Phil Davies - Staff Writer
Published September 1, 2004 | September 2004 issue
Immigrants from Bosnia, employed by StarMark Cabinetry in Sioux Falls, S.D.
The changing face of the district's workforce is plain to anyone who hails a taxi in Minneapolis, drives by the StarMark Cabinetry plant in Sioux Falls, S.D., at the start of the night shift or stops at a Kwik Trip in Eau Claire, Wis., to buy a gallon of milk.
Just as in New York City and Los Angeles, the labor supply in a wide array of manufacturing and service industries comes in countless hues, speaking numerous different tongues. Recent immigrants, the majority of them with poor English and scant skills, take the jobs that are offered them in meatpacking plants, on electronics assembly lines, in fast-food restaurants and in nursing homes.
So what? How does the surge of immigrants into cities and small towns across the district affect the livelihoods of those already there, and the economy as a whole? Economists, politicians and labor leaders have debated the impact of immigration on U.S. labor markets for decades. The topic is a source of angst for labor unions and anti-immigrant organizations such as the Federation for American Immigration Reform, which blames hordes of foreign job seekers for eroding the quality of life of the native-born. In a Gallup Poll last year two-thirds of Americans said they believe that immigrant labor drives down wages, taking money out of the pockets of American workers. The same charge has been leveled against highly skilled H-1B visa holders who come to this country to crank out software code or tend the sick in underserved areas.
Industries that depend on either cheap, relatively unskilled labor or on highly educated immigrants tend to take a more sanguine view of imported labor. They argue that immigrants keep the wheels of industry turning, especially in areas where native-born workers are scarce or otherwise unwilling to get their hands dirty for modest wages. High-tech companies maintain that without computer programmers and product engineers from India, those tasks would be outsourced overseas anyway.
Who's right? Is the rising tide of immigration into the district a boon or bane for labor markets? The answer depends on whom you talk to, who has the most to gain or lose from the presence of immigrants in the workforce. Not to be overlooked in gauging the impact of immigration on labor markets is the role of immigrant entrepreneurship—restaurants, real estate brokerages, auto dealerships and other businesses that generate jobs in the community. On balance, immigration probably confers an economic benefit on the district, including its native-born workforce.
As a group, immigrants lag behind native-born Americans in marketable skills and educational achievement. Nationally, 30 percent of immigrants have not completed high school, and a 2000 survey of Hispanic, Russian, Hmong and Somali immigrants in the Twin Cities by the Wilder Foundation found that 44 percent of workers held unskilled labor or service jobs, compared with 24 percent in the general workforce.
But their mobility gives them an edge in the national competition for jobs. Already uprooted from their homelands, refugees and recent immigrants are willing to move to where they're needed. Hence the burgeoning immigrant populations of meatpacking towns such as Worthington, Minn., Sioux Falls, and Barron, Wis., and the deep pools of foreign-born labor that have formed in Minneapolis-St. Paul, Sioux Falls and Fargo, N.D., fast-growing cities with historically low unemployment rates.
Businesses in Fargo are grateful for the fresh, cheap labor that immigrants provide. The unemployment rate in the Fargo-Moorhead area has averaged less than 3 percent for the past five years, and it's expected to stay low as economic recovery continues.
"The community and the major employers understand that those new Americans are filling an important niche in the labor market," said Richard Rathge of the North Dakota State Data Center. Specifically: a demand for semiskilled workers who can be trained quickly to operate machinery or perform basic, hands-on tasks. English proficiency is optional.
Immigrants make up roughly 55 percent of the workforce at Cardinal Insulated Glass in Fargo. The starting wage is $7.60 an hour, and the work—cutting and forming insulated glass for residential windows—isn't for everybody, said Plant Manager David Pinder. "We go through some people because they can't hang," he said. "We've got a very competitive atmosphere here, and the weaker folks just fall by the wayside." But a constant stream of job applications from refugees and immigrants who have moved to Fargo from other cities has allowed the firm to more than double its head count to 290 in three years. Many referrals come from relatives and friends of current employees. "Our labor force has really been self-sustaining," Pinder said.
In Sioux Falls, where the unemployment rate last April was 2.7 percent, the availability of immigrant workers has helped StarMark Cabinetry, a manufacturer of wooden cabinets for kitchens and bathrooms, to boost its revenue 30 percent to $60 million over the past year. The division of Eagan, Minn.-based Norcraft Cos. employs about 120 immigrants—a quarter of its workforce—on the factory floor and in shipping and receiving. StarMark President John Swedeen said that Bosnians, Somalis, Sudanese and other immigrants like working the night shift, which StarMark is ramping up to meet production demand.
