WASHINGTON (TNS) — President Donald Trump's plan to get Americans higher wages by limiting immigration may not be the right tool for the goal.
Average hourly earnings rose 2.5 percent in July from a year earlier for a fourth straight month, matching the rate of the past two years, according to Labor Department data issued Friday. While hiring continued at a solid pace and the unemployment rate matched a 16-year low, growth in worker pay has stalled at levels below recent expansions that typically produced gains of 3 percent or faster, even as companies frequently cite labor shortages.
Trump this past week endorsed a proposal to restrict legal immigration and give priority to those with higher skills, arguing that in the process, wages would rise across the board. While attracting the world's best and brightest may be a worthy goal, many economists doubt that shrinking the pool of foreign workers will make employers boost compensation, or help the economy, attributing the weak pay gains to other factors.
"Weak wage growth has to do with the real change we're seeing in corporate behavior and longer-term trends" such as automation and the rise of mega-firms that have more leeway to limit labor costs, said Scott Brown, chief economist at Raymond James Financial in St. Petersburg, Fla. "Companies are not going to boost your salary until you have one foot out the door. That's the way corporate America works these days."
Besides, he said, "I don't think immigration has that big of an impact on wages," so the new plan to restrict it "doesn't make much sense at all."
Sens. Tom Cotton, R-Ark., and David Perdue, R-Ga., have proposed legislation to evaluate visa applications based on merit, with a preference for people with higher education or job skills. The bill would significantly reduce the number of green cards issued, and eliminate some benefits for prospective immigrants with families already in the U.S. It would also cap annual refugee admissions, and end a visa lottery meant to diversify the immigrant population.
The plan "will reduce poverty, increase wages and save taxpayers billions and billions of dollars," Trump said Wednesday. The U.S. should "favor applicants who can speak English, demonstrate they can financially support themselves and their families, and demonstrate skills."
While the bill is unlikely to pass the Senate, Trump's support reflects pledges he made on the campaign trail to limit immigration and help working Americans.
Meanwhile, the solid run of hiring, business and consumer surveys — as well as company comments — indicate workers at all levels of the skills ladder are in demand. Job openings remain elevated and the Federal Reserve's regional surveys mention worker shortages. The National Federation of Independent Business reported that in July the share of small firms having trouble filling positions was the highest since 2000.
While supporters of the proposed immigration restrictions say they would help low-income and minority Americans gain get jobs, the July data showed that Americans on the sidelines and those who are less qualified are also being absorbed. That is happening even as current levels of immigration remain intact, indicating that there is work for those who want it.
Still, few employers are willing to pay more, and the industries and regions seeing a pickup are driven by localized supply and demand, Brown said.
Federal Reserve economists and Chair Janet Yellen have made the case that immigrant workers would expand the labor force and cushion the slide in the participation rate because of an aging workforce. By spurring innovation, foreigners have also helped boost U.S. productivity and create new businesses.
The persistent weakness in wages is entrenched in other longer-term trends. Among those: robots or technological change, low productivity, and more consolidation that has created bigger companies with more power to set wages.
Outsourcing to low-cost overseas locations and the decline in union membership in recent decades also has hurt workers' bargaining power.