment eligibility verification system and an expanded program for temporary nonimmigrant foreign-born farmworkers.

Labor is an important input to U.S. agriculture—accounting for about 17 percent of the sector’s variable production expenses and roughly 40 percent of such expenses for farms specializing in fruit, vegetables, or nursery products.

ERS analysis quantifies the possible effects of a decrease in the supply of unauthorized labor in all sectors of the U.S. economy—including agriculture—and an increase in the number of temporary nonimmigrant foreign-born farmworkers.

 

This article is drawn from . . .
The Potential Impact of Changes in Immigration Policy on U.S. Agriculture and the Market for Hired Farm Labor: A Simulation Analysis, by Steven Zahniser, Tom Hertz, Peter Dixon, and Maureen Rimmer, ERR-135, USDA, Economic Research Service, May 2012.

The 112th Congress is considering a variety of proposed changes to U.S. immigration law as it relates to foreign-born farmworkers. Some of these proposals would create additional opportunities for persons from other countries to work legally in U.S. agriculture, while others would use different methods to enforce existing U.S. immigration restrictions.

Any of these proposals, if enacted, is likely to have a substantial impact on U.S. agriculture and the market for hired farm labor. Labor is a major input for many agricultural sectors, and persons not authorized to work legally in the United States constitute a large share of the farmworkers employed by U.S. agriculture.

A recent ERS study considers two possible changes in the supply of foreign-born farmworkers: (1) a 156,000-person increase in the number of temporary nonimmigrant foreign-born farmworkers, such as those admitted under the current H-2A Temporary Agricultural Program, and (2) a 5.8-million-person reduction in the number of unauthorized workers in all sectors of the economy, including agriculture. The study quantifies the possible effects of these hypothetical scenarios on agricultural output and exports, the agricultural and nonagricultural job markets, and the economy as a whole.

Farm Labor’s Importance to U.S. Agriculture

During 2006-10, hired farm labor accounted for 17 percent of variable production expenses in U.S. agriculture and even higher proportions of such expenses in more labor-intensive sectors, such as vegetables (35 percent), nursery products (46 percent), and fruit (48 percent) (fig. 1). The farm labor situation is complicated, however, by the fact that many U.S. farmworkers lack the immigration status needed to work legally in this country. Analysis conducted by Daniel Carroll, Annie Georges, and Russell Saltz using the U.S. Department of Labor’s National Agricultural Workers Survey indicates that over the past 15 years, about half of the hired workers employed in U.S. crop agriculture were unauthorized, with the overwhelming majority of these workers coming from Mexico. Similar survey-based information on immigration status is not available for workers in livestock and dairy production.

Chart: Hired labor accounts for a large share of production costs for some crops

What Has Been Introduced in the 112th Congress?

Several bills related to immigration and farmworkers were introduced in the 112th Congress, two of which are discussed here. The Comprehensive Immigration Reform Act of 2011 (S. 1258) incorporates many elements of the Agricultural Job Opportunities, Benefits, and Security Act (AgJOBS), a decade-old proposal crafted by worker advocates and agricultural employers that was last introduced as a stand-alone bill in 2009. Several of its provisions make changes to the Federal Government’s H-2A Temporary Agricultural Program that might increase the program’s attractiveness to prospective employers. The H-2A program, as described by the U.S. Department of Labor, “establishes a means by which agricultural employers who anticipate a shortage of domestic workers can bring in nonimmigrant foreign workers to the U.S. to perform agricultural labor or services of a temporary or seasonal nature.” In fiscal year 2011, a total of 68,088 positions in the program were certified. Use of the H-2A program has decreased in recent years, and the number of certifications now corresponds with roughly one-tenth of hired farm laborers, according to USDA’s Farm Labor Survey.

One of the bill’s proposed modifications to the H-2A program concerns the adverse effect wage rate (AEWR), a wage rate that is determined by the U.S. Department of Labor so as not to affect adversely the employment opportunities of U.S. citizens and legal residents who want to perform farm work. Employers must pay their H-2A workers the highest of the Federal or State minimum wage, the prevailing hourly or piece rate, the agreed-upon collective bargaining rate, or the AEWR. For 2012, the AEWRs range from $9.30 per hour (Arkansas) to $12.26 per hour (Hawaii) and average $10.40 per hour for the 50 States.

The current bill would freeze the AEWR for each State at its January 1, 2011, level. If Congress does not establish a new wage standard for the H-2A program within 3 years of the bill’s enactment, then the AEWR would rise by the average of the consumer price index during the previous 2 years but by no more than 4 percent on an annual basis.

