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H-2B, or Not to Be? A Look at Labor Shortages and Immigrant Labor

by Jeff Soplop

H-2B, or Not to Be? A Look at Labor Shortages and Immigrant Labor

Several publications recently ran stories on issues with the H-2B visa program and impending shortages that are affecting local economies of various parts of the country. For those who aren’t familiar, the H-2B program allows US employers to bring in temporary workers for non-agricultural jobs. While the length of stay varies and can sometimes be extended, typically these workers come for about six months and then return home.

Some of the recent coverage is being driven by the fact that shortages are happening in parts of the country that voted for President Trump and yet, ironically, are highly dependent on H-2B workers. This NBC News piece, for example, covers H-2B worker shortages on Hoopers Island, MD, mainly for crab pickers who assist with seasonal harvest each year. Hoopers Island is part of Dorchester County, which voted for Trump by a 16-percentage-point margin over Hilary Clinton.

This incongruity makes for interesting feature stories – and catchy headlines: “Trump-voting crab town left shell-shocked by his visa changes” – but what’s perhaps most interesting about the H-2B controversy is that it’s a debate being carried out primarily between Trump supporters: businesses insist they need to use the program for seasonal workers to keep their businesses afloat while others want to quash immigration, claiming Americans are eager to fill these seasonal jobs.

For business owners, the situation is straightforward – there are insufficient local workers to meet seasonal demand, even when offering good wages of $15 per hour or higher. Looking at historical program applications, in FY2017 four out of the top five states requesting H-2B workers voted for Trump – Texas, Florida, Louisiana and North Carolina. The top occupations staffed by H-2B visa holders are landscapers, forest and conservation workers and housekeepers. So the program is clearly important in a lot of summer vacation and rural areas, many of which voted heavily for Trump, such as Hoopers Island.

The other side of the debate includes hardline immigration opponents who want to reduce immigration in all forms. This group is often led by the Center for Immigration Studies (CIS), which calls itself a research organization but has a long history of publishing the work of white nationalists. David North, a fellow at CIS, showed up in one H-2B story with this quote that summarizes their case against H-2B workers: “The solution is to raise the wages. It wouldn’t take much, maybe a dollar or two more an hour, and bingo, you’d have everyone you wanted.” By “everyone”, North means American workers would rush to take these jobs if only the pay was slightly higher.

To untangle these conflicting claims, let’s first consider whether businesses are right in claiming there is an actual shortage of H-2B workers this year.

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Is the Job Guarantee a Ponzi Scheme?

“The basic idea is that the government can’t run out of money. It creates money just by spending.” — Stephanie Kelton

This is true. Government cannot run out of its own money. But what is money? It is a token or pledge that can be redeemed for something of value. If government creates much more money than there are things of value to redeem it for the prices of those things go up. Not to worry, Zach Carter assures us:

But even inflation doesn’t impose a hard limit on policy options. The Federal Reserve can raise interest rates to deal with it, Congress can raise taxes to pull money out of circulation or even impose price controls.

Hyman Minsky expanded on this explanation in his financial instability hypothesis:

The first theorem of the financial instability hypothesis is that the economy has financing regimes under which it is stable, and financing regimes in which it is unstable. The second theorem of the financial instability hypothesis is that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.

In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values.

The financial instability hypothesis is a model of a capitalist economy which does not rely upon exogenous shocks to generate business cycles of varying severity. The hypothesis holds that business cycles of history are compounded out of (i) the internal dynamics of capitalist economies, and (ii) the system of interventions and regulations that are designed to keep the economy operating within reasonable bounds.