Faced with worker shortages, manufacturers can shift production to places where labor flows more freely. That isn't an option for hospitals and nursing homes; their services must be delivered locally, where the patients are. Throughout the district, labor-strapped health care facilities have turned to immigrants to provide hands-on care, from emptying bedpans to delivering babies. In Rochester, Minn., Somali women have landed jobs as personal-care attendants and nursing assistants at nursing homes. Last summer 10 to 15 Somalis were tending to the elderly at Sunrise Cottages, an assisted-living center north of town. Some of the women are graduates of a basic health-care training program offered two years ago through Rochester Community and Technical College.
Mercy Medical Center, an 87-bed regional hospital in Williston, N.D., has imported registered nurses from the Philippines to address a chronic nursing shortage in North Dakota. Last summer eight Filipino nurses were working in obstetrics, intensive care and other departments in the hospital. All were signed up by agencies that specialize in health care recruiting and issued H-1B visas that require them to work for the hospital for at least three years. Ildi Kiss, benefits coordinator for Mercy, said that the Filipinos fill a "dire need" for well-trained nurses at Mercy; before they started arriving three years ago, the hospital pressed nurses into overtime duty and contracted with traveling nurses—circuit riders who make the rounds of several hospitals in the state.
Certainly, some industries in the district—and their consumers—profit from the energy and talents that immigrants bring to the labor market. But what about the born-in-the-U.S.A. workers who must compete with immigrants for job openings? Does immigration drive down wages and deprive Joe and Sally of a decent living, as many Americans fear?
In theory, it should. Standard economic models dictate that in a competitive labor market, wages go down as the supply of workers increases. At a given skill level—day laborer, forklift driver, software engineer—immigrants increase competition for available jobs. It follows that some native-born workers will be forced to take lower-paying jobs, go on the dole or move to another city where labor competition is less intense.
But when economists look at immigration in the real world, it isn't clear what, if any, impact immigration has on the wage levels and employment of American workers. "It's a mystery," said David Card, an economics professor at the University of California, Berkeley, who has studied immigration issues. "Labor economists have been having a very difficult time understanding how immigration affects the labor market, because the kind of straightforward comparisons that we would do don't reveal very much."
Because U.S. immigration since the 1970s has been so heavily weighted to the bottom of the skill pyramid (immigrants make up 20 percent of the nation's low-wage workforce) economists have focused on the effect of immigration on the well-being of relatively unskilled, blue-collar domestic workers. Both economists and policymakers have tried to explain why the wages of low-skilled U.S. workers have stagnated over the last 30 years. (The argument that high-skilled H-1B immigrants also depress the earnings of native-born tech workers has been rendered moot for now by massive layoffs in the computer industry.)
George Borjas, a labor economist at Harvard University who is himself an immigrant from Cuba, takes a dour view of the continuing inflow of poor, unskilled immigrants from Latin America, Asia and Africa. In several books and dozens of academic papers Borjas has argued that immigrants depress workplace opportunity for less-skilled native-born workers, particularly black Americans. "[T]he evidence ... consistently indicates that immigration reduces the wage and labor supply of competing native workers," he wrote in a 2003 paper. Borjas estimates that a 10 percent increase in labor supply due to immigration reduces the wages of native-born workers by 3 percent to 4 percent. High school dropouts fare worst of all workers, suffering a 9 percent drop in wages because of competition from immigrants.
But other economists have failed to establish a strong link between immigration and lower wages and higher unemployment for native workers. In a 2004 study Card looked at the wage gap between native-born high school graduates and those who didn't finish school, comparing their relative wages in different U.S. cities. His analysis showed that the wage ratio for the two groups stayed constant, whether the American workers toiled in Los Angeles or St. Louis, the latter of which has a much lower proportion of foreign-born residents. And across the country, the wage gap between high school graduates and dropouts has remained nearly constant since 1980.
"[Immigration] should drive down the wages of the high school dropouts relative to the high school graduates," Card said in a phone interview. "As I show in that paper, that's not true city by city, and it's also not true at the national level."
Nor have economists been able to show that immigrants displace similarly skilled native-born workers in significant numbers. Echoing earlier studies showing that immigration has little effect on the employment levels of American workers, a 2001 analysis by Card found that immigration in the late 1980s reduced the relative employment rates of natives in low-skilled occupations by no more than 3 percent, even in major gateway cities such as Miami and Los Angeles.
One explanation for the gap between theory and reality is that immigrants naturally flock to cities that are experiencing robust economic growth; strong demand for labor masks any depressing effect on native-born earnings. If immigrants migrated en masse to a city with a stagnant economy, the impact on native wages and employment might be more obvious.
