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 Under the present system, subsidies are withdrawn quickly as people go back to work.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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