See? If “the authorities” decide to “exorcise [the demon of] inflation” through taxation or higher interest rates, it won’t be the government that goes belly up. It can’t run out of money. It will just be those speculative and Ponzi units whose net worth will evaporate. No problem!
It remains a mystery to me why job guarantee proponents point to Minsky as the patron saint of the job guarantee idea. It was, after all, Leon Keyserling who drafted the Full Employment Act of 1946, The Freedom Budget (1966) and job guarantee provisions of Humphrey-Hawkins (1976). Good old “siphoning off the increment to pay for the excrement” NSC-68 Leon.
Mr. Keyserling was a big fan of spending that “paid for itself” by augmenting growth in the gross national product. His 1966 Freedom Budget was also touted as being financed through an “economic growth dividend.” The idea was that economic growth of five percent over a ten year period would generate the revenue to pay for the program.
If it wasn’t the government doing it, the method of financing that Keyserling advocated would be a Ponzi scheme because it relied on revenues that would presumably arise solely from disbursements and not from the sales of value-added goods or services. Fortunately, a government cannot operate a Ponzi scheme because “it creates money just by spending.”
So, technically speaking, a job guarantee is not a Ponzi scheme. It’s only a wee bit Ponzyish.

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Downsizing

Dan here….Downsizing the home when retiring? How is that done? Anecdotal evidence in the Boston area reveals to me several reasons why downsizing is only a small percentage of the housing market:  Aside from being able to handle maintenance to a later age than in the past, and wishing to maintain personal community that a move would disrupt, downsizing is not necessarily as affordable as a cursory look might suggest.   Here is one look at data:

Via Calculated Risk:

Some interesting analysis from economist Josh Lehner, at the Oregon Office of Economic Analysis on whether people actually downsize in retirement. This is important since so many baby boomers are reaching retirement age. Will they downsize or will they age in place?

A few excerpts: Do People Really Downsize?

The question, or the assumption that older households downsize as they age is one that I’ve really struggled with trying to answer. Obviously it makes theoretical sense. As one’s children grow up, you no longer need as much space, and the love/hate relationship with the yard may become more physically taxing. I hear comments along these lines quite frequently. And many urbanists rightfully point out that one of the benefits of the missing middle housing — duplexes, quads, townhomes, etc — is it better allows aging in place. That is it would provide additional housing options within existing neighborhoods so if a household does sell/downsize, they do not have to leave their longtime friends and social networks. They can remain in the same area. An added benefit in this scenario would then be a larger, single family home coming back onto the market for another family to move into. We could adjust, or tailor our housing situation with our actual housing needs. Again, all of that makes sense. But do we actually see households downsize overall, let alone stay in the neighborhood? Turning to the data shows that it it kinda, sorta does happen on a small scale. …

 

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Jobs, Jobs, Jobs: GUARANTEED! — May 20 update

Class war? What class war?

Stephanie Kelton Has The Biggest Idea In Washington 

“Everybody wants a piece of Kelton these days because a simple, radical idea she has been workshopping her entire career is the next big thing in Democratic Party politics. She calls it the job guarantee… “

  • “Once an outsider, her radical economic thinking won over Wall Street. Now she’s changing the Democratic Party.”
  • “A onetime college dropout at California State University in Sacramento, Kelton has managed to earn the esteem of both Sanders and an oddball clique of multimillionaire Wall Street traders.”
  • “If you listen to Kelton long enough, you notice that she never refers to “bankers” or “Wall Street” with the derisive tone common among her political allies. She talks instead about “the financial community.”
  • “After all, Wall Street took her under its wing before Democrats took her seriously.” 
  • “Her career had changed tracks. She wasn’t just a clever economist with some quirky ideas anymore. Her credibility with Wall Street began to register as academic clout.”
  • “There are thousands of left-wing economists. But it’s hard for the economically inexpert to distinguish brilliant creativity from quackery. Kelton’s social credentials with Wall Street helped her stand out.”

I dunno what that’s about. Something about Wall Street?

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Jobs, Jobs, Jobs — GUARANTEED!

The current mania for “job guarantee” policies is making the Sandwichman anxious. I’ve been on the full employment beat for over 20 years so I think I have a pretty good grasp of the terrain. First principle is that there are no panaceas. My favorite policy option — reduction of working time — is not a panacea. Neither is yours.

