Disappearing Americans and Illegal Aliens
This was a post was sent to me by the Skeptical Economist. As some of the meat packing plants have been raided due to illegal immigrants it may explain why they are not having a hard time finding American workers to replace them. Please read and tell us what you think.
Angry Bear-Here’s a post by reader Ken Melvin, tackling the issue of illegal immigrants and how it affects the official unemployment figures in the US:
E/P Ratio, Disappearing Americans, and Illegal Immigrants
In the beginning – a model. For this model, 80% of the current population of some 300 million are between 16 and 65, and some 70% of this 240 million, i.e., some 166 million, are available for work for which they are qualified that pays a decent wage. That is to say that, in the model, some 166 million of the current 300 million (US population November 2006) are in ‘the labor pool’ or ‘labor force’. If 150 million of the 166 million citizens are employed in 2006, then the remaining 16 million are unemployed. The ratio of this 150 million employed to the 240 million of the population between 16 and 65 years of age, 62.5%, is known as the employment to population ratio, E/P. The ratio of the 16 million unemployed to the 166 million people available for work as a percentage, 9.6%, is the percent of work force unemployed, or the rate of unemployment.
If someone can’t find work, after awhile they may look for work less often and after a greater while they may stop looking altogether. In the real world of labor statistics, such persons are dropped from both the unemployed and the ‘labor force’, i.e., they are dropped from both the numerator and denominator of the equation for calculating the unemployment level. This masks and distorts both increases and decreases in unemployment. As unemployment increases, discouraged job seekers are dropped from both the rolls of the unemployed and the rolls of those available for work lessening the increase in ‘official’ unemployment. Similarly, when employment increases, those who had given up looking for worked move back into the labor force.
The period from the mid 1990s to 2000 provides a good example of what occurs during a decrease in unemployment. During this time, the number of jobs added exceeded the population increase by a significant ratio for a period of some six years but unemployment only went down some 2%. The official unemployment rate in 1994 was 6.1%. If the available work force in 1994 was 145 million this 6.1% unemployment equates some 8.8 million unemployed persons. If the 1994 available work force was 145 million and the population grew at 1%/yr during the period, by 2000, one would expect the work force to be approximately 1.07 times 145 million or about 155 million.Some 15 million jobs were added during this period from 1994 to 2000. Of these 15 million added jobs, some 10 million went to cover the increase in work force due population growth. Some 2.6 million of the remaining 5 million jobs went the change in the number of unemployment from 8.8 million in 1994 to 6.2 million in 2000. The remaining 2.4 million represent some portion of the work force that had been ‘disappeared’ prior 1994. This means that the actual number of unemployed in 1994 was at least 11.2 million (8.8 million plus 2.4 million), and the actual unemployment rate at least 7.7%. So, how much credence accord 2000’s 4% unemployment figure? Was 4% too low? If so, how much? Thus and so, the unemployed are disappeared during times of increasing unemployment only to reappear when job growth exceeds population growth.
But, the unemployed disappeared as above don’t disappear from the population, P, of the E/P ratio. The E of E/P (numerator) is the number employed, and the P of the E/P (denominator) is the portion of the total population within an age range. Thus it is that the current E/P ratio is low. The 2.2% difference between the E/Ps of 2000 and 2005 represents some 5 million disappeared unemployed (about the same number pulled in the gap from 2001 to 2004 that was never made up, see Chart 1 at , or an increase of some 3% in actual unemployment.
In October 2006, 4.7% was given as the official unemployment rate. At this time, payroll, from Chart 1: was some 135 million, yielding a labor force of some 142 million. The official E/P ratio of 62.5% suggests an ‘age group population’ of some 216 million. On these bases, the 4.7% unemployment rate equates some 7 million unemployed workers. In 2000, official unemployment was 4% and payroll 133 million, yielding a labor force of 138.5 million. And, the official E/P of 64.6% suggested a ‘population’ of some 206 million. During the six years, employment should have increased to some 141.3 million (1.07 x 133 – 0.007 x 142).
Note, adding the approximately 5 million ‘disappeared’ during the gap pulled from 2001 to 2004 spoken to above to 2006’s 135 million equals some 140 million, which is quite close to 141.3 million. And, for 2006, if we add the approximately 5 million ‘disappeared’ during the gap of 2001 to 2004 to both the 7.1 million of the numerator and the 142 million ‘labor force’ denominator, the unemployment rate for 2006 is some 8.2% [(12/147) x 100], which equates to some 12 million unemployed.
Similarly, if the labor force was 155 million in 2000 and increased by 1% a year to 166 million in 2006 but payroll employment only increased some 3 million from 2000 to 2006 there is a deficit of some 8 million jobs (166 – 155 – 3). The 1% increase in unemployment, from 4% in 2000 to 4.7% in 2006, accounts for less than 2 million of this deficit. The remaining more than 6 million deficit amounts to an additional some 3.6% unemployment which added to the official 4.7% equals a current actual unemployment of some 8.3% (3.6 + 4.7) meaning that there are more than 13.8 million unemployed.
