September 2, 2010

STUDIES FIND IMMIGRANTS GOOD FOR THE ECONOMY, CEOs BAD FOR IT

Giovanni Peri, Federal Reserve Bank, San Francisco - The effects of immigration on the total output and income of the U.S. economy can be studied by comparing output per worker and employment in states that have had large immigrant inflows with data from states that have few new foreign-born workers. Statistical analysis of state-level data shows that immigrants expand the economy's productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

Immigration in recent decades has significantly increased the presence of foreign-born workers in the United States. The impact of these immigrants on the U.S. economy is hotly debated. Some stories in the popular press suggest that immigrants diminish the job opportunities of workers born in the United States. Others portray immigrants as filling essential jobs that are shunned by other workers. Economists who have analyzed local labor markets have mostly failed to find large effects of immigrants on employment and wages of U.S.-born workers (see Borjas 2006; Card 2001, 2007, 2009; and Card and Lewis 2007).

This Economic Letter summarizes recent research examining the impact of immigrants on the broader U.S. economy. . . Consistent with previous research, the analysis finds no significant effect of immigration on net job growth for U.S.-born workers in these time horizons. This suggests that the economy absorbs immigrants by expanding job opportunities rather than by displacing workers born in the United States. Second, at the state level, the presence of immigrants is associated with increased output per worker. This effect emerges in the medium to long run as businesses adjust their physical capital, that is, equipment and structures, to take advantage of the labor supplied by new immigrants. However, in the short run, when businesses have not fully adjusted their productive capacity, immigrants reduce the capital intensity of the economy. Finally, immigration is associated with an increase in average hours per worker and a reduction in skills per worker as measured by the share of college-educated workers in a state. These two effects have opposite and roughly equal effect on labor productivity.

Institute for Policy Studies - Month after month, the headlines have pounded home a remarkably consistent message: Corporate executives, here in the Great Recession, are suffering, too.

Corporate executives, in reality, are not suffering at all. Their pay, to be sure, dipped on average in 2009 from 2008 levels, just as their pay in 2008, the first Great Recession year, dipped somewhat from 2007. But executive pay overall remains far above inflation adjusted levels of years past. In fact, after adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.

American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s. Back in those years, precious few top executives made over 30 times what their workers made. In 2009, we calculate in the 17th annual Executive Excess, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers. CEOs are clearly not hurting.

But they are causing others to needlessly hurt — by cutting jobs to feather their own already comfortable executive nests. In 2009, the CEOs who slashed their payrolls the deepest took home 42 percent more compensation than the year’s chief executive pay average for S&P 500 companies. Most careful analysts of the high-finance meltdown that ushered in the Great Recession have concluded that excessive executive compensation played a prime causal role. Outrageously high rewards gave executives an incentive to behave outrageously, to take the sorts of reckless risks that would eventually endanger our entire economy.

6 comments:

wellbasically said...

Immigrants are good for the economy -- it's possible. There needs to be investment from the older population in the younger, because that's who's going to make your retirement money grow the fastest.

But advocates for going easy on illegal immigrants seem to think they've done their job by letting a million or two come into America, from the 5 billion who are living in poverty around the world.

We need their countries of origin to become better places for these young people to apply their energy and multiply the investments we put into them. Because their home countries are so stifling, and the USA has a relatively encouraging investment climate, they come to the USA, but it would work just as well if they stayed home and had USA-levels of productivity there.

Anonymous said...

The economist who touts immigration as being good for the economy did not collect any data past 2007. That's an interesting ommission. A lot of Hispanics were employed in the housing industry -- and buying homes with 'liar loans', etc. -- during the boom. One could argue that cheap labor, along with cheap credit, created the disaster we've got currently.

Anonymous said...

Inviting more low skill labor into an economy with high unemployment will only drive down wages for working class folk. But I guess that fits with the plan. I can understand why an economist with the Federal Reserve would be peddling this idea, but why a 'progressive' would be selling it is beyond me.

Anonymous said...

I would agree that legal immigration the country, however ill-legal immigration is not. It is more important than ever to find way to get the illegal’s to self-deport, so that we can make way for qualified legal immigrants that will be a boost to our modern economy.

Anonymous said...

So all of the above posters are in favor of a huge increase in their food budget? That's exactly what you would get if all illegal immigrants were removed from America and no new ones came in. They pick our crops for ridiculously low wages, allowing our grocery bills to remain affordable. This is their primary job, and a recent attempt to get legal Americans to apply for and do this job got exactly 4 applicants. Only one of the four actually tried to do the job once the nature of it was explained and that one quit very quickly.

The notion that illegal immigrants are taking jobs that other Americans want is just a fiction created by politicians to give them a scapegoat they can use to distract attention from the real villains in our economy: the billionaires who own both political parties and encourage everyone to hate the notion of government handouts for the poor while quietly sucking up all your tax dollars in the form of handouts for the rich.

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