Explaining Trump’s Appeal, Part 2

Dan Crawford | August 8, 2016 9:54 am

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US/Global Economics

by Mike Kimel

Explaining Trump’s Appeal, Part 2

Last week I had a post looking at Trump’s appeal to a large segment of the electorate from an economic perspective. I noted that growth of real GDP per capita in the United States has been very, very slow since the year 2000. Even the recovery (say, from 2010 to the present) has been dismal from a historical perspective.

Today I want to discuss Trump’s appeal to some from a perspective of immigration. This is a complex issue, even in Trump’s mind. That means it can be sliced many different ways, which means it will require a few posts. All of which is to say, if I’m not covering your favorite immigration-related Trumpism in this post, please be patient.

To begin, here are figures for employment, population, and percentage of the population that is foreign born (see slide 3). I used the first and third columns to also calculate the native born and foreign born population.

kimel 11Figure 1

The data can then be modified to show the annualized change over a ten year period:

kimel 12Figure 2

This table tells a few stories. The first is that population was increasing at a faster and faster rate through 1980. Since then it has continued to increase, but at a slowing rate. The second thing we note is that employment changes followed the same pattern as population changes.

 

But then things get very interesting. From 1950 to 1960, the native born population outpaced job growth. However, it wasn’t a problem for the native born population since the foreign born population shrunk at the same time. In every other decade through the year 2000, job creation outpaced the increase in the native born population. But from 2000 to 2010, job creation was just north of zero, and certainly slower than the rate of increase of the population (both as a whole and native born).

Now, look at the foreign born population. From 1950 to 1970, it either shrunk or grew slowly. Since 1970, however, the foreign born population has increased at a much faster rate than the native born population. Since 1970, the foreign born have taken up the slack between the number of jobs created and the natural increase in the native born population.

But in the last decade, something changed. Though job creation was too slow to employ the native born population, the foreign born population continued to increase rapidly. In other words, the foreign born increase added to competition for a smaller number of jobs. So the notion that immigrants are simply doing the jobs Americans won’t do may have been more or less generally true for a few decades. It probably wasn’t true since GW took office, though. (Sure, the native born population may skew older and include an increasing number of retirees, but the Millennials are now a larger cohort than the Baby Boomers.)

There is another really cool thing we can do with the data which will help us tell more stories. For example, does a more rapid population increase in one decade correlate with faster job growth over the next decade? Do results change if the population is domestic or foreign born? Here’s a little table answering those questions:

Figure 3 - Correlation between changes in Population and changes in employment ten years laterFigure 3

So, how do we interpret this? Well, the correlation between ten year changes in the population and the ten year changes in employment that occur a decade later is about .45. That is to say, in general, the bigger the increase in the population during a given decade, the bigger the increase in the number of people employed over the following or next decade. The correlation is, in fact, quite a bit higher when we use the native born population. In other words, the greater the increase in the native born population over a ten year period, the faster the increase in the number of jobs over the subsequent ten years.

The last row, however, points to a problem. The change in the foreign born population is negatively correlated with employment figures a decade later. Put plainly, over the period for which we have data, the bigger the increase in the foreign born population in a given decade, the fewer jobs were created in the next decade.

Knowing how the commentariat works, it occurs to me that someone is going to state that the decrease in the foreign born population in the first decade in our sample drives the negative results on the last row, so the second column of the table leaves out the 1950-1960 period. The results are, if anything, stronger.

The second issue that someone will try to use to beat down the results in comments is that correlation is not causation, even if we are correlating series where one occurs before the other. That, of course, is a correct observation. But there is a converse that is also true – if the the correlation between series X in a given period and series Y ten years later is negative, it is hard to construct a story where more X generates more Y. In the period for which we have data, immigration has not, on the whole, created jobs.

Now, these results deal with aggregates. There are, of course, many examples of immigrants creating jobs. However, on a grand total, over the period for which we have employment figures, the foreign born population has not been a growth driver. That said, in periods where job creation exceeds the natural increase in the domestic born population, immigration doesn’t generate much friction. But that isn’t the case at present.

My next post on the series will add a bit more data, use it to explain the results seen in tables two and three above, and tie that explanation into the proposed Great Wall of Trump along our southern border.

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