Is the Hot Economy Pulling New Workers into the Labor Force?

Lay of the land of Americans religiosity in 2020, "....According to PRRI’s 2020 American Values Atlas, seven in ten Americans (70%) identify as Christian, including more than four in ten who identify as white Christian and more than one quarter who identify as Christian of color. Nearlyone in four Americans (23%) are religiously unaffiliated, and 5% identify with non-Christian religions. The most substantial cultural and political divides are between white Christians and Christians of color. More than four in ten Americans (44%) identify as white Christian, including white evangelical Protestants (14%), white mainline (non-evangelical) Protestants (16%), and white Catholics (12%), as well as small percentages who identify as Latter-day Saint (Mormon), Jehovah’s Witness, and Orthodox Christian.2 Christians of color include Hispanic Catholics (8%), Black Protestants (7%), Hispanic Protestants (4%), other Protestants of color (4%), and other Catholics of color (2%).3 The rest of religiously affiliated Americans belong to non-Christian groups, including 1% who are Jewish, 1% Muslim, 1% Buddhist, 0.5% Hindu, and 1% who identify with other religions. Religiously unaffiliated Americans comprise those who do not claim any particular religious affiliation (17%) and those who identify as atheist (3%) or agnostic (3%). Over the last few decades, the proportion of the U.S. population that is white Christian has declined by nearly one-third. As recently as 1996, almost two-thirds of Americans (65%) identified as white and Christian. By 2006, that had declined to 54%, and by 2017 it was down to 43%.4 The proportion of white Christians hit a low point in 2018, at 42%, and rebounded slightly in 2019 and 2020, to 44%. That tick upward indicates the decline is slowing from its pace of losing roughly 11% per decade...."

Economist Staff, "Money really can buy happiness and recessions can take it away,"The Economist, July 11, 2020, https://www.economist.com/graphic-detail/2020/07/11/money-really-can-buy-happiness-and-recessions-can-take-it-away

The biggest mistake is to focus on gross, not net, taxes. They ignore transfer payments, like Social Security, which are disproportionately paid to the poor. In doing so, they mistake language for economics.

Messrs. Saez and Zucman’s second mistake is measuring progressivity on a one-year rather than a remaining-lifetime basis. That ignores the fiscal system’s double taxation: Income earned, taxed and saved this year will be subject to future taxation on interest, dividends and capital gains. This omission disproportionately understates taxes for the rich, who save at a higher rate. The current-year focus also understates benefits paid to the poor, since future benefits are a bigger share of their resources.

Their third mistake is failing to adjust for age. The old have paid most of their lifetime taxes, which makes them now look like tax cheats, particularly those who saved out of previously highly taxed labor income. With changing demographics, this problem will deeply confuse tax progressivity comparisons over time.

I’ll focus on 40-year-olds, but the results are similar for all age groups. Each dollar of pretax remaining lifetime resources of those in the top 1% of the resource distribution is, on average, taxed on net at a 34.5% rate. For those in the top quintile, the average net tax rate is 28.4%. For those in the bottom quintile, every dollar of pre-tax resources is matched by a 46.6% netsubsidy. (The tax rises steadily to 4.2% for the second quintile, 12.6% for the third and 18.5% for the fourth.)

The average net rates for the current year only (not including future net taxes) for this cohort understate true progressivity. They range from negative 9.8% for the bottom 20% to positive 38.2% for the top 1%.