Like my learned friend Max B. Sawicky, I am in favor of a job guarantee — provided it meets MY criteria. The proposals currently being shopped around don’t. That should not be a fatal flaw. Inadequate policy proposals can serve as the starting point for dialog that can lead to better proposals. From the left, Matt Brunig, and from the center?, Timothy Taylor have offered constructive critiques of the current proposals. I would like to offer a bit of critique from history.

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A Guide to the (Financial) Universe: Part III

by Joseph Joyce

A Guide to the (Financial) Universe: Part III

Parts I and II of this Guide appear here and here.

4.      Stability and Growth

Is the global financial system safer a decade after the last crisis? The response to the crisis by central banks, regulatory agencies and international financial institutions has increased the resiliency of the system and lowered the chances of a repetition. Banks have deleveraged and possess larger capital bases. The replacement of debt by equity financing should provide a more stable source of finance.

Indicators of financial volatility, such as the St. Louis Fed Financial Stress Index, currently show no signs of sudden shifts in market conditions. The credit-to-GDP gap, developed by the Bank of International Settlements (BIS) as an early warning indicator of systemic banking crises, exhibits little evidence of excessive credit booms. One exception is China, although its gap has come down.

But increases in U.S. interest rates combined with an appreciating dollar could change these conditions. Since the financial crisis, financial flows have appeared to be driven in part by a global financial cycle that is governed by U.S. interest rates as well as asset market volatility. This has led Hélène Rey of the London Business School to claim that the Mundell-Fleming trilemma has been replaced by a dilemma, where the only choice policymakers face is whether or not they should use capital controls to preserve monetary control. Eugenio Cerutti of the IMF, Stijn Claessens of the BIS and Andrew Rose of UC-Berkeley, on the other hand ,have offered evidence that the empirical importance of any such cycle is limited. Moreover, Michael W. Klein of Tufts University and Jay C. Shambaugh of George Washington University in one study and Joshua Aizenman of the University of Southern California, Menzie Chinn of the University of Wisconsin and Hiro Ito of Portland State University in another have found that flexible exchange rates can affect the sensitivity of an economy to foreign policy changes and afford some degree of policy autonomy.

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Trump to ban Title X federal funding of Planned Parenthood Clinics regardless of whether they Do Abortions or Not

“The Trump administration wants to effectively pull Title X funding from family planning clinics providing abortion services” as reported in Modern Healthcare.

Planned Parenthood while offering other healthcare services would not receive federal funding if they provided any abortion services or referred patients to other facilities that did perform abortions.

The Washington Post “For Planned Parenthood abortion stats, ‘3 percent’ and ’94 percent’ are both misleading

Planned Parenthood would say abortions are just 3% of total health services.

The Susan B Anthony would argue abortions are 94% of all Planned Parenthood Pregnancy Services.

I would argue it is better to have an abortion in a controlled medical area rather than in a back alley with a coat hanger.

Of course let us not forget the person signing this rule has paid a $million for one Playboy Bunny to have an abortion and somewhere in the files are probably more hidden payments made. The fact that he would even bring himself to sign such a bill after what he has done and talked about is ludicrous.

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The percentage of employees who don’t get wage raises; is the Taboo undergoing an “extinction burst”?

The percentage of employees who don’t get wage raises; is the Taboo undergoing an “extinction burst”?

I came across the below graph yesterday from the Kansas City Fed. It’s pretty shocking:

It represents “wage rigidity.” In english, that means the percentage of employees who don’t get any annual wage increases.

It speaks for itself. Nine years into the economic expansion, with an unemployment rate under 4%, and un underemployment rate of 7.8% (only 1% above its all time low), more workers still aren’t getting any raises than at any time during the 2001 recession or at any time during the expansion thereafter.

And it isn’t simply slack in the labor force.  Here’s the employment-population ratio for prime age workers:

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