Another proposed modification to the H-2A program would allow goat herders, sheep herders, and dairy workers to participate and eventually apply for permanent residency under certain conditions. Currently, the H-2A program is limited to temporary or seasonal workers, which largely excludes dairy, livestock, and nursery operations from participating.

A second bill introduced to the 112th Congress, the Legal Workforce Act (H.R. 2885), would require all employers, agricultural and nonagricultural, to use E-Verify to confirm the employment eligibility of new hires. E-Verify is an Internet-based system operated by the U.S. Department of Homeland Security in partnership with the Social Security Administration. The system enables employers to determine the eligibility of their employees to work in the United States using the information reported by employees on their Form I-9, Employment Eligibility Verification.

The Legal Workforce Act would give agricultural employers 36 months to comply with its E-Verify mandate. Currently, the Federal Government does not require all private-sector employers to confirm the eligibility of their employees using E-Verify, although several State governments do. Some farm groups have expressed concern that mandating E-Verify—without some sort of new or expanded program for foreign-born, agricultural workers who are not currently authorized to work in the United States—would adversely affect many agricultural employers.

Simulation Analysis of Immigration Policy and U.S. Agriculture

ERS has not attempted to estimate the exact effects of the two proposed bills mentioned in this article. Instead, ERS has used a computable general equilibrium (CGE) model to analyze the impact on the U.S. economy under two alternative scenarios in which the supply of foreign-born labor increases or decreases appreciably. A CGE model is a type of economic model that uses interrelated equations to represent an entire economy—agricultural and nonagricultural—and the interactions among its parts.

The model used in ERS’s study—the U.S. Applied General Equilibrium (USAGE) Model—differentiates the U.S. workforce into three categories according to immigration status:

  1. U.S. born;
  2. foreign-born, permanent resident: a person with the U.S. immigration status of permanent resident (including naturalized citizens) and thus legally authorized to work in the United States; and
  3. foreign-born, not a permanent resident: a person without the U.S. immigration status of permanent residency.

The majority of persons in this third category are not legally authorized to work in the United States. For this reason, the term “unauthorized” is sometimes used to refer to people in the third category, and the term “authorized” is sometimes used to refer to people in the first and second categories. The third category, however, also includes foreign-born persons with nonimmigrant visas, such as H-2A workers, who are legally authorized to work in the United States during a specified period but are not permanent residents of the United States.

With these categories in place, researchers used the model to generate longrun (15-year) economic projections for the United States under a base forecast and two alternative labor supply scenarios—one in which the number of temporary nonimmigrant, foreign-born farmworkers increases and one in which the number of unauthorized workers in all sectors of the economy decreases. The base forecast simulates how the economy would evolve under current laws and policies and serves as a benchmark for evaluating the two scenarios.

Like many CGE models, the USAGE model achieves a longrun equilibrium in which all labor and capital resources are nearly fully employed. Thus, the simulations reported here do not apply to the current economic environment, in which about 8.1 percent of the U.S. workforce is unemployed (as of April 2012). Instead, the model results describe hypothetical longrun scenarios in which the U.S. economy is much closer to full employment and has an unemployment rate of about 5 percent.

In the first scenario (increased farm labor supply), the number of temporary nonimmigrant foreign-born farmworkers is assumed to increase by about 30,000 in Year 1 of the simulation and 83,000 in Year 2. The growth rate for the number of such workers declines in subsequent years, with participation reaching 156,000 additional workers in Year 15. The additional workers are assumed to be available to all agricultural sectors, including those that have been traditionally excluded by the H-2A program, and no constraint similar to the AEWR is placed on their wages.

In the second scenario (decreased unauthorized labor supply), the unauthorized workforce—agricultural and nonagricultural—is assumed to decrease by 2.1 million in absolute terms over the first 5 years of the scenario. Under this scenario in Year 5, the unauthorized workforce in the U.S. economy as a whole is 4.0 million people smaller than in the base forecast. Growth in the unauthorized workforce resumes thereafter but at a slower pace than in the base forecast. By Year 15, the projected size of the unauthorized workforce is 8.5 million, compared with 14.3 million in the base forecast, a difference of 5.8 million, or 40 percent.

Modeling Results

The results from the increased farm labor supply scenario conform to basic economic principles when the supply of one factor or input of production—such as labor, land, or machinery—becomes more plentiful. Greater availability of temporary nonimmigrant foreign-born farmworkers leads to their increased employment at lower wages. This, in turn, results in longrun increases in agricultural output and exports, above and beyond the growth projected by the base forecast. The increases in output and exports are generally larger in labor-intensive sectors such as fruit, tree nuts, vegetables, and nursery products. By Year 15 of the scenario, these four sectors experience a 1.1- to 2.0-percent increase in output and a 1.7- to 3.2-percent increase in exports, relative to the base forecast. Less labor-intensive sectors, such as grains, oilseeds, and livestock production, tend to have smaller increases, ranging from 0.1 to 1.5 percent for output and from 0.2 to 2.6 percent for exports.

