Monday, August 29, 2016

Scapegoat: How Trump Misleads Angry American Workers on Immigration and Wage Stagnation

by Nomad

Economic experts for both sides of the political spectrum tell us that Donald Trump is dead wrong to blame wage stagnation on flawed immigration policies. That hasn't stopped him searching for scapegoats and misleading the angry American Workers.

During his lengthy acceptance speech at the Republican convention, the Republican nominee Donald Trump blamed lower wages for American workers on immigration.
He said:
Decades of record immigration have produced lower wages and higher unemployment for our citizens, especially for African-American and Latino workers. We are going to have an immigration system that works, but one that works for the American people.
The speech was filled with an eighteen-wheeler full of balderdash so a statement like that probably went unnoticed. However, stirring up middle-class resentment like that is exactly how Trump managed to rise to his precarious place in American politics. 

Wage Stagnation and the Plight of the American Worker  

It is true, wage stagnation is not something that Trump just made up to win votes. It is real and it is causing widespread hardship due to income inequality. Wages have simply not kept up with the cost of living. Add to that the general expansion of non-wage benefits, fall in the price of consumer goods and rise in the price of services, such as education and healthcare and you have a lot of home-grown misery out there.

Lawrence Mishel, one of the authors of a series of recent reports from the Economic Policy Institute (EPI)
"Since the late 1970s, wages for the bottom 70 percent of earners have been essentially stagnant, and between 2009 and 2013, real wages fell for the entire bottom 90 percent of the wage distribution."
The report also pointed out that the Great Recession of 2008 didn't create this problem. It only compounded and exacerbated an economic effect that stretched back some 30 or more years.

Most importantly, the report finds that wage stagnation is not an accidental thing. Policy makers have created (or at least, allowed) the problem of wage stagnation.  A very wealthy minority with undue influence in Washington were allowed to rake in enormous profits based on frozen wages and increased productivity. 

Trump casually blames immigrants for the problem and yet cannot supply any evidence for this idea. And in turn, his working class fans seem oblivious to the peculiar fact that they are listening to a billionaire acting like an authority on low wages. For some reason, they believe that this man can actually sympathize with the plight of the American worker. There's a lot of suspension of disbelief going on, it seems.

So perhaps it is not all that extraordinary that Trump can get away with blaming undocumented workers. That's something that President Obama attempted to make clear in his State of the Union
Immigrants aren’t the principal reason wages haven’t gone up enough; those decisions are made in the boardrooms that too often put quarterly earnings over long-term returns.
Experts argued that Obama was too forgiving when he used the phrase "the principle reason." That was wrong. There was no relationship at all between wages and immigrants, Obama's critics said.
If one wishes to find the real reasons for wage stagnation, there are plenty out there.

Five Real Reasons 

A website for the largest federation of unions in the United States, the AFL-CIO, summarizes the 5 leading causes of wage stagnation and, perhaps unsurprisingly, immigration is not listed at all.

1. The abandonment of full employment
2. Declining union density
3. Changes in labor market policies and business practices
4. Deregulation of the finance industry and the unleashing of CEOs
5. Globalization policies

According to Trump's logic, by accepting low wages, illegal immigrants have destroyed the wage standards of the US labor market. For angry American workers- and they have every reason to be angry- Trump has found the perfect scapegoat, illegal outsiders. 
It seems to make sense. However, economic experts agree that this conventional wisdom is wrong, wrong, wrong.

In August 2015, Forbes magazine (a publication most would consider friendly to the corporate world) pretty thoroughly trashed Trump's position.
Anti-immigration voters and candidates are on the wrong side of history and the wrong side of social science on this: opening the borders—even just a little bit—could make a huge difference for the world’s poor while making Americans richer as well.
Experts provided support for the surprising claim in the Forbes article. According to an April 2015 symposium on the effects of illegal immigrants in the Southern Economic Journal, illegal immigrants actually raise wages for documented/native workers.
That certainly seems to defy the logic of a labor market.

However, the research that found that
documented workers’ wages rise with increases in the share of undocumented workers in a worker’s county and employed by their employers. The biggest boosts are for workers in low- and medium-skill firms that hire a lot of undocumented immigrants with an even larger boost for workers in low-skill firms with a lot of undocumented workers in the county and industry.
There used to be a saying in this country ( commonly attributed to John F Kennedy) that has long fallen out of favor. "A rising tide lifts all boats" is the idea that improvements in the general economy will benefit all participants in that economy and that economic policy, particularly government economic policy. 
This, economists seem to be suggesting, applies to immigration. The rising tide principle is exactly the opposite of the "trickle-down" economic theory. 

