Prepare For A Bad Decade At The Border

Prepare For A Bad Decade At The Border

Submitted by Princeton Policy Advisors

Apprehensions at the US southwest border track US job openings. And that means trouble is brewing.

Jobs and Apprehensions

As readers know, Customs and Border Protection reports southwest border apprehensions monthly. Readers may be less familiar with JOLTS, the Job Openings and Labor Turnover Survey, a monthly assessment of the US job market published since late 1999 by the Bureau of Labor Statistics of the Department of Labor.

Border apprehensions closely track JOLTS job openings. A quick tour through the historical data is enlightening.

The previous peak for border apprehensions occurred during the hot economy of the dot-com boom in 2000, and apprehensions thereafter followed job openings down, bottoming in 2002 with the subsequent recession. The recovery from the dot-com bust brought more jobs and more migrants, with apprehensions interestingly peaking in 2005 with the US real estate market and declining precipitously thereafter. Indeed, border apprehensions were an earlier indicator than US job openings of the severe recession which took hold in late 2007.

With the onset of the Great Recession in 2008, apprehensions continued to decline and collapsed to levels not seen since the late 1970s. They remained depressed until 2018.

The Obama administration faced a small surge at the border in 2014, but managed to regain control over illegal entries by the end of that year. The border saw yet another surge in the months prior to Trump’s inauguration, with migrants accelerating their US crossings for fear of more difficult border conditions once Trump took office. Trump’s harsh rhetoric did in fact intimidate migrants into delaying their journeys north, with the result that 2017 border apprehensions were the lowest since the early 1970s. Action did not match words, however, and migrants soon came to appreciate the Trump administration as something of a paper tiger. Border traffic rebounded, culminating in another crisis starting in July 2018 and peaking in May 2019. During this period, the Trump administration undertook a series of measures to induce Mexican and Northern Triangle governments to curtail migrant movement and implemented the much-loathed Migrant Protection Protocols. These reduced apprehensions to more typical levels by the end of 2019, even though the US job market remained strong.

The covid pandemic saw both job openings and border traffic crater. By this past spring, however, US job openings were headed into record territory and border apprehensions were keeping pace, likely to reach all-time highs this calendar year.

The history of the last twenty years strongly suggests that migrants respond to US labor market conditions, both good and bad. Migrants are not driven principally by domestic hardship, as both CIS and I have shown. Rather, when US wages are strong and jobs are plenty, Central Americans head north. The strange and yet inescapable conclusion is that US and Latin American labor markets are to an extent integrated. Guatemala and Honduras may be exotic places in the American imagination, but Central Americans are no strangers to working in the US. The US is not exotic, it’s where the jobs are. Therefore, illegal Central Americans and Mexicans may be considered an integral part of the US labor force, a ‘subprime’ part perhaps, but nevertheless a part of it. This is quite remarkable given that crossing the border is ostensibly illegal. The migrant response to US job openings should not be so dynamic. But it is, and we see a healthy market as though the border were mostly an inconvenience, that is, we see a robust black market in migrant labor finding its way around border enforcement with comparative ease.

Of course, US administrations have successfully limited illegal border crossings in recent years. As noted above, the Obama administration suppressed a smaller surge during 2014; the ‘Trump intimidation’ brought near record low crossings in 2017; and the various harsh Trump policies from July 2018 managed to restore order by the end of 2019. While all of these worked for a time and to an extent, traffic inevitably picked up if jobs were waiting.

The Biden administration has managed to be both unlucky and inept, a combination not limited to border policy. The administration relaxed border enforcement straight into the teeth of the hottest job market in at least twenty years, with the likely result a record in border apprehensions for the year. The high number of border crossings is partly, but not entirely, due to administration policy. Be that as it may, the Biden administration will carry the blame, in this as in other matters.

The Outlook for Illegal Immigration

In some ways, the more pressing issue is the outlook for future border crossings. Just a few years ago, our friends at some of the think tanks assured us that the threat of massive surges in illegal immigration were over. By this line of thinking, granting amnesty to undocumented residents represented no risk of a new surge in illegal immigration, as had been the case in 1986 following the passage of IRCA, legislation which extended amnesty to undocumented Mexicans in the US. Clearly, the risk of a massive illegal immigration is not over.

What should we expect in the future? Is the current surge an anomaly which will pass, or does it represent a return to earlier historical patterns? As it happens, this depends principally on the interpretation of the decade from 2008 to 2018, which in turn depends upon whether the Great Recession was only a recession, or in fact, a depression.