Per the model, if employment is some 150 million and the E/P ratio some 62.5%, then the ‘population’ is some 240 million, the labor force is some 168 million, and there are some 18 million (168 – 150) unemployed workers for an actual unemployment rate of some 10.7%.
By most accounts, upwards of a million illegal workers have entered the US each year since 2000. It is generally accepted that more than 12 million are in residence. It is generally acknowledged that these illegal immigrant workers make up at least 5% of the US work force, i.e., at least 7.5 million of the some 150 million total jobs in 2006 were held by illegal workers. In other words, the real employment to population ration in 2006 is not 62.2%, [(150/240) x 100 = 62.2%], but rather it is some 59.4%, [(142.5/240) x 100 = 59.4%]. This also means that actual unemployment among legal US workers is greater than 9.5% [(7.5 + 8.3)/(166)] x 100.
Combining the effect of illegal workers with the disappeared; actual unemployment among legal US workers in 2006 is on the order of 12.5%, [(7.5 + 5 + 8.3)/166] x 100.
Beyond taking the jobs of millions of US citizens and other legal workers, illegal workers work for lower wages thus forcing down wages in those industries where they work. The effect of illegal workers on the economy is almost exactly the same as that of offshoring.
Finally, a distinction between illegal Chinese workers and those from Latin America: While illegal workers from Latin America take jobs normally held by US citizens, i.e., the displacement is direct; those from China tend to work exclusively for other Chinese as waiters, chefs, seamstresses, laborers, etc. The restaurants, shops, etc., where they work have such low prices that similar businesses with legal worker staffs simply can’t compete and are forced to close.
I believe another problem with this statistic is that they’ve shortened the amount of time an unemployed person can actually recieve unemployment compensation, correct? But no adjustment was made to the “input criteria” to adjust to this new reality.
Yet another rehashing of the same argument that has been posted constantly here day after day after day…
After 50 more illegal immigrant posts, perhaps the government and all of America will see it your way.
That with an occupation in Iraq going poorly (you wrote that ‘conservative solution for Iraq’, so that’s covered I suppose…why not a ‘conservative solution to illegal immigration’ and then leave IT alone for a while?), Katrina victims still being shafted, etc – - – -
A NEW Democratic Congress about to take over…and the Control Congress website has more about foreigners holding us down than anything else.
John, do you read National Review or any of the heady political publications out there? The constant pounding of this one issue is considered a NEGATIVE over time for your cause.
Saturation on a single issue, one that alienates a large portion of voters, is hardly a recipe for change or success in future elections.
You and the skeptical economist are convinced, but the way you go about convincing the rest of the country isn’t really helping your cause. It is simply turning people who were on the fence away from your positions.
Conservative thinkers told me this by the way…and many of them blame folks like yourself for embracing the House version of the immigration reform bill, which produced rhetoric from the right that absolutely turned off voters…like, the portion of the GOP base that views the poor with compassion and actually buys into the multicultural reality of our society.
This is your pet cause, I understand, but what good does it do to simply reshuffle the deck everyday and deal out the same hand over and over and over?
Also – the far right that is so busy demonizing immigrants is really coming off to a lot of people as the racist-right.
The ends justify the means in your mind, but if you’re coming off as a racist, shouldn’t it be time to recalibrate your approach a bit?
AL
The Angry Bear is one of the most well respected left leaning economic blog in our Country. The reason I put this up is to answer your question about the low unemployment numbers and how they are falsely reported.
I wanted to demonstrate the facts about unemployment being wrong are equally shared from the right and the left. Also the effect driving wages down due to bad trade and immigration policy has agreement on the right and left from economist.
Now you can put your head in the sand and pretend it is not true or deal with the facts.
http://angrybear.blogspot.com/
ANGRY BEAR
Slightly left of center economic commentary on news, politics, and the economy.
Angry Bear has three primary contributors, Angry Bear (me), Kash, and PGL. All three have PhDs in Economics. Kash’s training is in macroeconomics, mine is in microeconomics, and PGL’s is in finance. We also have a regular Monday poster, CR of the blog Calculated Risk. While not an economist, CR does have an extensive background in business, finance, and economics.
I started the blog in February of 2003. At the time, I chose to use and continue to use the name of the blog, “Angry Bear” or “AB” for short, as my pseudonym. The title primarily reflects my emotional reaction (anger) to my view (bearish) of the state of the economy at the time of the founding of the blog. Neither sentiment has changed yet.
In August of 2003, Kash agreed to fill in for me while I was on vacation. He then agreed to continue posting on Fridays, and finally, by popular demand, to post as often as he wished.
