Labor shortage changes immigration debate

The tightening labor market in Wisconsin has led some business leaders to ask politicians to rethink state and national policies on immigration.

At a time when Republican presidential candidates, including Gov. Scott Walker, are veering to the right on immigration issues, businesses are being forced to constrain growth because they can’t hire enough people.

One of the most outspoken executives on the shortage is Scott Mayer, CEO of QPS Employment Group, a staffing company with 30 office locations, 280 employees and 5000 temporary employees at work at 1500 companies in the Midwest. “We can’t fill $12 an hour jobs,” he said.

“The minimum wage is pretty well gone,” he added.

He and other business executives are more pragmatic than polemical about the 12 million illegal immigrants now residing in the United States. “The illegals, are they taking all the jobs?” he asks. “No!”

Further, he maintains that losing those 12 million workers “would kill the economy.”
He goes so far as to say that labor shortages could cause a recession.

Several executives I have interacted with in recent weeks said they support some kind of path to legal status for the illegals so they can go to work in the above-ground economy. It doesn’t have to be full citizenship.

At Serigraph, for example, we recently decided to hire six people for fulltime jobs, but we couldn’t complete the hires when they couldn’t produce papers.

The unemployment rate has dropped so low that the remaining people without jobs seem to like it that way. That may or may not be true, but it is true that many file an application and then don’t show for the job interview.

A good number drop out of the application process when they learn they have to pass a drug test.

That said, here is an addressable issue. Under the present system, subsidies are withdrawn quickly as people go back to work. If a jobless person is making the equivalent of $9 per hour on unemployment, and then takes a job at $10, and then loses $2 in subsidies, meaning she nets $8 at work, there is a big disincentive to take a job. It is rational economic behavior to stay home.

One obvious conclusion, on which labor and management can agree: we need policies that make people better off for working.

You would think that the economic centers and institutes in the UW System could analyze the complex interactions for federal and state subsidies and come up with a plan for smoothing out their withdrawal so net income rises as people re-enter the work world and move up the pay ladder. (Perhaps such pragmatic work is not abstract enough to catch their attention.) A legislative council could get that job done.

Quick service restaurants, by example, have responded to the labor shortage been by handing out $1 per hour raises. Great! But if the employee faces cliffs in the fall-off of subsidies like food stamps, childcare and earned income tax credits, it’s not so great. We need to smooth out those cliffs so a worker getting a raise comes out ahead on combined pay and subsidies.

To find and develop workers, Wisconsin companies are adopting a variety of tactics beyond raising pay. They are reestablishing apprenticeships for youths and adults. They are putting in on-site health clinics as a benefit. They are accepting GEDs as equivalent to high school diplomas. They are hiring veterans. They are courting young millennials via social media. They are paying for further education.

These are all promising advances that will add to the prosperity of the state’s workers. But Wisconsin’s demographic projections are so dire that it is not enough.

One political leader sums it up this way: for every 5000 births in Wisconsin, 6000 people are dying and 10,000 boomers are retiring. Therein lies the challenge.

Some states, those on the east, west and southern borders, pick up working age people through in-migration. But that doesn’t happen on a net basis in the Midwest.

Wisconsin is picking up some people along its border with Illinois as low-income people move north for higher benefits. But we are losing more than 10,000 college graduates per year on a net basis, the “brain drain.” That’s a catastrophe in the making, since the annual loss cumulates into big numbers in a very short time.

On the state level, we need to rev up the economy with high growth, tech-based startups. Our kids and grandkids will stay here if we have enough interesting, high-pay jobs for building a career. Look at the Epic effect in Dane County.

Work force training is part of the answer. One software company owner told me he would hire 20 programmers tomorrow if he could find them. State schools have ramped up software programs, but we still need more code writers. And the pay is great.

Many efforts are at work to tap into the unemployed pool in Milwaukee. That work is essential.
Beyond that, Mayer wants to change immigration policy. “We need more legal immigrants in a controlled manner,” he said.

He cites the example of $15 apple-picking jobs going begging in the state of Washington. The shortage of labor cost the growers a quarter of their crop last year. In Wisconsin, $15-$20 jobs milking cows are going begging.

Will pragmatic business people be able to affect the political debate on the right as GOP presidential candidates try to out-do each other’s conservative agendas and credentials?

Often in politics, it takes a crisis to break through the cant and dogma. The growing labor shortage may be just that.

