Labor Force – Maurice Belanger Consulting

CBO’s Demographic Projections Highlight Importance of Immigration

In July of 2022, the Congressional Budget Office (CBO) released a report projecting demographic trends in the U.S. for the next 30 years. The Demographic Outlook: 2022 to 2052 provides population projections that underlie the CBO’s baseline budget projections and economic forecast published in May 2022, and long-term budget projections published in July 2022. Among other things, these projections help determine the expected impact on the social security system.

Two take-aways from the report are similar to the findings of other projections of U.S. population growth: the growth of the U.S. population is slowing, and immigration will be an increasingly important contributor to population growth.

Population Growth

The U.S. population is projected to grow by 0.3 percent per year, on average, over the coming 30 years. For comparison, population growth over the previous 40 years averaged 0.9 percent. Within the overall growth of the population, the cohort that is 65 or older will grow at a faster rate than younger cohorts. The number of people in their prime working years, age 25 to 54, will grow at an average annual rate of 0.2 percent. By contrast, that cohort grew by 1 percent on average during the period 1980 to 2021. In 2022, the number of people in their prime working years relative to those who are 65 and older (and generally retired or about to retire and drawing Social Security) is 2.3 to 1. By 2052, that ratio will be 1.7 to 1.

Immigration

Over the projection period, fertility rates remain below the replacement rate, and so immigration will increasingly drive population growth. CBO projects immigration to gradually rise to 1.1 million by the third decade of the projection period. (This is still 400,000 below the average net immigration in the early 2000s, prior to the Great Recession.) Over the next decade, immigration will account for about 75 percent of population growth. By 2043, immigration is projected to account for all of U.S. population growth.

Where Assumptions Could Go Awry

The CBO Notes that fertility rates in the U.S. averaged 2.02 children per woman in 1987 – 2007 period. In 2007, the rate peaked at 2.12. During the Great Recession, the rate began to decline, falling to 1.64 children per woman by 2020. CBO assumes the rate will rise to 1.75 births per woman by 2030. It is not hard to imagine, however, that another period of economic instability could create conditions for another downturn in the fertility rate.

The CBO projects mortality rates to decrease, with life expectancy rising by approximately five years by 2052. However, from 2015 to 2017, life expectancy in the U.S. actually declined — driven by suicides and drug overdoses, and life expectancy declined again in 2020, driven by COVID-19. It is not hard to imagine periods of life expectancy declines over the next 30 years. For example, the lethality of future pandemics might be increased due to the substantial percentage of Americans who don’t trust measures to protect us from deadly viruses. Also, it is not hard to imagine that, in an increasingly polarized society, violence may alter mortality projections. By 2020, for example, gun violence became the leading cause of death among children ages 19 and under.

Immigration is another area where there could be significant deviations from what is projected. CBO notes that, while net immigration averaged 1.5 million between 2000 and 2006, it fell considerably during the Great Recession. It never recovered by the time policies of the previous administration slowed immigration, and policies enacted during the COVID-19 pandemic caused a steep drop in immigration flows. Policies of future administrations could significantly impact these CBO projections.

If any of these rates (fertility, mortality, immigration) were to deviate significantly from CBO projections, the effects on the future workforce could be significant. For example, of the more than one million deaths due to COVID, approximately 260,000 of them were below retirement age (and more likely than not in the workforce). Between 2017 and 2022, the sharp downturn in net immigration removed 3.2 million potential workers from the workforce, contributing to our current labor shortage.

This report reinforces other population projections which have emphasized the importance of immigration to U.S. population growth a — and to the growth of our workforce.

He’s Gotta Have It

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President Trump has been insistent that Congress give him money to build a wall on the southern border — that structure of concrete or steel slats that will somehow magically stop illegal immigration (even though, these days, most undocumented immigrants arrive with visas and do not depart when their visa expires).

Thanks to a lengthy Washington Post article published on February 8^thby a team of journalists, including Pulitzer Prize-winner David Farenthold, we learned there is something else Mr. Trump must have. At the same time that Donald Trump has staked his presidency on building The Wall, he has staked his business success on the availability of undocumented workers he is trying to keep out as president.

The Post article tells the story of the undocumented workers who tended grounds, provided housekeeping services and worked in the kitchen of Trump’s golf course in Bedminster, New Jersey. The article notes that, in the estimation of the workers interviewed, more than 100 undocumented workers labored at the Bedminster golf course at one time. And Bedminster is not the only Trump property that employed undocumented workers. Continue reading “He’s Gotta Have It”

When do we give them a break?

There have been a pair of reports released recently with new estimates of the undocumented immigrant population in the U.S. A report by the Pew Research Center, released in November, provides a wealth of information on the size and demographic characteristics of the undocumented population as of 2016. These estimates are compared to population estimates calculated in 2007.

Another report by the Center for Migration Studies (CMS) takes a look at trends in the undocumented population between 2010 and 2017.

