November 27, 2006

National Data, By Edwin S. Rubenstein

Immigrant Workforce Up—Labor’s GDP Share Down

While President Bush touts economic growth and job creation, wages for most American workers are barely keeping up. The share of Gross Domestic Product [GDP] going to labor has eroded over the last five years.

Labor’s share of GDP, which includes wages, health insurance, and pension benefits, declined 2.5 percentage points, from 59 percent in 2000 to 56.5 percent in 2005, according to the Commerce Department’s Bureau of Economic Analysis.  By contrast, the preceding five-year period, 1995 to 2000, workers’ share of the economy grew 2.3 percentage points. (After Years of Growth, What About Workers’ Share? by Eduardo Porter, New York Times, October 15, 2006)

The usual suspects, according to the conventional wisdom: outsourcing; the loss of high paying manufacturing jobs; the introduction of labor saving technology.

Over the past ten years, however, none of these trends have accelerated as dramatically as immigration.

During the decade of the 1990s, 47 percent of the nation’s civilian labor force growth was due to immigration. This represented the largest influx of foreign workers ever to enter the U.S. in a given decade—substantially exceeding the number who came here during the Great Wave of 1890 to 1910. [Andrew Sum, et al., Foreign Immigration and the Labor Force of the U.S., [PDF] Center for Labor Market Studies, Northeastern University, July 2004.]

But records are made to be broken, and nowhere more so than in immigration. During the succeeding 2000 to 2005 period, foreign-born individuals accounted for:

Click here for underlying numbers.

The foreign-born share of the U.S. labor force grew from 12.6 percent in 2000 to 14.8 percent in 2005. If the immigrant and U.S.-born labor forces continue growing at their 2000-05 rates, the foreign-born share will reach the following levels:

By contrast, at the peak of the “Great Wave” in 1910 the foreign born share of the U.S. labor force was slightly more than 15 percent.

Unfortunately, but not unusually, the government does not publish monthly data on immigrant employment. But the monthly Bureau of Labor Statistics report does track Hispanic employment—and because so many Hispanics are immigrants or the children of immigrants, their employment history is a good proxy for that of immigrants. Similarly, the ratio of Hispanic to non-Hispanic employment growth is a good indication of native worker displacement.

The following graphic shows month-to-month growth in Hispanic and non-Hispanic employment since the start of the Bush administration, as well as the ratio of the two growth rates— which we call the VDARE.COM Worker Displacement index (VDAWDI).

The black line is Hispanic job growth; pink is non-Hispanic, and yellow the ratio of Hispanic to non-Hispanic. From the start of the Bush Administration (January 2001) through October—

Average wage and salary income of Hispanic workers in 2005 was 30 percent less than the average of all U.S. workers that year.

Bottom line: Since 2000 immigrants have accounted for more than 80 percent of U.S. employment growth. Immigration’s biggest impact, according to Harvard economist George Borjas, is to redistribute income from native workers to employers by bidding down wages.

So immigration is a major factor—unmentionable in the MSM— behind labor’s declining share of national income.