Increase Immigration or Citizen Labor Force Participation? Policy Problems

By David North on February 17, 2022

All too often business interests (joined by the ill-informed Left) say that we have too few workers and must therefore increase immigration above its current high levels.

The reply of sensible voices, like that of my colleague Steven Camarota, is that we do not need more alien workers because there are more than 54 million people of working age who are not now working or seeking work. If we could get a couple of percent of them back to work, any alleged “labor shortage” would be solved.

This leads to the question of means: What do we need to do to encourage more potential workers to work longer, even part-time?

Clearly, we need to adjust the labor market to encourage more work, but every tool at our disposal has some disadvantages. No matter what we do, somebody’s ox gets gored, including oxen owned by some very important parts of the body politic. I would argue that it is far easier to keep migration down to a dull roar rather than to tackle these other issues.

There are two general ways of getting more workers in the U.S. economy:

  1. By making work more attractive; and
  2. By making non-work less attractive.

Let’s look at some of the complications when attempting these changes.

Making Work More Attractive. The most obvious way to get more people to work is to increase wages, but as my former boss, the late ex-Secretary of Labor W. Willard Wirtz, often said, “Management is much more interested in increasing the size of the workforce than it is in increasing the size of paychecks.”

If corporate bosses were to slightly increase the worker’s share of the pie and thus decrease their share and that of the stockholders, most of the problem would be solved, but that does not happen and our political system is such that government will not force that solution on our corporations. Look at the minimum wage, still set at the ridiculous $7.25 an hour for the last dozen years.

Another way to make work more attractive would be to shape the work-time to meet the needs of staff members who do not want to work the standard five eight-hour shifts. Some sectors could adjust to a mix of part-time workers and full-time ones. In some other sectors, as we have learned recently, work from home is a real option. Specific jobs could be adjusted to meet individual workers’ needs.

For example, the standard practice of American supermarkets is that the cashiers stand all day. In the UK they are seated. If an employer uses the latter system the employer would have access to a larger pool of workers, and many who do not want, or cannot, stand all day would be able to join the workforce. But that would be a jolt to the supermarkets’ status quo.

Making Non-Work Less Attractive. One basic way to get more workers at any one time, is to postpone retirement. If every worker, on average, spent six more months on the job and had a six months shorter retirement, that would make a huge difference both in the labor supply and to the fiscal health of the Social Security system.

Let’s look at some numbers: There are about 160 million people employed at the moment; let’s say that the average number of years of employment is 40. Adding another six months to that would bring the total to 40.5 years, or an increase of 2.5 percent. Thus, adding six months to the work life, on average, would increase the size of the labor force to 164 million.

While the Chamber of Commerce would be delighted, and all reasonable observers would be pleased, the uproar from those nearing retirement age would probably persuade Congress not to inflict such a rule.

Another way to increase the years on the job, though nowhere nearly as important, would be to increase the minimum required earning years for Social Security benefits from the current 10 years (called 40 quarters within the system) to, say, 12. Since men have longer working careers than women, this would probably hurt some marginal female workers, and again there would be a howl from the Left.

Yet another way to increase the size of the workforce would be to install a new program for those about to retire. One could announce a planned retirement one year before the event, and past the year of normal retirement, and payroll taxes would be eliminated for that final extra year in the workforce. The loss in income to the trust funds could be compensated by lifting the maximum now set on Social Security payroll taxes from the current $147,000 by $20,000 or so.

The oxen gored in that case would be best-paid of the workforce, and their political influence would undoubtedly outweigh that of those who would benefit.

The point of all this is that increasing the years of work, while an excellent idea, would upset a lot of interests and lots of voters. Politically, it would be easier to insist on some reduction in the current massive inflows of immigrants. It may be callous to point this out, but most of the people losing in that equation do not have the vote.