Accompanying this additional growth in agricultural output and employment, however, would be a relative decrease of about 5.7 percent in the number of U.S.-born and other permanent residents employed as farmworkers and a 3.4-percent relative decrease in their wage rate. In the model, U.S.-born and foreign-born permanent resident workers are assumed to compete with foreign-born temporary nonimmigrant workers in the labor market. A 3.4-percent relative decrease in the wage rate does not mean that the wage rate is projected to fall by 3.4 percent over the 15-year period of the projection. Instead, it means that the wage rate in Year 15 is projected to be 3.4 percent lower in the increased farm labor supply scenario than in the base forecast.

The longrun results from the decreased unauthorized labor supply scenario show a reduction in the labor supply to agriculture with effects on agricultural output and exports that are opposite in sign from the increased farm labor supply scenario and larger in magnitude. Fruit, tree nuts, vegetables, and nursery production are again among the most affected sectors but with longrun relative declines of 2.0 to 5.4 percent in output and 2.5 to 9.3 percent in exports. These effects tend to be smaller in other, less labor-intensive, parts of agriculture—a 1.6- to 4.9-percent decrease in output and a 0.3- to 7.4-percent decrease in exports.

Changes in labor supply affect output, exports, employment, and earnings in the long run

Variable

Scenarios

Increased farm
labor supply

Decreased unauthorized labor supply

Assumed impact on labor supply

+ 156,000 temporary nonimmigrant, foreign-born farmworkers

– 5.8 million unauthorized
workers, farm and nonfarm

Percent change

Percent change

Fruit, tree nuts, vegetables, nurseries
Output

+ 1.1 to 2.0

–2.0 to –5.4

Exports

+ 1.7 to 3.2

–2.5 to –9.3

Other agricultural sectors    
Output

+ 0.1 to 1.5

–1.6 to –4.9

Exports

+ 0.2 to 2.6

–0.3 to –7.4

 

Percent change

Percent change

Employment in agriculture

+ 1.7

–3.4 to –5.5

U.S.-born & foreign-born, permanent resident

– 5.7

+2.4 to 4.0

Foreign-born, not a permanent resident

+ 32.4

–34.1 to –38.8

Earnings per job in agriculture

– 4.4

+ 3.9 to 9.9

U.S.-born & foreign-born, permanent resident

– 3.4

+ 3.3 to 7.5

Foreign-born, not a permanent resident

– 10.0

+ 13.6 to 39.8

 

Percent change

Nonfarm employment of U.S.-born and other permanent residents

Negligible effects on
nonfarm economy

 
Lower paying occupations

+2.2 to 3.2

Higher paying occupations*

–0.5 to –0.7

Nonfarm earnings per job of U.S.-born and other permanent residents

Lower paying occupations

+1.7 to 4.5

Higher paying occupations*

–0.2 to –0.6

GNP, less payments to people without permanent residency status

–0.9 to –1.1

*Annual income of $20,000 or more.
A negligible effect is an increase or decrease of less than 0.05 percent.
Results are estimates of percent difference in the outcome between the base forecast and the alternative scenario in Year 15 of the policy period.
GNP=Gross National Product.

Source: USDA, Economic Research Service.

As part of the decreased unauthorized labor supply scenario, the number of unauthorized workers employed as farmworkers falls by between 34.1 and 38.8 percent, depending on modeling assumptions, relative to the base forecast for Year 15. At the same time, the number of farmworkers who are either U.S.-born or foreign-born, permanent residents increases by about 2.4 to 4.0 percent in the long run, compared with the base forecast, and their wage rate increases by 3.3 to 7.5 percent. However, the increased farm employment of U.S.-born and other permanent resident workers is not sufficient to offset the decrease in unauthorized farmworkers. As a result, the total number of farmworkers decreases by 3.4 to 5.5 percent.

Some observers question whether a reduction in the number of unauthorized workers would benefit or harm U.S.-born and other permanent resident workers. Model results suggest that wages would rise (relative to the base forecast) in some lower paying occupations where unauthorized workers are common, decrease slightly in many higher paying occupations, and decrease on average.

