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NEW YORK (AP) - Throughout the economic boom of the 90s, when the unemployment rate got as low as 3.9 percent, economists marveled at the U.S. economy's ability to grow jobs without sparking wage-led inflation.
Many speculated that the waves of low-paid immigrants had created a "safety valve," keeping average wages low enough for the economy to grow without an increase in prices.
Now, a recent article in the Labor Department's "Monthly Labor Review" has laid out just how important those foreign-born workers were for the U.S. economy.
Drawing upon the 2000 Census that registered for the first time where workers were born, the article by Labor Department researcher Abraham Mosisa notes that in that year some 17.7 million foreign-born people comprised 12.6 percent of the labor force.
In retrospect, it seems these people may have helped alleviate stresses that Federal Reserve Chairman Alan Greenspan worried about in February 2000. At that time, Greenspan said in his semiannual Congressional testimony that "imbalances in the labor market may have more serious implications for inflation pressures," especially because "there is an effective limit to new hiring, unless immigration is uncapped."
In fact, the Census data show that immigrants played a direct role in keeping wages low. According to Mosisa's article, "foreign-born workers earned about 75.6 cents for every dollar earned by the native born in 2000." These points highlight a long-standing harsh reality for successive waves of immigrants to the United States: they tend to start at the bottom of the income stream. And while that's unfortunate individually and a contentious issue for some, their collective willingness to accept lower pay provided what Greenspan dubbed a labor market "safety valve."
Indeed, Mosisa noted that "foreign-born workers 16 years and older constituted 48.6 percent of the total labor force increase of 6.7 million in the 1996-2000 labor force expansion." In effect, as the demand for labor grew through the expansion, and low-skilled native-born workers vacated low-paid positions, the hole they left was filled by foreigners.
Now, with the expansion over and the economy only barely pulling out of a brief recession in 2001, the question is: what role are foreign-born workers playing in an environment in which there is now greater competition for work among jobseekers? And here, the Census data is quite illuminating, if sketchy.
It seems that while jobs have been hard to find for many native workers, foreign born workers may have simply looked harder for them. Mosisa notes that "the number of employed foreign born increased by 491,000 over the year, while the number of employed native born declined by 897,000."
Notably, much of that gain, he says, consisted of foreign-born women entering the work force in 2001. Of them, 54.5 percent were employed or actively looking for work, compared to 54.0 percent in 2000, while the participation rate for foreign-born men was unchanged at 79.8 percent. Among native-born workers, the participation rate for men dropped to 73.5 percent from 73.9 percent, while women saw their rate fall to 60.9 percent from 61.1 percent.
The suggestion here is that when times got tough, foreign-born women, who'd often been more likely to stay out of the labor force, perhaps because of childcare responsibilities, went out and sought work.
Presumably, many of the jobs they found were low-paid jobs.
Indeed, the 2000 Census data on participation rates suggest a stronger willingness to take on low-paid jobs among foreign-born workers than native-born workers.
According to Mosisa, the data showed that in 2000, the participation rate for foreign-born workers without a high school diploma was much higher than for the native-born population (59.0 percent compared with 37.4 percent) and was also higher for foreign-born high school graduates with no college degree than for the native-born (66.5 percent compared with 64.4 percent).
The greater presence of low education levels among the foreign-born labor force may account for the fact that, as Mosisa points out, "the foreign born tend to be over-represented in low-paying occupations, which often do not require the completion of high school.
Poorer educational background, language difficulties, and unfamiliarity with the U.S. job market are likely explanations for the high proportion of foreign-born in lower-paying jobs.
But, according to Lehman Brother's senior economist Joseph Abate, there's also "much less evidence of a so-called `discouraged worker syndrome among immigrants ... they can shift in and out of jobs more easily and they came here for opportunities."
Indeed, a greater willingness to work may be helping these workers to more easily weather the current slump in hiring.
Even though the foreign-born saw a 1.1 percentage-point increase in their unemployment rate to 5.3 percent in 2001, compared with 0.7 percentage point rise to 4.7 percent for native-born workers, the increase in the number of looking for work explains much of the difference.
In reality, the foreign-born have continued on an upwardly mobile path - albeit a low-paid one - even while their native-born counterparts seem to have moved backward since the recession.
That has implications, not only for the labor market, but for household spending.
"I'm finding that immigrants form much of the upward pressure on home prices," said Lehman's Abate. "Immigrants tend move up the income stream quickly and try to buy a house after 10 years. This is one reason I don't believe there's a housing bubble. It's real demand."
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