Or, as Julian Simon and other economists have suggested, unskilled immigrants don't vie directly with their native-born neighbors for jobs at the bottom of the economic barrel. A report released in June by the Pew Hispanic Center in Washington, D.C., showed that immigrants filled almost a third of the 1.3 million jobs created in the country since early 2003, but most of those new jobs-roofing houses, stocking merchandise, doing laundry-pay poorly and require relatively low skills. Natives generally aspire to less onerous, better-paying jobs.
For example, working at the Jennie-O Turkey Store plant in Barron, Wis., holds little appeal for the town's native-born young people, said Zoltan Grossman, a geographer at the University of Wisconsin-Eau Claire who has studied the growing Somali community in Barron. "American kids don't want to take those jobs; they leave for the [Twin] Cities," he said. "So [Jennie-O] basically would have had to close the plant because of a labor shortage if it wasn't for immigrants."
The recent experience of Somali and other immigrant workers in the Rochester area suggests that when unskilled immigrants go head to head with Americans for semiskilled assembly jobs, they lose. Two years ago hundreds of Somali refugees manned the factory floors of furniture, composites and electronics manufacturers in southeast Minnesota. The region's economy has since slowed, putting many low-skilled workers, including most Somalis, out of work. With spare resumes and minimal English, Somalis and other recent immigrants can't compete with native-born workers for the remaining factory positions, said Norm Doty, co-owner of Express Personnel Services, a temp agency that supplies workers to a number of manufacturers in the area. "The immigrant workforce is the first to go in a slow economy and the last to come back in a good one," he said.
There's a message there, said Bruce Corrie, an economist at Concordia University in St. Paul, who participated in a 2002 study of immigration in Minnesota. Instead of complaining about immigrant labor, native-born workers should focus on upgrading their jobs skills. Like protesting overseas outsourcing, blaming immigrants for the woes of U.S. workers is "an argument that isn't addressing the problem," he said. "The problem is a lack of skills or a lack of competitiveness or something that needs to be fixed inside."
Even if immigrants do displace some American-born workers, economic analysis indicates that foreign-born workers create more jobs for natives than they fill, through economic expansion and spillover effects. A 2000 study commissioned by the Region Nine Economic Development Commission in Mankato, Minn., estimated that about 2,600 Latino workers (not all of them immigrants) in south-central Minnesota supported 3,770 jobs held by non-Latinos in the region. When increased consumer demand was factored in, Latinos working primarily in food processing and packaging firms generated an additional 4,100 jobs in the nine-county region.
In the 25 nonmetro counties with the highest concentrations of Latino, Asian and African immigrants—the categories of foreign-born most likely to be poor and low-skilled—growth rates for median and per capita income in the 1990s either equaled or exceeded growth rates in nonmetro counties that have seen less immigration. Income growth rates in smaller cities with high immigrant populations even rivaled those in metro areas such as the Twin Cities, Fargo and St. Cloud, Minn. (see table).
Driving around an immigrant neighborhood, the first thing you notice is the signs—a multitude of storefront banners and billboards in foreign languages, promoting everything from Vietnamese carryout to Ethiopian couture to Spanish-speaking tax preparation. In the Twin Cities, immigrant-owned businesses have revitalized formerly depressed areas such as the West Side and Frogtown in St. Paul, and East Lake Street and Central Avenue in Minneapolis. Immigrants, especially Latinos, are also starting businesses in suburbs and small towns, diversifying the product mix at the mall and on Main Street.
Source: U.S Census Bureau
The Economic Census of 1997 counted 18,440 minority-owned, non-American Indian firms with total sales of $3.8 billion in Minnesota and the Dakotas. That's more than double the number of minority-owned businesses and total revenue figures reported five years earlier. In Minnesota, 10 rural counties each had more than 100 minority firms in 1997. The census doesn't distinguish between foreign-born and native racial minorities, but given the amount of immigration into the district in the 1990s, it's likely that immigrants own many of those new businesses.
"A lot of immigrants are using entrepreneurship as their first entry point into American life, integrating [into society] and achieving mobility through entrepreneurship," said Corrie, himself an immigrant from India.
The entrepreneurial spirit burns bright in immigrant communities—perhaps because, as Corrie's comment suggests, immigrants face daunting barriers in the labor market. It's tough to climb the career ladder when you have difficulty communicating and you don't have a high school diploma. A 2002 survey of 121 Hmong businesses in the Twin Cities by the Minneapolis Fed found that Hmong entrepreneurs were willing to take higher risks than white, native-born business owners, leveraging personal savings to invest large sums of money in startups.