40 to 50 year olds:

Richest 1%

Poorest 25%

40 to 49 years

Net tax rate

Share of consumption

Share of income

Share of wealth

Richest 1%

34.5%

14.5%

17.9%

34.3%

Highest 20%

28.5%

Lowest 20%

(46.6)

7.3

4.0

0.6

Laurence Kotlikoff, “Tax Myths Of Warrenomics,” Wall Street Journal, October 17, 2019, https://www.wsj.com/articles/tax-myths-of-warrenomics-11571351806

New FRBSL note:“…U.S. bilateral trade balance can vary significantly depending on whether one looks at value-added trade or gross trade. For example, the U.S. trade deficit with Canada and Mexico shrinks considerably and is on average 40 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance. Futhermore, the U.S. trade deficit with Mexico was cut in half in 2015. These changes likely reflect the fact that many exports to the U.S. rely on content from other countries including the U.S., as we saw in the vehicle example. Also, the U.S. trade deficit with China is on average 20 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance, but it is 40 percent larger with Japan and twice as large with South Korea. Again, these changes likely reflect the fact that many Chinese exports to the U.S. rely on higher value-added foreign content(e.g., from Japan and South Korea)….”B. Ravikumar and Brian Reinbold, "Value-Added Trade vs. Gross Trade," Federal Reserve Bank Of St. Louis, June 2020, https://research.stlouisfed.org/publications/economic-synopses/2020/02/14/value-added-trade-vs-gross-tradeValue-Added Trade vs. Gross Trade

2"Measuring Trade in Value Added," inInterconnected Economies: Benefiting from Global Value Chains. OECD Publishing, Paris, 2013.

1de Gortari, Alonso. "Disentangling Global Value Chains." Working Paper, November 2019.

Notes

Conventional trade statistics may have been sufficient when goods were produced entirely within a nation's borders and then exported to other countries; but with increasingly complicated supply chains and an increasingly interconnected global economy, value-added trade can provide a more accurate picture of global trade.

Also, the U.S. trade deficit with China is on average 20 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance, but it is 40 percent larger with Japan and twice as large with South Korea. Again, these changes likely reflect the fact that many Chinese exports to the U.S. rely on higher value-added foreign content (e.g., from Japan and South Korea).

For example, the U.S. trade deficit with Canada and Mexico shrinks considerably and is on average 40 percent smaller when looking at the value-added trade balance as opposed to the gross trade balance. Futhermore, the U.S. trade deficit with Mexico was cut in half in 2015. These changes likely reflect the fact that many exports to the U.S. rely on content from other countries including the U.S., as we saw in the vehicle example.

The Organisation for Economic Co-operation and Development provides value-added trade statistics from 2005-15.2The figure shows the U.S. trade balance from 2005-15 with several major trading partners in terms of real gross trade and real value-added trade.

Additionally, as we saw in the vehicle example above, such measures neglect the role of other countries in the supply chain. One way to combat this issue is to look at the value added, such as labor compensation and profits, by each country at each step of the production process. This provides a better way of incorporating the intricacies of today's global supply chain into trade accounting.

Traditional trade measures record gross, or total, flows of goods and services every time they cross a border. This includes the cost of inputs plus the value added by each country. Such traditional trade measures lead to double counting because countries trade intermediate goods for further processing.

For example, when Mexico assembles a vehicle, only one-third of the vehicle's value is derived from Mexican parts and labor. The rest is due to foreign components; about 74 percent of these foreign parts is imported from the U.S.1However, when Mexico ships this vehicle to the U.S., the entire factory cost of the vehicle, which includes the cost ofall of the partsand assembly, will be added to the U.S. trade deficit with Mexico despite the fact that much of the vehicle's value comes from U.S. parts. In other words, the U.S. would run a much larger trade deficit in terms of gross trade with Mexico than in terms of value-­added trade.

The rise of globalization has led to increasingly complicated supply chains. Raw materials and intermediate goods now move strategically throughout the world before a final good reaches the consumer. Traditional measures of trade often do a poor job of capturing this complexity.