Several factors account for the slight decrease in earnings. First, the decrease in the supply of unauthorized labor leads to a longrun relative decrease in production, not just in agriculture but in all sectors of the economy. This, in turn, reduces incomes to many complementary factors of production, including U.S.-born and foreign-born, permanent resident workers in higher paying occupations. Second, with the departure of so many unauthorized workers, the occupational distribution of U.S.-born and other permanent resident workers necessarily shifts in the direction of more hired farm work and other lower paying occupations, such as food service, child care, and housekeeping, and away from higher paying occupations (a much larger category). The effect of this compositional change is to reduce the average real wage for U.S.-born and foreign-born, permanent resident workers in all sectors of the economy, even as real wages in many lower paying occupations rise.

In the long term, overall gross national product accruing to U.S.-born and foreign-born, permanent residents would fall by about 1 percent, compared with the base forecast. This result indicates that the negative economic effects generated by the departure of a significant portion of the labor force outweigh the positive effects on the wages of U.S.-born workers and other permanent residents employed in lower paying occupations. This conclusion, however, might be different in a model that reproduced current levels of unemployment, rather than describing a longrun equilibrium in which the economy is much closer to full employment.

Filed Under: Uncategorized Tagged With: immigration reform, labor

Abbott & Costello Economics

February 16, 2012 by Charlie

Unemployment is dropping — as explained by Bud & Lou:

COSTELLO: I want to talk about the unemployment rate.
ABBOTT: Good Subject. Terrible times. It’s 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that’s about 20%.
COSTELLO: You just said 9%.
ABBOTT: 9% Unemployed.
COSTELLO: Right 9% out of work.
ABBOTT: No, that’s about 20%.
COSTELLO: Okay, so it’s 20% unemployed.
ABBOTT: No, that’s 9%…
COSTELLO: WAIT A MINUTE. Is it 9% or 20%?
ABBOTT: 9% are unemployed. 20% are out of work.
COSTELLO: IF you are out of work you are unemployed.
ABBOTT: No, you can’t count the “Out of Work” as the unemployed. You have to look for work to be unemployed.
COSTELLO: But they ARE out of work!!!
ABBOTT: No, you miss my point.
COSTELLO: What point?
ABBOTT: Someone who doesn’t look for work, can’t be counted with those who look for work. It wouldn’t be fair.
COSTELLO: To whom?
ABBOTT: The unemployed.
COSTELLO: But they are ALL out of work.
ABBOTT: No, the unemployed are actively looking for work… Those who are out of work stopped looking. They gave up. And, if you give up, you are no longer in the ranks of the unemployed.
COSTELLO: So if you’re off the unemployment roles, that would count as less unemployment?
ABBOTT: Unemployment would go down. Absolutely!
COSTELLO: The unemployment just goes down because you don’t look for work?
ABBOTT: Absolutely it goes down. That’s how you get to 9%. Otherwise, it would be 20%. You don’t want to read about 20% unemployment do ya?
COSTELLO: That would be frightening.
ABBOTT: Absolutely.
COSTELLO: Wait, I got a question for you. That means they’re two ways to bring down the unemployment number?
ABBOTT: Two ways is correct.
COSTELLO: Unemployment can go down if someone gets a job?
ABBOTT: Correct.
COSTELLO: And unemployment can also go down if you stop looking for a job?
ABBOTT: Bingo.
COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work.
ABBOTT: Now you’re thinking like a politician.
COSTELLO: I don’t even know what I just said!

Filed Under: Content Tagged With: economic forecasts, labor

Number of the week

January 14, 2012 by Charlie

450,000: The likely threshold of new claims for unemployment benefits, above which the economy is likely losing jobs and below which it is adding jobs.

The unemployed are more likely to apply for government benefits than they used to be, and it’s changing how economists use reports of new jobless claims as a gauge of labor-market health.

An economic rule of thumb that generally held through the recessions of the1970s, 80s and 90s was that when new weekly claims for unemployment benefits rose above 400,000, the economy was cutting jobs and when claims were below that level, jobs were being added. Indeed, in the latest survey of economists by the Wall Street Journal, most respondents still put the threshold at the 400,000 level. But new claims spent much of 2010 and 2011 above 400,000 even as the economy steadily added jobs.

Recent research by the St. Louis Fed put the threshold since 2008 at 450,000, and noted that the level actually moves around over time. An analysis by Zach Pandlof Goldman Sachs noted similar results. Pandl showed that the relationship of claims to the change in employment fluctuates during the course of the business cycle. The threshold falls when more people are quitting and it rises when a greater share of the unemployed are applying for benefits. Pandl’s analysis of October data put the threshold at about 435,000 for that month.

That the threshold is rising isn’t necessarily as surprising as the fact that it held up for so long. After all, the population was a lot smaller in the late 1970s than it is today. In 1976, 400,000 people represented 0.42% of the labor force compared to 0.26% today. The reason the level held up even amid a rising population has to do with the take-up rate, which measures how many of the unemployed actually apply for benefits.

