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Business Calls for More Immigrants: At What Cost to Taxpayers?

Figure 4 updated through 2016

I was checking the headlines this morning and found a Mankato Free Press article (summarized below) calling for much more “immigration.” We are hearing the call for more immigration every day in Minnesota as employers struggle to find good employees around the state. And it’s more like an alarm since the President called a “time out” on refugees and immigrants, and signaled a desire to re-work trade agreements.

From the MANKATO FREE PRESS:

As debate rages over immigration enforcement, tightening the border and renegotiating trade agreements, Minnesota business leaders warn that a slowing of immigration will stifle the state’s economy. “Immigrants are a significant contributor to the development and growth of the state’s economy,” said Bill Blazar, president of the Minnesota Chamber of Commerce. “And that’s true whether you’re in Minneapolis or Mankato or Thief River Falls.”

The uncertainty that President Trump has introduced is unsettling—change always is. But there is a freaked-out tone to the conversation that calls for a review of where we are as a state. Also, I have some questions for the business owners.

The business chambers are selling hard that immigrants will meet a business need, work hard and pay taxes etc. and I get that. But are there costs that are unaccounted for?

First let’s look at migration trends.

If you look at the chart below (State Demographer, January of 2015), you will see that in the 1990’s Minnesota’s migration pattern used to have a mix of international (immigrants and refugees) and domestic (people born in the United States or immigrants who originally entered Minnesota from somewhere in the United States).

Figure 4

But look at the shift in 2001 when international migration suddenly increased and outpaced previous levels of domestic migration. The immigration trends seem to be moving in the direction the business community is calling for. Minnesota has lots of international migration by historical standards. Is this because we have lots of jobs that Minnesotans cannot or will not fill?

Just as dramatically, we also have domestically-born people leaving the state in droves (and they are not just snow birds). According to a report on income migration by my colleague Peter Nelson last year, most are working age people making a good living, also known as taxpayers.

In 2001, Minnesota began to lose more domestically-born people to other states than it gained. We can safely assume that most of the people leaving are making more money, and paying more taxes, than the immigrants coming to our state. That is not a good trend.

Most people assume that the focus on immigrants (and refugees) as a solution to a worker shortage means that businesses are looking for a few skilled people (engineers, and other IT employees) but that most of the jobs are “cheap labor” for jobs that “Americans will not take.”

To the extent that it is skilled labor we need, why are people from Minnesota/the U.S. unable to fill these jobs? Why don’t business chambers focus on working with educators to prepare our domestic workforce for the jobs that await them?

As for unskilled jobs, how much do our welfare policies and extended unemployment insurance explain the lack of interest on the part of Americans in taking these jobs? Particularly when unemployment was running high and we have historically low labor force participation rates, especially among men?

What can we do to get them off their duffs?

What is the business community doing to insure that this immigration is a long term success, not a just a short term fix? Why are we ignoring the cultural differences in the people who are immigrating (religion, labor force participation rates especially among men, the practice of polygamy and female mutilation by Muslims)?

Are employers indifferent as to whether this immigration comes from economic migrants who are seeking to work and become “American” as opposed to immigrants and refugees who may not be coming here for the same reasons? Should we look at who is most likely to succeed by integrating culturally as Minnesotans?

The business chambers and media often conflate immigrants and refugees. Both have legal status but refugees are almost certainly to be on intensive welfare for years. Unfortunately, immigrants are more and more likely to also be on welfare.

The cost to Minnesota may be quite different depending on where in the world people come from and why they arrived in the United States. But one thing is certain: welfare dependency is a sure-fired way of making sure that people do not work and that they will have a hard time making the transition to being working class or middle class.

Refugees and welfare-dependent immigrants not only add to Minnesota’s already ballooning welfare costs, they add huge indirect costs to school districts, ESL language assistance, the court system, law enforcement and other institutions as we absorb and attempt to integrate new arrivals.

The tragic problems Sweden is experiencing, while perhaps out-sized due to the massive numbers of refugees from Somalia, is worth an honest review. Culturally Minnesota is a lot like Sweden. We have to get comfortable talking about these problems.

What is Minnesota doing from a policy perspective, to create this worker shortage and make matters worse rather than better (e.g. tax policies that drive up the costs of doing business, the cost of employing people so that business demands “cheaper” employees). What are we doing to drive good employees from Minnesota, and create a talent and employee shortage?

Here is Susan Brower, our State Demographer:

Compared to other Midwestern states…Minnesota competes favorably in terms of overall positive net migration. But considering the reversal of domestic migration to a net outflow more than a decade ago, and given our state’s near-term labor force challenges with the Boomers’ retirement, additional attention to our migration situation is warranted. More than 100,000 people come to Minnesota from other states each year, and an even greater number leave Minnesota for other states. These sizeable flows of people present an opportunity to change the migration equation to better benefit our state. Minnesota should work to stem and reverse domestic losses, redouble efforts to attract and integrate new residents, especially young adults, and seek to retain its current resident population.

To summarize, while I am very sympathetic to the needs of the business community to find great employees, from low-skilled to high-skilled, I would like to see a shift in the conversation to recognize that:

  • New arrivals, especially refugees, require a big investment from taxpayers. That is an expensive model for creating a workforce.
  • Why not instead enact state policies to retain and attract Americans of all skill levels to Minnesota for work, and reverse the flow of tax-paying Minnesotans out of the state?
  • Why not focus on apprenticeship programs at high schools and trade schools as the source for new employees? In other words, rather than looking abroad, let’s figure out how to get Americans back to work and filling the needs of U.S. business. There is a disconnect in skills, so let’s figure that out.

We think that most Minnesotans would rather pay a little more for products that are made by higher-paid employees rather than pay through their taxes to subsidize a low-skilled, low-wage workforce just to keep prices lower.

We also think that Minnesotans enthusiastically welcome skilled and unskilled immigrants who are ready to work, contribute to the tax base and embrace the American experiment.

 

 

 

 

 

 

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