Quiet force behind economic boom: immigrants

The Federal Reserve's task of keeping inflation under control has been greatly eased by, guess what?

Immigrants.

In the past decade, at least 10 million immigrants have entered the United States. Most sought work, easing any labor shortages.

"Wages would be much higher today if we didn't have immigrants," says George Borjas, an economist at Harvard University in Cambridge, Mass.

That fact may trouble many.

But to the Fed, rapidly rising wages can be inflationary. They add to the labor costs of business, tempting firms to raise prices when these extra costs exceed rising productivity.

Fed officials often speak about this inflationary risk.

Last January, when Fed Chairman Alan Greenspan was being confirmed for another term, senators pressed him to endorse a measure boosting the inflow of high-tech foreigners.

"Aggregate demand is putting very significant pressures on an ever-decreasing available supply of unemployed labor," Mr. Greenspan responded.

It may be the first time in history that the Fed is "trying to use immigration as an element of monetary policy," says Dan Stein, executive director of the Federation for American Immigration Reform (FAIR) in Washington.

The central bank is expected to raise interest rates tomorrow for the sixth time in a year. Without the high inflow of immigrants, the Fed might have had to brake the economy much earlier.

Most Americans aren't harmed by the inflow of immigrants. They may, indeed, often benefit from the cheap labor. But two groups face huge wage pressures from immigrants.

One is the bottom 10 to 20 percent of workers. These 30 million people often have a high school education or less - the same as most immigrants. They work as maids, day-care workers, security guards, janitors, and in other low-skill jobs.

The economic boom has pushed up their wages, after inflation, for nearly three years. But they remain about 8 percent poorer than they would otherwise be if immigrant inflows had been restrained, says Steven Camarota, research director of the Center for Immigration Studies.

The immigrant inflow is also one reason why poverty in the US has dropped so little in these good times, Mr. Camarota says. Immigrant households account for more than one-fifth of the poor and one-fourth of child poverty. Immigration may explain in part the wide income gap between rich and poor and why the number of people without health insurance has grown, he adds.

The other hard-hit group is high-tech workers. Computer programmers from India, China, Russia, and other countries depress salaries in this field by about 20 percent, calculates Norman Matloff, a professor of computer science at the University of California, Davis.

The House Judiciary Committee expects to approve a bill this week that would enlarge the inflow of high-tech workers under the H-1B Non-Immigrant Specialty Visa program.

Congress set a quota for 1999 and this year of 115,000 H-1B visas. But the government handed out 22,000 more visas than the quota allowed last year, annoying Rep. Lamar Smith (R) of Texas, head of the immigration subcommittee.

Mr. Smith proposes allowing companies to bring in as many high-tech workers as they want, as long as the firms meet specific requirements aimed at preventing too severe competition to American-born workers and limiting fraud. Each H-1B worker would have to be paid at least $40,000 a year. The employing firm would also have to publish a detailed job description on the Web and need to have a net worth of $250,000.

But experts suspect a bill proposed by Sen. Spencer Abraham (R) of Michigan that would raise the quota to about 195,000 has a better chance in Congress.

Opponents of the H-1B law have three complaints.

1. Though labeled temporary workers, most H-1B entrants remain in the US after the six-year limit has passed. They seek other employment-related visas that get them a coveted green card. So the visas are a way of increasing immigration without a national debate on its merits.

2. The foreign high-tech workers aren't needed. Internet and other computer companies could retrain American workers, especially older ones, to do the job.

3. The fight over H-1B law has become a way for milking campaign funds from New Economy companies and their executives. Millions of "soft money" dollars flow to key members of Congress, including Senator Abraham.

FAIR has been running print, radio, and TV ads in Michigan, Abraham's home state. The senator would "give away our best-paying jobs to nationals from other countries," Mr. Stein says.

Stein wants less immigration. Otherwise, he says, the US will be a crowded nation with 400 million people in 2050.

(c) Copyright 2000. The Christian Science Publishing Society