The take-up rate declined through much of the late 1970s and 80s, according to research from the San Francisco Fed. The authors of the Fed paper, Aisling Cleary, Joyce Kwok and Rob Valletta, cite research showing the decline was the result of falling unionization and unemployment shifts toward states with lower benefit take-up rates. “Lower rates of unionization affect UI take-up because unions provide resources that ease filing procedures for members,” they write. “The variation in take-up rates across states is less easily explained, but probably reflects cross-state differences in cultural norms regarding participation in public programs.” Since fewer of the unemployed applied for benefits, it allowed the population to rise while the threshold stayed relatively steady.

But that trend is changing. This recession has seen the take-up rate move higher than it has in recent years. In his analysis, Pandl of Goldman cites potential reasons: “(1) a more generous unemployment insurance program, (2) greater financial distress among households, and therefore more need for benefits, or (3) greater pessimism about the ability to find new work.” Though the trend has been exacerbated by the recession and slow jobs recovery, it actually began in the 1990s.

The San Francisco Fed research notes that take-up rates have been steadily increasing for some time. Part of the reason could be a shift in the pool of the unemployed. Through the 1970s and 80s when the labor force increased, a large share came from younger workers and women working for the first time. These groups were counted as unemployed when they started looking for work but weren’t eligible for unemployment benefits. Now a larger share of the newly unemployed are job losers, not people entering the work force. That means more people eligible for benefits.

If the increases in the take-up rate are here to stay, it could mean so is the higher threshold for jobless claims.

Filed Under: News Tagged With: labor

Upcoming webinar: Economic Recovery Brings Immigration Debate Back to the Forefront

April 27, 2011 by Charlie

During the last recession, the green industry got a bit of a reprieve in that the country’s attention was focused on the economic downturn. But now that things are improving, dialogue regarding various immigration policies is resurfacing, particularly among the enforcement only camp.

Need proof? The federal Immigration and Customs Enforcement (ICE) is currently conducting I-9 immigration audits at many greenhouse, nursery, landscape businesses across the country. Even if you are in compliance, the results can be devastating as you are forced to terminate experienced and valued workers. Poor compliance practices can mean thousands of dollars in fines, or worse. While the impacts of an audit cannot be completely avoided, smart preparation can save you time and money.

But compliance is but one facet of the immigration reform issue. Craig Regelbrugge, ANLA vice president for government relations, who co-chairs the Agriculture Coalition for Immigration Reform (ACIR), will give a brief update on the federal legislative picture and prospects for meaningful immigration reform.

This webinar is brought to you through a grant received by Dr. Charlie Hall (Ellison Chair in International Floriculture) and Dr. Marco Palma (Extension Horticultural Marketing Economist) at Texas A&M University.

Title:      Economic Recovery Brings Immigration Debate Back to the Forefront

Date:     Tuesday, May 24, 2011
Time:     10:00 AM – 11:00 AM  Central Daylight Time

After registering you will receive a confirmation email containing information about joining the Webinar.

System Requirements
PC-based attendees
Required: Windows® 7, Vista, XP or 2003 Server
Macintosh®-based attendees
Required: Mac OS® X 10.4.11 (Tiger®) or newer

Space is limited.
Reserve your Webinar seat now at:
https://www1.gotomeeting.com/register/688016936



Filed Under: Uncategorized Tagged With: labor, webinars

Training available for new greenhouse workers

April 26, 2011 by Charlie

Are you hiring labor this spring that needs training on greenhouse production basics? Then this one-hour online training course may be the perfect compliment to your training program this spring.

The video-based training is entitled Introductory Employee Training Program for Greenhouse Crop Production, and is offered by the Ellison Chair in International Floriculture at Texas A&M University. It provides introductory-level information about the greenhouse industry plus learning models on greenhouse crop production from beginning to end, controlling insects and diseases, and shipping and handling procedures.

One of the unique features of this training is that it is offered in English and Spanish. With the increased number of Hispanic workers in the green industry, this training module provides a valuable service to the industry by providing employees who are new to the industry with an overview of what greenhouse production of floral crops is all about.

Video quizzes are used throughout the course sections, and the instruction is available in both languages with transcripts available for downloading.

The course costs $55 and is available through eXtension, an online collaboration among the Cooperative Extension System. Growers can enroll at any time and will receive an “enrollment key” to the site which is valid for 90 days in order to facilitate training multiple employees during that time frame.

Registration for the course may be completed by going to http://agrilifevents.tamu.edu and clicking on “Online Courses” or by clicking here for the direct link.  After successfully registering for the training, the user will be automatically directed to the eXtension website where the course is administered (under the “Greenhouse” section). Simply enter the enrollment key and the training begins automatically.