Congressional Budget Office (CBO). July 9, 2019. “The Distribution of Household Income, 2016.”https://www.cbo.gov/publication/55413

Drew Desilver, "Immigrants don’t make up a majority of workers in any U.S. industry,"Pew Research Center, March 16, 2017, https://www.pewresearch.org/fact-tank/2017/03/16/immigrants-dont-make-up-a-majority-of-workers-in-any-u-s-industry/

Immigrants don’t make up a majority of workers in any U.S. industry

Immigrants are more likely than U.S.-born workers to be employed in a number of specific jobs, including sewing machine operators, plasterers, stucco masons and manicurists. But there are no major U.S. industries in which immigrants outnumber the U.S. born, according to a Pew Research Center analysis of government data.

There are two main ways to look at the kinds of work people do: by industry (that is, the business their employer is engaged in) and by occupation (the kind of work they do on the job). To get a sense of the work immigrants to the U.S. do most frequently, we relied on 2014 workforce estimates by Pew Research Center. The estimates, based on augmented data from the Census Bureau’s 2014 American Community Survey, cover all workers ages 16 and older who reported being in a civilian industry or occupation, including both lawful and unauthorized immigrants.

Private households were the most immigrant-intensive “industry” in 2014. Of the 947,000 people working for private households, 45% were immigrants, with lawful immigrants slightly outnumbering unauthorized immigrants. The industries with the next-biggest shares of immigrant workers were textile, apparel and leather manufacturers (36%) and the farm sector: A third (33%) of the nearly 2 million agriculture workers in 2014 were born outside the U.S.

While these industries had the biggest share of immigrant workers, they weren’t the biggest overall employers of immigrants, since industries with a smaller share of immigrants may have more of them in absolute numbers.

The overall U.S. workforce - U.S.-born and immigrant (both lawful and unauthorized) - is concentrated in a relatively small number of industries. But while the 10 biggest-employing industries are the same for U.S.-born and lawful immigrant workers (and in almost the same order), the employment pattern among unauthorized immigrants is markedly different.

Retail, for instance, was the single biggest employer of lawful immigrants (10% of all lawful immigrant workers), followed by educational services (8%) and non-hospital health care services (7%). By contrast, the top industry for unauthorized immigrant workers was construction, which included 16% of all unauthorized immigrant workers. Construction was followed by eating and drinking places, which had 14% of unauthorized immigrant workers, and administrative and support services (9%). Those three industries each included between 5% and 7% of lawful immigrants.

Any given industry employs workers in many different occupations, and people may do much the same job in any number of different industries. The occupational group with the highest share of immigrants in 2014 was farming, fishing and forestry: Nearly half (46%) of the 1.2 million people in those occupations were foreign born. More than a third (35%) of the 6.7 million people in building and grounds cleaning and maintenance occupations were immigrants, as were 27% of the 8.3 million people in construction and extraction occupations.

And as with industries, the distribution of occupations differs significantly between lawful and unauthorized immigrants. More than half of all unauthorized immigrant workers in 2014 were in just four occupational groups: construction and extraction; building and grounds cleaning and maintenance; food preparation and serving; and production. In contrast, those four groups accounted for only about a quarter of lawful immigrants’ jobs. The biggest occupational sectors for lawful immigrant workers were office and administrative support, sales, and management (each with 9% to 10% of the total).

The immigrant share of the U.S. workforce has grown over time. Back in 1995, according to Pew Research Center estimates, immigrants (lawful and unauthorized) made up about 12% of the total civilian workforce. The lawful-immigrant share has risen gradually, from an estimated 9% in 1995 to 12% in 2014; the unauthorized-immigrant share rose from about 3% in 1995 to 5% in 2005, but has been roughly stable ever since. Immigrants, and their U.S.-born children, are projected to drive growth in the nation’s working-age population for at least the next two decades.

Views on immigration’s impact on U.S.-born workers have shifted significantly over the past decade, according to a Pew Research Center survey released last year. Americans then were almost evenly divided, with 42% saying the growing number of immigrants working in the U.S. helps American workers and 45% saying it hurts workers who were born in the U.S. In 2006, 55% said having more immigrants hurt U.S. workers, with just 28% saying it helped them.