January 31, 2001

Mr. James F. Hoge, Jr.
Editor
Foreign Affairs
58 East 68^th Street
New York, NY 10021

Dear Mr. Hoge:

Please find enclosed a response to the recent article by James Goldborough. I leave it to your discretion whether to publish this as an article, an essay or a letter to the editor.

Please feel free to contact me should you have any questions about the enclosure, or need confirmation before publication. My direct number is (716) 231-1122.

Sincerely yours,

Margaret A. Catillaz

President

James Goldsborough’s recent article on these pages ("Out-of-Control Immigration," September/October 2000) is factually inaccurate, wrong on the economy and just plain misguided. Goldsborough manipulates discontent and fears about the economy, rather than dealing with the reality of our booming economy. He overlooks the fact that leading economists report that our economy is undergoing a sea change, which affects not just the types of goods and services produced but also the way we measure economic progress. These same economists also repeatedly have lauded the contributions that immigrants and immigration have made to this new economy. As a result, Goldsborough’s thesis is no longer accurate.

Bad Facts
His article is so replete with factual inaccuracies that it would take an entire column just to correct the misconceptions and misinformation. For example, he wrongly asserts that "skilled immigrants are driving down wages for America’s skilled labor force and diverting resources from the education of Americans."ⁱ Nothing could be further from the truth. In fact, the latest survey of the digital economy conducted by the U.S. Department of Commerce finds that the average wage for skilled high-tech workers was 85% higher than the average wage for all private sector workers.ⁱⁱ Since 1992, wages of high-tech workers grew by 5.8%; average private-sector wage growth over the same period was 3.6%.ⁱⁱⁱ The Commerce Department reports that skilled workers in the high-tech industry (i.e., those with a bachelor’s degree or above who would be eligible to receive temporary visas under the H-1B program) earn an average of $59,900^iv, and that the average weekly earnings for such skilled professionals went from $810 to $952 between 1992 and 1998^v The law governing H-1B visas also requires employers to pay temporary foreign professionals the same prevailing wage and benefits as they do U.S. workers in similar positions.

Goldsborough’s allegation is simply refuted by the law governing temporary foreign professional employees. Two recently signed laws increased the cap on H-1B visas, and requires sponsoring employers to pay a $1,000 fee.^vi Monies generated by those additional fees are used for job training,^vii scholarships for low-income students pursuing degrees in mathematics, engineering or computer science,^viii and demonstration programs to provide technical skills training for workers.^ix

A Blast from the Past
Goldsborough’s entire thesis is based on an old economic model in which the U.S. economy goes through periods of boom and bust, during which productivity and employment are linked, and it is virtually impossible to maintain ultra-low levels of unemployment and low inflation.

The current growth has been fueled largely by dramatic increases in productivity and efficiency.^x These increases, in turn, have been fueled by high-technology and the way that U.S. businesses employ this technology.^xi As Federal Reserve Chairman Alan Greenspan recently remarked:

These technological changes are interesting in and of themselves, but what is important is that "the efficiency gains that have already been achieved are permanent."^xiii Chairman Greenspan has stated that he sees "no reason that productivity growth cannot remain elevated."^xiv In other words, according to Greenspan and other economists, these changes are here to stay; companies and our economy can no sooner forget how to use a computer and improve productivity than we can forget that we invented the wheel and how it works.

Perhaps the most profound impact of these structural changes, in the words of Federal Reserve Board Governor Laurence H. Meyer, is that, even if the U.S. economic growth rate slows, "the resulting growth rate could remain well above the average growth rate over the previous 25 years."^xv Even if our economy slows down, we still will not see the massive layoffs, job displacements and corporate closures that we have seen during previous downturns.