Filed Under: Uncategorized Tagged With: labor

The younger companies are, the more jobs they create, regardless of their size.

February 1, 2011 by Charlie

The popular perception that small businesses create most of America’s jobs has been the focus of heated debate for three decades. However, the more telling characteristic for predicting job creation is the age of the firm, not its size, according to a new study by John Haltiwanger, Ron Jarmin, and Javier Miranda. In Who Creates Jobs? Small vs. Large vs. Young (NBER Working Paper No. 16300), the researchers conclude that the younger companies are, the more jobs they create, regardless of their size.

Of course, all startup firms operate in a volatile “up or out” environment. After five years, many of these young companies are “out” — they fail and, as a result, destroy nearly half of the jobs created by all new companies. Nevertheless, the surviving firms continue to ramp “up,” growing faster than more mature companies, and creating a disproportionate share of jobs relative to their size.

“Firm startups account for only 3 percent of employment but almost 20 percent of gross job creation,” the authors write. “[T]he fastest growing continuing firms are young firms under the age of five,” the authors conclude.

In this study, which relies on data from the Census Bureau, the authors confirm that smaller companies created more jobs than larger companies during 1992-2005. But the importance of firm size depends very much on the assumptions one makes about the base year of the analysis, the number of employees used to define “small”, and other factors. The real driver of disproportionate job growth, they find, is not small companies, but young companies. It is the startup firms that generate the surge of jobs that earlier research attributed to small companies.

Indeed, grouped in traditional ways, businesses tend to create jobs in proportion to their importance in the economy. Thus, large mature firms — those more than ten years old and with more than 500 workers — employed about 45 percent of all private-sector workers and accounted for almost 40 percent of job creation and destruction in this study.

Filed Under: Uncategorized Tagged With: labor, recovery

Role of Immigrants in U.S. Labor Market

July 24, 2010 by Charlie

People born in other countries are a growing presence in the U.S. labor force. In 2009, more than 1 in 7 people in the U.S. labor force were born elsewhere; 15 years earlier, only 1 in 10 was foreign born. About 40 percent of the foreign-born labor force in 2009 was from Mexico and Central America, and more than 25 percent was from Asia.

Today CBO released an update to its November 2005 report on the role of immigrants in the U.S. labor market. That earlier report included data through 2004; this update, the first of several on various aspects of immigration, incorporates data through 2009 from the Census Bureau’s Current Population Surveys. The update includes various tables showing statistics on the number of foreign-born workers, the countries from which they have come, their educational attainment, the types of jobs they hold, and their earnings.

The Role of Immigrants in the U.S. Labor Market: An Update

View more presentations from Congressional Budget Office.

Some highlights include:

  • People born in other countries represent a substantial and growing segment of the U.S. labor force—that is, people with a job or looking for one. In 2009, 24 million members of the labor force were foreign born, up from 21 million in 2004. However, the growth of the foreign-born labor force was much slower between 2004 and 2009 than between 1994 and 2004.
  • In 2009, over half of the foreign-born workers from Mexico and Central America did not have a high school diploma or GED credential, as compared with just 6 percent of native-born workers. Yet nearly half of the foreign-born workers from places other than Mexico and Central America had at least a bachelor’s degree, as compared with 35 percent of native-born workers.
  • Over time, participants in the U.S. labor force from Mexico and Central America have become more educated. In 2009, they had completed an average of 9.8 years of schooling—up from 9.5 years in 2004; 55 percent lacked a high school diploma or GED credential—down from 59 percent in 2004; and among 16- to 24-year-olds, 50 percent were not in school and were not high school graduates—down from 60 percent in 2004. Nevertheless, those born in Mexico and Central America constitute an increasingly large share of the least educated portions of the labor force.
  • To a considerable extent, educational attainment determines the role of foreign-born workers in the labor market. In 2009, 70 percent of workers born in Mexico and Central America were employed in occupations that have minimal educational requirements, such as construction laborer and dishwasher; only 23 percent of native-born workers held such jobs.
  • Foreign-born workers who came to the United States from places other than Mexico and Central America were employed in a much broader range of occupations. Nevertheless, they were more than twice as likely as native-born workers to be in fields such as computer and mathematical sciences, which generally require at least a college education. Their average weekly earnings were similar to those of native-born men and women.
  • On average, the weekly earnings of men from Mexico and Central America who worked full time were just over half those of native-born men; women from Mexico and Central America earned about three-fifths of the average weekly earnings of native-born women.

This report was prepared by Nabeel Alsalam of CBO’s Health and Human Resources Division.

