APRIL 24, 2000
How Immigrants Keep the Hive Humming
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They may prevent the economy from overheating
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America has long prided itself on being a country of immigrants. But in the midst of this nine-year economic boom, that pride is increasingly tinged with a sense of desperation. Consider Julie K. Hilton's six hotels in Panama City Beach, Fla. She recalls a local job fair that attracted 30 potential workers for 32 employers. To keep her family business running, she's turned to Czech immigrants, hired through contractors, who now comprise about 30% of her 600-person workforce. ''I don't think we'd have been able to operate for the last couple of years had it not been for the immigrants,'' she says.
Hilton is hardly alone. With unemployment holding at 4.5% or less for two years, employers all across America are finding immigrants--legal and illegal--to be a critical safety valve. From programmers in Silicon Valley to restaurant bus boys in Bethesda, Md., and nurses in New York, immigrants are filling jobs that might otherwise go begging.
Economists say the cross-border flow of workers provides a critical boost for the surging economy. Without the additional workers, they argue, the good times would have ended long ago. ''Foreign immigration has been a key source of growth in the economy throughout this expansion,'' says Mark M. Zandi, chief economist at RFA Dismal Sciences in West Chester, Pa. Without the flood of immigrants since 1991, he figures, ''the unemployment rate would be closer to 2%. Thus the economy probably would have overheated two or three years ago.'' What's more, immigrants may be helping keep a lid on wage gains, particularly among low-skilled workers. ''Every extra person who's skilled and available to work helps to maintain price stability,'' says Neal M. Soss, chief economist at Credit Suisse First Boston.
No one knows for certain just how big the immigrant labor force is or how fast it's growing. The Immigration & Naturalization Service says that 700,000 were admitted for legal permanent residence in fiscal 1998. And based on growing discrepancies between employment surveys of households and companies, Soss believes the number of illegal immigrants may have grown by 600,000 last year, far more than the usual estimate of 275,000. All told, the Urban Institute projects that immigrants will be 12% of the population in 2020, up from 10% today and just 6.2% in 1980.
SHRINKING POOL. The economy's increasing reliance on foreign-born workers has also emboldened groups pushing for the easing of immigration restrictions--and brought them increased support. Even Federal Reserve Chairman Alan Greenspan has suggested that more immigrants may be needed to cope with a shrinking pool of available workers. ''There's clearly a new opening in the immigration debate,'' says Frank Sharry, executive director of the Washington (D.C.)-based National Immigration Forum. Though policymakers are wary, given the anti-immigrant backlash of the mid-'90s, he predicts an overhaul of immigration laws in the next few years.
Already, the Clinton Administration plans a drive to grant residency to an estimated 500,000 long-term illegal immigrants. And Congress is likely this summer to lift the ceiling on the number of high-skilled, primarily high-tech workers allowed to enter the country each year. The allotment of so-called H1-B visas, which also cover such workers as medical technicians and university professors, was capped at 115,000 this year, up from 65,000 in 1998. But that's nowhere near enough: Soaring demand for tech workers used up all available visas by mid-March. Though current bills would raise that figure to about 200,000 a year, the Information Technology Assn. of America figures it will suffer a shortfall of 850,000 skilled workers over the next 12 months.
Unless Congress lifts the cap on high-skilled workers, many companies will be forced to create foreign subsidiaries to do their work, warns Jack Mollen, senior vice-president of human resources for EMC Corp. in Hopkinton, Mass. The world's leading maker of information-storage systems, EMC has more than 100 software and systems engineers on H1-B visas, and it desperately wants more. ''An increase in the number of immigrants is fundamental to us keeping a competitive position in the New Economy,'' says Mollen.
High-tech companies aren't the only ones clamoring for relief. Universities claim the current quotas are leaving them short of the 10,000 foreign faculty and researchers they need each year.
Less-skilled workers are in hot demand, too. The recently created Essential Worker Immigration Coalition, representing restaurant, hotel, and other companies, is formulating its own plans to loosen immigration policies for lower-skilled workers. ''Forget high-tech. We hear from members that the worker shortage is across the board,'' says Randel K. Johnson, vice-president of labor and employee benefits for the U.S. Chamber of Commerce, a coalition member. Johnson points to government estimates that the U.S. could see a shortage of 20 million workers by 2026.
''AS GOOD AS IT COMES.'' Pam Felix is on the front lines of the war to lure workers in Bethesda, Md. At her California Tortilla restaurant, she pays a starting wage of $7 an hour, plus full health and dental benefits after a year. ''For fast food, we pay as good as it comes,'' she says. Still, she's had a hard time filling her 30 jobs, and 20 are now taken mostly by immigrants. ''We shouldn't necessarily open the floodgates [to immigrants],'' says Felix, ''but the ones who are here are so hard-working.''
While immigration is widely believed to boost the economy as a whole, not everyone wins. For the bottom 20% of wage earners, pay may have been 8% to 10% higher without immigrant competition, says Steven A. Camarota, director of research at the Center for Immigration Studies, a nonprofit think tank. That's based on his 1992 study comparing wages in similar occupation groups with varying levels of immigrant competition. ''Throughout both good times and bad, there seems to be a small effect of immigrants on wages of low-skilled natives. It's not a big effect, but it's there,'' says demographer Jeffrey S. Passel of the Urban Institute.
If that's the case, why is the AFL-CIO reversing course to call for amnesty for an estimated six million illegal immigrants and an end to most employer sanctions? Because it, too, believes illegal workers are holding down wages and working conditions at the bottom of the labor market, says David A. Smith, director of the public policy department for the federation. Unions want to organize these workers so employers can't exploit them by threatening them with exposure and deportation.
Yet in this overheated job market, even frightened immigrants have more bargaining power than ever before. Consider Chicago janitor Ryszard Cebenko, 50, an illegal immigrant who came to the U.S. from Poland eight years ago. A former aircraft mechanic, he now makes $6.65 an hour, with no benefits, cleaning at a factory by day and a university by night. ''I have to be happy with whatever they give me because I don't have papers,'' says Cebenko.
But Cebenko joined the Service Employees International Union Local 1 in 1992, and the union is now threatening to strike Apr. 17 to win better pay and benefits for the 10,000 mostly immigrant janitors it represents in Chicago. ''The possibility [of employers] getting scabs today is pretty small. Who's going to scab for $6.65 an hour?'' asks SEIU spokesman Ken Munz.
In short, a tight labor market may ultimately lift all boats. But the nation will clearly have to wrestle with just how tight is too tight and how many immigrants are too many.
By Wendy Zellner in Dallas, with Michael Arndt in Chicago and Amy Borrus in Washington
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Copyright 2000, Bloomberg L.P.
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