To be fair, it is not surprising that Goldsborough missed the boat. After all, the Federal Reserve Board is just beginning to understand this new economic paradigm. For example, Chairman Greenspan has acknowledged that the Federal Reserve recently "has been required to react to a constantly evolving set of economic forces, often at variance with historical relationships."^xvi Vice Chairman Roger W. Ferguson, Jr. recently remarked that the Federal Reserve Board’s "understanding of the macroeconomic environment has deteriorated,"^xvii and, therefore, it is relying less upon information from "increasingly unreliable old models and more upon inferences from the more recent past."^xviii

Fears Not Facts
It is perfectly understandable that, during such times of dramatic economic change, people get worried. Polls and news reports show that just such anxiety is occurring. Economists report that lingering uncertainties explain why wage pressures remain more modest that they were in the milder and shorter economic booms of the recent past.^xix While American acknowledge an abundance of jobs, a surprising number still tell pollsters they fear being laid off in the near future.^xx

Even Federal Reserve officials are acknowledging this financial insecurity lurking just beneath the future. For example, Chairman Alan Greenspan recently said one unwelcome byproduct of the rapid economic and technological changes "is the evident insecurity felt by many workers"^xxi caused by "a fear of job skill obsolescence."

Who Needs Workers?
In so doing, Goldsborough ignores what leading economists have called the gravest threat to our continued economic expansion: the severe worker shortages hitting all sectors of our economy.^xxii For the past three years, the Federal Reserve Board’s so-called "Beige Book" has reported that businesses across all economic sectors have been experience severe shortages.^xxiii

A leading demographic economist testified before the House of Representatives that, "The United States has entered a protracted period of worker dearth,"^xxiv that "consists of a slowly growing and eventually shrinking workforce pool."^xxv The existing and coming worker shortages will "seriously threaten America’s economic growth."^xxvi In fact, from now until the year 2008, the workforce will grow by only about 1% annually.^xxvii The latest government report shows that in 2008, the U.S. will have a shortage of 6,219,000 workers.^xxviii Things will get worse after the year 2011, when the total size of the nation’s workforce will actually shrink.^xxix

These worker shortages are caused by simple demographics. Between now and 2030, the number of people age 65 or older will double, while the number of people of prime working age (i.e., 20-64) will increase by only about 15 percent.^xxx From 1999-2008, demographers predict that the number of people between ages 25 and 40 will drop by 1.7 million.^xxxi

Simultaneously, people born during the post-World War II baby boom will either retire or near retirement age, and we are feeling the effects of a lower birth rate. The Congressional Budget Office estimates that, due to the retirement of so-called baby boomers and the lack of new bodies entering the workforce,

The Coming Economic Crisis
What do the converging demographic factors of severe worker shortages, a potential worker dearth and the coming retirement of post-World War II workers -all of which Goldsborough ignores- mean? Budgetary analysts and politicians of both political parties predict it could spell a budgetary and economic crisis.

The National Bipartisan Commission on the Future of Medicare predicts that, by 2011, nearly 77 million baby boomers will begin entering the medical benefits system.^xxxiii Due to the demographic trends described above, "As the number of new Medicare beneficiaries rises sharply, there will be significantly fewer workers per retiree to fund Medicare."^xxxiv The Social Security Administration predicts that Social Security recipients will increase from about 20 percent 1990 to 35 percent in 2030.^xxxv

Immigration Is a Solution
There is one other solution to our coming crisis. As demographic economist Richard Judy put it in his testimony before the House: "Most of the demographic realities . . . are immutable except, perhaps in the very long run. Even then, however, neither birth rates nor death rates are responsive to policy change. Among the fundamental drivers of demographic change, only immigration policy is amenable to manipulation by government policy makers."^xxxvii

Judy’s comments have been echoed by none other than Alan Greenspan, who on more than one occasion, has stated that one way to solve the worker shortage (and presumably forthcoming disparity between workers are retirees) would be to "open up our immigration rolls significantly."^xxxviii He also has stated that this demographic crisis would continue "unless immigration is uncapped."^xxxix

Yet, Goldsborough insists that immigration is off limits. Rather than expanding immigration to help save the United States from its coming budget crisis and ensure our continued economic expansion, Goldsborough would reduce it. He would condemn us to a potential demographic, economic and social disaster, rather that admit that he and others who played off people’s fears were and are wrong. That would be more than foolish and stubborn, it would be the public policy equivalent of a crime.

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