Filed Under: News Tagged With: immigration reform, labor

The Effect of Immigration on Productivity

March 8, 2010 by Charlie

Immigration during the 1990s and the 2000s significantly increased the presence of foreign-born workers in the United States, but the increase was very unequal across states. In The Effect of Immigration on Productivity: Evidence from US States (NBER Working Paper No. 15507), NBER Research Associate Giovanni Peri analyzes state-by-state data to determine the impact of immigration on a variety of labor market outcomes, including employment, average hours worked, and average skill intensity, and on productivity and income per worker.

Peri reports a number of distinct findings. First, immigrants do not crowd-out employment of (or hours worked by) natives; they add to total employment and reduce the share of highly educated workers, because of their larger share of islow-skilled relative to native workers. Second, immigrants increase total factor productivity. These productivity gains may arise because of the more efficient allocation of skills to tasks, as immigrants are allocated to manual-intensive jobs, promoting competition and pushing natives to perform communication-intensive tasks more efficiently. Indeed, a measure of task-specialization of native workers induced by immigrants explains half to two thirds of the positive effect on productivity.

Third, Peri finds that inflows of immigrants decrease capital intensity and the skill-bias of production technologies. The decrease in capital intensity comes from an increase in total factor productivity; the capital-to-labor ratio remains unchanged because investment rises coincident with the inflow of immigrants. The reduction in the skill-intensity of production occurs as immigrants influence the choice of production techniques toward those that more efficiently use less educated workers and are less capital intensive.

Finally, Peri finds that for less educated natives, higher immigration has very little effect on wages, while for highly educated natives, the wage effect of higher immigration is positive. In summary, he finds that a one percent increase in employment in a US state, attributable only to immigration, is associated with a 0.4 to 0.5 percent increase in income per worker in that state.

A central challenge in establishing a causal link between immigration and economic outcomes is the fact that immigrants may be disproportionately attracted to states with strong economic performance. Peri recognizes this problem, and uses information on state characteristics, such as the location of a state relative to the Mexican border, the number of ports of entry, as well as the existence of communities of immigrants there before 1960 to predict immigrant inflows. He then studies how these predicted inflows, rather than actual inflows, are related to labor market outcomes. He argues that the state characteristics that underlie his predictions are not likely to be associated with either labor market outcomes or productivity. He also controls for several other determinants of productivity that may vary with geography such as R and D spending, computer adoption, international competition in the form of exports, and sector composition.

Filed Under: News Tagged With: immigration reform, labor

What the Stock Market Decline Means for Financial Security and Retirement Choices

March 8, 2010 by Charlie

The recent decline in stock market values will have only a muted impact on the retirement of the average early baby boomer, according to NBER Research Associate Alan Gustman and his co-authors Thomas Steinmeier and Nahid Tabatabai. In What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population (NBER Working Paper No. 15435), they explain that with only around 15 percent of the wealth of workers aged 53 to 58 in stocks, they aren’t likely to see a huge hit to their retirement portfolios, despite the market losing roughly a third of its value from its 2007 peak through the fall of 2009. More than a quarter of the household wealth of this group is instead concentrated in anticipated Social Security payments.

The pension wealth of this group is far more dependent on traditional pensions, called defined benefit plans, than on 401(k)s or defined contribution plans, which often are heavily reliant on stock market performance. The simulations in this study suggest that the declines in the stock market will only cause early boomers to postpone retirement by an average of 1.5 months. The drop in housing prices is also unlikely to greatly affect their retirement plans.

“For most of those approaching retirement age, while losing several percentage points of this total is certainly a significant average loss — and is of greater significance for those who are more exposed to the stock market and will experience even larger losses — these losses will not be life-changing,” the authors conclude.

Early boomers might seem to be especially vulnerable to the twin declines in stock and housing markets, since they have little time to recover before reaching retirement age. A 2006 survey of nearly 2,500 households in which at least one member was 53 to 58, conducted as part of the Health and Retirement Study, found that these households had an average of $766,945 in total wealth. But Social Security was their single largest asset, representing 26 percent of total wealth on average. Pensions were the second largest source of wealth: 23 percent on average. Home equity averaged 22 percent. Stocks in defined contribution plans and held directly accounted for only $116,535, or about 15 percent of the total.

To estimate the effect of stock market declines on retirement, this study looks at the last stock-market plunge: the bursting of the dot com bubble in the early 2000s. It concludes that stock-market plunges have a modest effect on older workers and change the average age of retirement by only a few months. In addition, these modest delays in retirement by some workers trying to make up for stock losses may be swamped by the number of early retirements caused by a lack of good jobs. Even if the stock market decline, taken alone, modestly decreases the number of retirements, the recession that started in 2007 may substantially increase retirement due to poor job prospects, the authors write. Thus, the net effect of a deep recession and a falling stock market may be an overall increase in retirements.