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  • Todd Temperly

    There needs to be more research into this. Just because you repeat ‘labor shortage’ over and over does not make it true. Many of those companies claiming a labor shortage most likely have a history of re-orgs and job eliminations of workers age 40 and above. If you want workers, do not lay them off on a whim. Has anybody actually requested records of these companies of people who submitted job applications and resumes? Whenever I go job searching, only 25% of companies I submit resumes to even respond back. How many applications and resumes are these companies throwing in the trash. What about able-bodied people on welfare assistance? There is no manual labor shortage as long as this program exists.

    • JohnTorinus

      Why would these executives lie about this issue?

      • Todd Temperly

        A push for cheaper wages which contradicts our politicians of promising higher wages. Main reason people lie is for their own personal benefit.

        • JohnTorinus

          Well, right now, wages are rising sharply. Higher wages must be good for companies, too, else they wouldn’t do it, right? It would follow, then, that I am lying about higher wages also.

          • Todd Temperly

            McDonald’s is fighting tooth and nail to prevent wage increases for their workers. It contradicts your statement that higher wages are good for companies. I had 2 IT jobs that were lost to outsourcing to India because of a wage difference. That was the official reason. Those same companies are telling Congress they did it because they could not find American IT workers. Misinformation is being given to government.

          • JohnTorinus

            There are IT jobs all over the place. Give me a call, and I will steer you to the company that is looking for 20 programmers.

          • Where are wages rising sharply? Link please.

          • JohnTorinus

            At my company for one, whee entry wages are up about $2 per hour.

  • Doug Swanson

    $15/hr apple pickers? $15 – 20/hr milkers? Where are they advertising these jobs? I’ve never seen any indication that they would pay this much – ever. In fact I’ve never seen these jobs advertised at all. As for the programmer jobs “the pay is great”, but obviously not great enough. My guess is they won’t touch a programmer without a 4 yr degree. Believe me when I tell you those 20 humanities credits really won’t help my programming skills. I’m also guessing they want their employees to hit the ground running. You’re right though about the dis-incentive to work. And you didn’t even mention childcare. The biggest reason that my married friends have for one of them not working. This country should absolutely bring in more people that want to be here (and stay here) and have good skills. That’s one of the things that will stop American decline.

  • As for temporary employment places like QPS, they’ve always had to offer a little more than the minimum wage, in order to make up for the insecurity of the employment. Even if there’s a possibility of a temporary position becoming permanent, this doesn’t always happen. And if the $12 an hour jobs are a long distance from the possible employees, they might not take it. Perhaps their plan is to send a crew of legalized-illegals to live there at 5 to an apartment and work for $12 an hour until the job is done.

    • JohnTorinus

      Staffing companies are a good place for people to get into the work force. And people aren’t stupid. They take the temp jobs because they are better off than without the jobs.
      The best answer is to create companies that create jobs. That puts an upward pressure on wages, as is happening right now.
      Social engineers and theorists and pundits don’t create good-pay jobs. Entrepreneurs do. So, if you want to help, start a high growth company. Talk is just talk.

      • All that is just talk. In manufacturing, the corporations get tax write-offs to eliminate jobs by automating – as I’m sure that you are aware. Thanks to those corporations, eliminating jobs is treated as if it’s a positive social value, because it helps get rid of those pesky unions and drives wages downward for the masses, too.

        • JohnTorinus

          Oh well. Let’s agree to disagree.

  • Someone on unemployment generally gets about two-thirds of what they made before they were laid off, so someone getting $9/hr. worth of unemployment would have been making about $13.50 an hour. Then you question them for not taking a $10 an hour job? Well, for your information, the unemployment people would question them for even applying for such a job. Thankfully, there is no obligation to take any job that comes up, no matter how low-paid.

    • JohnTorinus

      That was exactly my point.

      • I also meant to ask, what is this mysterious “$2 in subsidies” that someone would supposedly lose by taking a job? It couldn’t be for transportation (which I’m not sure exists) or for child care, because the person is nominally home all day.

  • I just checked out the job openings at your company, Serigraph, and found four, one of which, “molding operator,” I am familiar with. In this field, an “operator” is the least skilled and lowest paid, but the skills called for here include several which are typically more skilled and better paid. Namely, they include setup and teardown of the press (this typically requires specialized training); and operation of forklift/crane (which typically requires special licensing, not just anyone is allowed to do this). Is this job intended to pay someone as an “operator” who actually deserves better pay than that? If so, it does not reflect well on your company. Otherwise, the job title should be changed to better reflect the skills required.