Coincidentally, it was under Reagan that the policy of trickle-down began to be widely promoted. That was at just about the same time as wages began to stagnate. 

Historical Examples

Immigrant workers do not actually compete with American workers, or at least, not in the way that Trump and others have consistently implied. 
The study explains:
The law of comparative advantage says we get more productive when we have more trading partners, and the arrival of undocumented workers with limited English skills frees up low-skill American workers who can then specialize in tasks that require better English.
An immigration policy analyst at the Cato Institute’s Center for Global Liberty and Prosperity, David Bier points out that the history of the American economy after the World War refutes Trump's claim. Income stagnation goes much deeper than undocumented workers stealing American jobs. 
Immigration critics claim that wages cannot grow if the labor force is allowed to expand quickly. But history refutes this claim. From 1948 to 1980, the labor force grew by 76 percent, and the median income for wage and salary workers shot up by over 80 percent for both men and women. In the following 33 years, the labor force grew just 43 percent—almost half the earlier amount—yet median income rose only 8 percent for men and 55 percent for women. Since new job-seeking has declined since 1980, new job seekers—foreign and domestic—cannot explain income stagnation.
The post-World War II era is not the only example. The so-called Gilded Age (from the 1870s to about 1900) provides us with a more conclusive argument against Trump's proposed anti-immigration policy as a key to economic prosperity.

Even though we think of this period as a time of abject poverty for a large percentage of the population, there's another side to the story. 

It was also an era of rapid economic growth, especially in the North and West. During the Gilded Age, the U. S. economy grew at the fastest rate in history. Yet, it was, at the same time, a period saw an influx of millions of European immigrants (27.5 million in total). Many (if not most) were unskilled, uneducated and unable to speak or write English. The majority of immigrants who came to the US with nothing were able to prosper within a single generation.

According to the 2013 book, The Price of Inequality: How Today's Divided Society Endangers Our Future by an American economist and a professor at Columbia University, Joseph E. Stiglitz:
real wage growth of 60% between 1860 and 1890, spread across the ever-increasing labor force. The average annual wage per industrial worker (including men, women and children) rose from $380 in 1880 to $564 in 1890, a gain of 48%.
As bad as the Gilded Age might have been in terms of income disparity, at least, wages kept up with inflation. Today, things are much worse than that. Even as we witness the indefensible rise in income inequality, a 48% gain in wages is something depressed American workers no longer even dream about. 
Not for themselves and not for their children.
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In other words, Trump is selling American workers a well- disproved lie. And keep in mind that the Cato Institute is certainly not a liberal think-tank by any definition.  The organization was not created to expand the liberal conspiracy. 
As a matter of fact, Wikipedia describes Cato  as an American libertarian think tank with ties to the Koch brothers- fathers of the Tea Party.
That's pretty incredible when you think about it. Both sides of the political spectrum (who normally agree on nothing) agree that Trump's idea that immigration is the principle cause of wage stagnation is a load of rubbish.

Trump's Campaign Ghost 

There are other problems with Trump's remark. One of those problems is what Trump himself has said earlier in the campaign. 
In November 2015, in response to a question about the New York decision to raise the minimum wage for certain workers to $15 an hour, he said
“Taxes too high, wages too high. We’re not going to be able to compete against the world.”
It was clear by that statement, Trump wasn't interested in raising wages for American workers, but decreasing them in order for America to more competitive. 
(In an earlier blog, we took a look at the "race to the bottom" policy that Trump has hailed as the answer to America's economic problem.)

It's an example in which Trump's "brilliant" solutions contradict one another. According to that strange logic, we ought to be welcoming immigrants who are willing to work for practically nothing. With a workforce made up of slave wage undocumented workers. the US could definitely compete with Third World nations.   
Come to think of it, we could leave it to illegal aliens to make America great again and dispense with electing Trump altogether. 
*   *   *
Based on faulty information, arrogance, and political dishonesty, Trump's immigration plan is a disaster in the making. Worse than that, it represents a search for the scapegoat to deflect us from getting to the real source of the problem.

As a nation, we will be forced to expend lots of energy debating pointless things, it will further divide the nation. In the end, it won't actually solve the problem and, thanks to the billionaire Trump, the real culprits will remain at large.