On the housing front, the fallout from the big decline in home prices may also be muted for early boomers. Nearly half of early boomer households had no mortgage. Almost all of the rest had positive equity. Mortgages represented 39 percent of their home values on average, leaving only a tiny sliver of early boomers 1.7 percent with negative home equity in 2006. If housing prices were to fall 20 percent, only 6.4 percent of the households in this age group would be “under water,” according to the study. Typically, it will be many years before these boomers sell their homes to capture the equity in them.

The study points out that some early boomers may be affected by the combination of stock and housing declines. Those who lose a job may have to retire early or take another job that will likely pay much less. This diversity of winners and losers poses a major policy challenge for those wanting to extend government help to hard-hit early boomers.

Filed Under: News Tagged With: labor

How reducing payroll taxes increases employment

February 4, 2010 by Charlie

Today CBO released a letter to Senator Robert Casey, Jr., in response to questions he asked about policies that could be adopted to increase employment. Specifically, Senator Casey was interested in a policy option to reduce employers’ payroll taxes for firms that increase their payroll, and how different design elements of this type of policy might affect its impact on employment.

In CBO’s January 2010 publication, Policies for Increasing Economic Growth and Employment in 2010 and 2011, the agency analyzed the effects on employment of several policy options, including giving employers a one-year, nonrefundable credit against their payroll tax liability for increasing their payrolls in 2010 from their 2009 levels. (To finance Social Security, employers and employees each pay 6.2 percent of an employee’s annual earnings up to a maximum.) Such a tax cut would lead to increased employment through a number of channels. For example, some firms would hire more people because hiring would be less expensive; others would lower prices to increase sales, thus spurring production and increasing the demand for labor; still others would increase compensation for employees, which would encourage more spending.

CBO measured the effect of that policy (and others) on employment as the cumulative effect on years of full-time-equivalent employment for each dollar of a policy’s total budgetary cost. (A year of full-time-equivalent employment is 40 hours of employment per week for one year.) CBO estimated that, through its effects on wages, prices, and profits, the policy would add 8 to 18 cumulative years of full-time-equivalent employment in 2010 and 2011 per million dollars of total budgetary cost, measured in terms of lost revenues. Thus, the budgetary cost of increasing employment by one full-time person for one year would probably be between $56,000 and $125,000. Although such a policy would have economic benefits in the short run, it would also add to already large projected budget deficits. Unless offsetting actions were taken to reverse the accumulation of additional government debt, future incomes would tend to be lower than they otherwise would have been.

Policymakers could structure legislation that reduced payroll taxes for firms that increase employment using various combinations of caps on the total amount of the tax benefit a firm could receive, limits on the size of firms that would receive the tax cut, methods of measuring payroll growth, and other elements. In today’s letter, CBO separately analyzed several key policy design elements and concluded that, per dollar of budgetary cost:

  • Capping the size of the tax cut for individual firms would decrease the employment effect;
  • Restricting eligibility to small firms would decrease the employment effect;
  • Limiting the eligible wage base would not change the employment effect, but would alter the types of employment fostered by the policy;
  • Basing the tax cuts on the total payroll in 2010 for new hires rather than on the net change in a firm’s payroll from 2009 to 2010 would have a similar effect on employment;
  • Offering larger tax cuts in economically depressed areas would probably not significantly alter the effect on employment;
  • Raising awareness of the tax change would increase the employment effect; and
  • Increasing the complexity of the tax change would reduce the employment effect.

Filed Under: News Tagged With: labor

  • Page 1
  • Page 2
  • Page 3
  • Go to Next Page »

About the Chair

  • About the Chairholder
  • Donors
  • Contacts

Advisory Commitee

  • Overview
  • Permanent Seats
  • Rotating Seats
  • Ex-Officio Members
  • Members Emeritus
  • Early History of the Ellison Chair

Multimedia

  • Webinars
  • Distinguished Lecture Series

Conferences/Workshops

  • Executive Academy for Growth & Leadership (EAGL)
View Charlie Hall's profile on LinkedIn
Texas A&M AgriLife Extension Service
Texas A&M University System Member
  • Compact with Texans
  • Privacy and Security
  • Accessibility Policy
  • State Link Policy
  • Statewide Search
  • Veterans Benefits
  • Military Families
  • Risk, Fraud & Misconduct Hotline
  • Texas Homeland Security
  • Texas Veteran's Portal
  • Equal Opportunity
  • Open Records/Public Information