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EconomicPolicyInstitute March 4, 2010

Congress has finally taken action to address the jobs crisis, but the $15 billion jobs bill passed by the Senate and the House is not nearly enough. The bill, which would give employers tax breaks for new hires, is likely to create only a couple of hundred thousand jobs at a time that the country needs 11 million jobs just to return to pre-recession levels of employment.

High unemployment could last for years
EPI President Lawrence Mishel emphasized the magnitude of the jobs crisis and the size of the response needed during a February 23 testimony to the House Committee on Financial Services. Mishel warned that unless Congress acted quickly and at a sufficient scale, “high and damaging unemployment will continue for years.”

The Senate bill is less than one-tenth the size of the $174 billion jobs bill that the House of Representatives passed last year, which itself fell far short of President Obama’s proposal to invest $267 billion to put people back to work. EPI’s American Jobs Plan proposes spending $400 billion to create 4.6 million jobs in one year.

One key problem with the Senate’s response to the jobs crisis is that its last-minute extension of unemployment benefits for millions of long-term unemployed is only a 30-day extension. By the end of March, 200,000 workers will begin losing benefits each week. EPI Vice President Ross Eisenbrey issued a statement criticizing the Senate for failing to extend these badly needed benefits for the rest of 2010. The unemployed workers waiting on Congress, Eisenbrey said, had “lost their jobs not through any fault of their own, but because of the worst economic crisis in 70 years. Now they are unable to work because there are more than six job seekers for every job opening.”

Eisenbrey also stressed that in addition to providing relief to needy families, extending unemployment insurance was an excellent economic stimulus, which puts money back into communities, allowing the unemployed to buy goods and services from local merchants. EPI estimates that a full-year extension of unemployment benefits and subsidies to COBRA health insurance would save or create more than 800,000 jobs. This research was cited on CNBC during a debate on whether to pass another extension of benefits.

An immigration system where everybody wins
EPI has recently published a series of papers that make a strong case that immigration brings economic benefits not just for individual immigrant workers and their families, but also for native-born workers, and that those benefits are greatest when the immigrant workers become citizens.

This trend seems to hold true for both low- and high-skilled workers. In his recent paper Bridge to Immigration or Cheap Temporary Labor? EPI research associate Ron Hira focuses on the H-1B and L-1 visa programs for high-skilled workers, and argues that these visas are often used to recruit cheap temporary labor or to outsource U.S. jobs. His research shows that many companies employ large numbers of H-1B of L-1 visa holders but pay them less than what U.S. citizens earn for comparable work, and never sponsor most of them for citizenship.

Economist Heidi Shierholz’ new paper, The Effects of Citizenship on Family Income and Poverty, looks at a much broader pool of immigrant workers and also finds that citizenship leads to higher wages, as well as lower levels of poverty, even after accounting for other differences between citizen and non-citizen immigrants, such as age and level of education. Shierholz said the research shows how citizenship can help millions of people reap greater rewards for their work while at the same time boost tax revenues as workers wages rise.

This matter of how citizenship benefits local economies through higher tax revenues is examined in more detail in The Economic Benefits of Immigrant Authorization, a new study by the Center for the Study of Immigrant Integration at the University of Southern California, which was co-authored by EPI board member Manuel Pastor. The paper looks at the 1.8 million unauthorized Latino workers in California, and shows that those workers who are citizens earn substantially more than those working in the shadows. Pastor’s paper estimates that granting California’s unauthorized immigrants legal status could result in a total gain for California of $16 billion a year.

The China Trade Toll
The China Trade Toll, a 2008 paper by international economist Robert Scott about the U.S. jobs that have been lost or displaced because of increased trade with China, continues to influence trade policy discussions. Last month, when President Obama discussed tougher enforcement of trade rules with Senate Democrats, Senator Arlen Specter cited the paper’s findings that 2.3 million U.S. jobs had been lost or displaced between 2001 and 2007 as a result of a trade imbalance with China. Scott’s paper also looks at how this trade imbalance has suppressed wages and finds that even when workers displaced by the growing trade deficit found new work, it was typically at a much lower salary, with an average annual loss of $8,146 per worker between 2001 and 2007.

Last week Scott published an op-ed in The Huffington Post where he addressed The Myth of the Manufacturing Recovery, and said that growing trade deficits were largely to blame for the six million U.S. manufacturing jobs that had been lost since 1998.

EPI in the News
CBS Sunday Morning prominently featured EPI President Lawrence Mishel and his research on growing wage inequality in its story The Great American Paycheck Squeeze. Mishel stated that the hourly compensation of a typical high school or college graduate did not grow at all between 2002 and 2007, and that the latest recession has put even more pressure on wages.

The story also highlighted Mishel’s research on the disconnect between worker productivity and worker wages. Since 1970, it said productivity surged 70% but (inflation-adjusted) hourly wages rose just 4%, with earners at the very top of the income scale reaping the most benefit: Between 1989 and 2007 the top 1% of earners received 55% of all income growth, and the top tenth of the upper one percent got about one-third of all income growth.

“We know that CEOs in large companies make 270 times that of a typical worker,” Mishel said. “It used to be around 20 times, 30 times, back in the ’60s and ’70s.”

Salon wrote about last week’s op-ed co-authored by Mishel and Peterson Foundation CEO about the need to Address Jobs Now and Deficits Later. “The entire piece is well worth reading,” Salon states, “because the authors come from different sides of the political divide,” but still agree that “government must create more jobs now, for economic as well as moral reasons.”

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