Then, in August of 2004, we added a third economist, PGL, who had been an active and insightful commenter for some time. Like Kash, after a short stint as a temporary contributor PGL succumbed to crowd and peer pressure and became a regular poster.
Calculated Risk joined the blog after I noticed him, first in his comments here and then at his own blog, saying a lot of really smart and insightful things. So I asked if he’d like to post here on a weekly basis, and he agreed.
How’s the economy treating you, Al? Because if you’re secure in your current net worth and retirement plans, then you can afford to diversions into different issues unrelated to your personal economy. But job security, income security and economic security, or rather insecurity, is about to overtake this country like a tsunami.
Chris
Al would rather be PC than worry about jobs and wages.
Al, “Immigration” is not a single issue. It affects everything and no problems can be resolved until we stop the invasion. It is such a grave problem that knowledgeable folks like John bring it up daily so more people can wake up and pull their heads out of their butts and start working to save the nation. And ethnic aspects are very important to this debate. You and others throw out the “racist” label, but ethnic groups are not fungible. As Pat Buchanan said, it would be a lot easier to assimilate 1000 Englishmen into a European based nation such as the U.S. than it would be to assimilate 1000 Zulus. Al, if you disagree with this last statement, pray give me some logic as to why you disagree, as if you call me a racist, you are admitting defeat!
Al
BTW you are the one who brings up race and never deals with unemployment and declining wages for hard working American family. WHY??????
I blame the government for allowing the private sector to enjoy more of their money without getting anything in return. Lower taxes, they were allowed to repatriate billions held overseas without having to pay the 35% tax rate, and the NYTimes reported today that the IRS has been auditing less corporate tax filings…
All those breaks and the line worker can’t get anything better than a lousy 2%?!?!?!
The government could change that, but the current regime doesn’t believe in ‘government’ to begin with, so to expect them to represent the interests of workers is silly.
Union-busting corporate hacks…we’ve been electing them into office since the 80s simply because they claimed to have big cahones and opposed abortion. Congratulations! You get what you pay for.
Interesting how the economy is such a burning problem on this site, yet the only two things anyone ever points to are immigration and trade. As long as your focus is to remain so narrow, I will happily provide ‘yall a crash course on the opposite side of that there coin.
Or am I wrong and George W. Bush, Dick Cheney, Bill Frist and Tom Delay really DID put the interests of workers above those of corporations?
Hmmm? I’d be more apt to believe the entire problem has to do with immigration and trade if the party of John Konop (and I assume several of you who posted within this thread) hadn’t been in charge with the record that is right there for all to see.
Bankruptcy Bill anyone? For my money that one right there pretty much summed up what Republicans thought of us “working folk”. But I’m sure you’ll keep voting for them, so that bill and every other piece of legislation and non-oversight that Republicans put through for the sake of someone other than you or me are irrelevant, right?
Because government doesn’t matter, right? It’s immigration and trade, nothing else.
Time for some soul searching…GOP voters got what they paid for. The USA got what it paid for. We deserve this mess because we’re stupid enough to elect leaders who will ignore our interests, look the other way constantly, all for the sake of…”he’s a God-fearing man, just like me”…
Al, I do very much agree with your closing paragraph, at least as far as it went. And while I’m a lifetime registered Republican, I often skip over specific elections. And I very well will switch to Independent.
And of course, the Democrats are just as bad or worse. The Dems and Repbs. are two wings of the same bird these days. And it’s an evil bird, at that. Combination of a vulture and a few other sorry birds I can’t recall at the present time.
Al
I have given you many links from economist saying tax policy will not fix the problem of falling wages. We have economist on both sides who realize our trade and immigration is causing falling wages. What part of this do you not understand? You know both Parties got us into the race to the bottom trade and immigration policy?
Why can you not deal with an issue without looking at as a talking point hack?
Yes Al, the GOP is bad, bad, bad for the economy and the country. Redundant tune at this point. How are the Dems any better? What could they possibly do to ensure my kids the promise of at least the opportunity to reach some half-rewarding American Dream, and myself the security of some kind of reasonable financial support in my retirement, from my own decades of savings and investments?
Al
How will a U.S. union help stop child and slave labor in China?
Unions in China are only tools of the Communist party to stop any protest. You offer words and no solutions.
Chris
Your post is why I am speaking out about the sell-out of American families.
Read this comment I found on this topic. I am sure Al will have no real answer if he reads this article.
The logical argument is simple. If immigration wasn’t substantially reducing wages (and eliminating unions, see Unions Weakened) why is corporate America so fanatically in favor of Amnesty, guest workers, Open Borders, etc. Do you really think these folks are bleading heart liberals concerned about downtrodden poor people in third world countries seeking a better life in America?