The headline is that the undocumented immigrant population has declined significantly. Pew estimated the undocumented population to be 10.7 million in 2016 — down from its 2007 peak of 12.2 million. It is as low as it has been since 2004. The estimate includes individuals who are now living with temporary protection from deportation through two programs — Temporary Protected Status (TPS), covering approximately 317,000 people, and Deferred Action for Childhood Arrivals (DACA), which protects approximately 700,000 persons from deportation. The Trump administration is trying to end both of these programs.

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Source: Pew Research

According to Pew, undocumented immigrants now make up less than a quarter (24 percent) of the total immigrant population in the U.S., down from 2007 when it was nearly a third (30 percent).

The decline is attributed primarily to a sharp decline in the number of Mexicans entering without authorization, and the departure of Mexican undocumented immigrants. CMS estimated that, since 2010, the undocumented Mexican population has declined by 1.3 million and, in 2017 for the first time, undocumented immigrants from Mexico constituted less than half of the U.S. undocumented population. Continue reading “When do we give them a break?”

The Missing One Percent

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Recently, Robert Samuelson wrote a column for the Washington Post in which he discussed different projections for future economic growth. On the one hand, he noted that a recent White House economic report includes a projection of 3 percent economic growth per year for years to come.

On the other hand, most economists project slower growth. In part, this is due to the slow growth projected for the U.S. labor force. As Samuelson illustrates, the Congressional Budget Office is projecting labor force growth of 0.5 percent annually over the next 10 years. Productivity growth is projected to be 1.3 percent annually. Adding these together gets economic growth to 1.8 percent per year—more than one percent short of the White House’s rosy projections.

What Samuelson does not talk about in his column is immigration.

Continue reading “The Missing One Percent”

Rising Prices Make Housing Unaffordable for Immigrants in California Cities

The California Immigrant Policy Center recently released its annual report on the economic contributions of immigrants to California’s economy. The contributions are huge–$715 billion, or one-third of the state’s total output. And the state’s total GDP makes it the sixth largest economy in the world. Undocumented immigrants alone contribute an amount equal to the entire output of the economy of Oklahoma.

The continued ability for immigrants in California to play such a crucial role in the economy is being undermined, however, by rising inequality and housing prices that are increasingly unaffordable for immigrants at the low end of the pay spectrum.

The study takes three examples of neighborhoods in Los Angeles and San Francisco that traditionally housed an immigrant population and shows that, with housing costs rising in these neighborhoods, the immigrant population has been declining.

Read more of my summary of the California Immigrant Policy Center’s study over on Immigration Impact.

Photo credit: Luke Price under Creative Commons License 2.0.

New Data Places a Value on Immigrant Lost Potential

A new report by the Migration Policy Institute (MPI) on the issue of “brain waste” describes the most important factors that result in high-skilled immigrants being underemployed (that is, high-skilled immigrants in low-skill jobs) or unemployed. For the first time, this report estimates the earnings lost from underutilized immigrant skills.

MPI researchers determined that the 1.5 million high-skilled immigrants working in low-skill jobs earn a total of $39.4 billion less each year than they would if they were employed in jobs appropriate to their skill level. The forgone earnings translate into a total of $10.2 billion in lost state and local tax revenue, according to the report.

This new research gives advocates the tools to go to policy makers at the state and local level and show them what their return on investment will be when they support programs to help skilled immigrants gain whatever extra training they need to gain employment in high-paying jobs appropriate to their skill level. A modest investment of public funding will lead to a big boost in earnings and, as a result, a big boost in taxes paid.

Read more in my post on Immigration Impact.

Photo credit: Department of Foreign Affairs and Trade.

Immigration and Japan’s Declining Economy

I saw that this post on IZA World of Labor about the Japanese economy. It has again slipped into recession. Why? An aging workforce, and very low immigration.

Japan just doesn’t have enough workers to fill available jobs. The unemployment rate is at a long-term low of 3.4 percent. For every job seeker, there are 1.24 job openings. Japan’s worker shortage, according to the Wall Street Journal, will cost the country $86 billion in 2015 and 2016, or 2 percent of the country’s GDP.

Japan’s aversion to immigration has been a slowly developing disaster. Japan ranks 3rd in the world in median age of its population: 46.1 years. Immigrants could bring down the median age of the workforce and help alleviate the worker shortage. However, today foreign-born workers constitute just 1 percent of the Japanese workforce.

Here in the U.S., immigrants make up 16.5 percent of the workforce. Undocumented immigrants here make up a far greater percentage of our workforce than all foreign labor in Japan: 5.1 percent. The median age in the U.S. is 37.6.

Still, our policies aren’t keeping up with the times. Congress last adjusted our immigration levels a quarter century ago, in 1990. Since that time, the GDP of our economy has doubled. And it looks like Congress will not act any time soon to modernize our immigration system.

Photo credit: Stephen Geyer via Flickr and the Creative Commons license.