Immigrant businesses make a huge impact on the region's economy, both in direct job creation and the ripple effect of increased spending on everything from corn flour to accounting services. Based on census data and his own figures, Corrie estimated that roughly 1,100 Mexican-American businesses operate in Minnesota, generating over $200 million in sales. Hmong firms in the state account for another $104 million in revenue.
Hard figures on jobs created by immigrant businesses in the region are more elusive, but statistics compiled by the Neighborhood Development Center in St. Paul demonstrate the capacity of just a few startups to stimulate the local labor market. The nonprofit organization offers business training and loans to inner-city entrepreneurs, many of them small startups and home-based businesses. As of 2002, 138 immigrant-owned enterprises served by the NDC had created 386 new jobs, and last year those businesses shelled out $5.6 million for payroll, rent, supplies and other expenses.
Not every immigrant business survives long enough or grows large enough to become a truly equal-opportunity employer, hiring native-born workers as well as members of the owner's immediate family or clan. Many small and home-based ethnic businesses cater to their community's specific cultural needs (imported food, funeral rites) or rely on linguistic affinity and ethnic loyalty to sell homes, automobiles, accounting help, Internet access and other necessities to fellow immigrants. At some point an ethnocentric business runs out of customers, either because a particular immigrant group is limited in size or because too many businesses are vying for the same customers.
"If you're doing that grocery shop or restaurant business in the ethnic economy, in the long haul you might just make it, but you won't become very successful," Corrie said. "The [immigrant businesses] that are very successful are the ones that have a broader base, that are integrating their business with the mainstream."
Examples of immigrant-owned businesses in the district that tap into broad, trans-ethnic markets include Nath Cos. of Bloomington, Minn., the fourth largest Burger King franchisee in the country with 98 restaurants in five states; Higher Dimension Research, a technology consulting company in Oakdale, Minn., that has developed high-performance protective fabrics; and Inca Mexican Restaurant in Sioux Falls, a 10-employee firm that draws its customers from all over the Sioux Falls area.
Nath Cos., which also owns a dozen Denny's restaurants, a Radisson hotel and various real estate properties, employs 3,400 people and reported $150 million in sales last year. Indian immigrants Mahendra and Asha Nath founded the company in 1990.
Perhaps the most valuable attribute of the immigrant workforce, if not today then in coming decades, is its youth. Compared with the district's native-born population, which is aging fast, immigrants have most of their working lives ahead of them. In 2002, according to the Census Bureau, 45 percent of U.S. immigrants were between the ages of 25 and 44, while only 27 percent of U.S. natives fell in this prime working age group. (For more reading on the district's aging population, see the March and May issues of the fedgazette.)
Thus immigrants are the workers of the future, a demographic shot in the arm that promises to sustain the region's labor supply and keep its economy on an upward trajectory, not to mention paying Social Security and other taxes needed to support American baby boomers in their old age. Boomers born in 1950 are only 11 years away from retirement.
"We have this large population of people who will be leaving the labor force within the next six to 10 years, and we're not cranking out kids fast enough to fill their jobs ... let alone new [jobs] that will come from economic growth," said Phil Wheeler, director of the Rochester (Minn.)/Olmsted County Planning Department. Immigrants can help fill that baby gap with their own labor and that of their U.S.-born children. Wheeler noted that fertility rates for Latino, Asian and African immigrants run at least 40 percent higher than the rate for native-born whites.
In North Dakota, where the number of 25- to 34-year-olds dropped 26 percent in the 1990s, government officials are looking for ways to attract more immigrants to the state. A bill introduced in 2001 would have created a division of immigration "to encourage and promote the permanent settlement and improvement of all sections of the state," and this fall an interim legislative committee was slated to recommend strategies for increasing both foreign and domestic in-migration.
"Because they're having a difficult time retaining the domestic young adult population, [policymakers] see the immigrant population as an untapped source," Rathge said. In Williston, the Filipino nurses working at Mercy Medical Center are sold on the Great Plains lifestyle; all eight have applied for permanent residency.
But will they and other new Americans stay in North Dakota and other parts of the district fighting to maintain vital labor forces, when opportunity beckons in so many other places in the country? Rathge pointed out that wages in North Dakota run about 20 percent below national averages. Recent immigrants are just as likely to vote with their feet as native-born young people, flocking to Sioux Falls, Minneapolis and other areas where the number of jobs and wages are on the upswing.
"People are making very informed choices of whether or not to stay, based on economics," Rathge said. "Many of these individuals obviously want to stay, but if the economics don't pan out, they leave. And once they leave, it's difficult to get those people back."
Research for these stories was contributed by Rob Grunewald, regional economic analyst, and public affairs research assistants Shefali Mehta and Colbey Sullivan.