A short digression on economics

There is no agreed definition of the difference between a recession and a depression. However, if one cares to dig a bit, they can be distinguished, and if one works with a variety of time series data as I do, the hallmarks of a depression are evident after 2008. For example, on the graph below we can see US vehicle miles traveled (VMT) on US roads and highways, generally a good indicator of the country’s economic health. During the first oil shock of 1974 and the subsequent oil shocks of 1979-1982, vehicle miles traveled initially fell, but achieved new highs immediately after the recession officially ended. In the 1991 Gulf War recession and the 2001 dot-com bust, VMT barely flinched. By contrast, during the Great Recession, vehicle miles traveled fell steeply and did not regain their 2007 peak until 2014, seven years later. (And for that, thank you, US shales.) And further, VMT was not back on trend until mid-2017, ten years after the beginning of the downturn. Clearly, the Great Recession was qualitatively different from a normal recession, different even from the brutal and prolonged oil shocks of the late 1970s.

These effects are also visible in housing and consumer credit, more relevant indicators for our discussion. Some analysts feel that the business cycle is essentially the housing cycle, and indeed, housing starts largely track recessions and recoveries. However, on only two occasions in modern history have house values fallen and remained depressed: the Great Depression of the 1930s and the Great Recession of 2008. Much like vehicle miles traveled, US house values did not recover their 2007 peak until late 2016, almost a decade later. This matters because homes are the primary collateral of consumers, and homeowners were thus compelled to spend the better part of a decade paying down mortgages and other loans, with consumer credit not recovering its 2008 peak until 2017. In the interim, borrowing remained depressed, employment and GDP growth were tepid, and the public mood remained sour. Establishment politicians struggled for credibility, and voters across the globe regularly turned to outsiders, including television personalities and a few comedians, hoping for a better approach to governance.

So why does all this matter for illegal immigration? Because the patterns of depression are visible there as well. As with housing, vehicle miles traveled and consumer credit, remittances to Mexico from the US peaked in 2007 and did not regain that level until May 2018. Similarly, the undocumented Mexican population, according to estimates by Pew Research, peaked in 2008 and declined through 2018. Clearly, the undocumented immigrant population was under financial stress, as were US homeowners, and this stress may have contributed to some undocumented residents returning to Mexico, on the one hand, and likely acted as an impediment to new border crossers, on the other. A depression from 2008 to 2018 would explain the decline in the undocumented immigrant population.

Remittances recovered their previous highs in May of 2018, and the Trump border surge began two months later, in July. This recovery in border traffic was interrupted by covid, but as the pandemic has eased, apprehensions have soared to what promises to be historic levels. One is left with the impression that the recent, elevated levels of apprehensions are not entirely one-off surges, but rather the restoration of patterns which persisted for decades before the Great Recession. It would appear that the Great Recession was the anomaly, and the Trump and now Biden surges constitute a return to business as usual.

Demographic trends to 2030 — an aging US society coupled with a shortage of low wage workers — will make illegal border crossing attractive. Migrants may well be incentivized to jump the border for the balance of the decade. The future may therefore look like the pre-2007 era; indeed, from the migrant perspective, the 2020s may prove the best decade for illegal immigration since the current border regime was established in 1965.

The numbers can be estimated. In the twenty years to 2007, border apprehensions averaged 1.2 million per year, and the undocumented population grew by 0.5 million per year. Therefore, if the Great Recession is the anomaly and the post-2018 period represents a return to normal patterns of illegal immigration across the southwest border, expect the undocumented population in the US to rise from its current level around 10 million to approximately 15 million by 2030.

Everyone Loses

For both the left and the right, a large increase in undocumented immigrants would be a disaster. For the Heritage Foundation, CIS and FAIR, an increase in the undocumented population of 50% is a catastrophic failure of their policy goals. But life is no better for amnesty advocates like, the NILC or the Immigration Hub (the prior home of the President’s new immigration advisor, Tyler Moran). The emerging equilibrium may well mirror that of the 1987-2007 period, when high levels of illegal immigration made any talk of amnesty moot. Thus, a reversion to historical patterns portends disaster for literally every major stakeholder group dealing with illegal immigration: the border will be in chaos, illegal immigration will soar, and yet long-term undocumented residents will be no closer to legal status in 2030 than they are today. Even DACA may become trapped in the wash. That is what prohibitions and resulting enforcement regimes produce: wretched outcomes for everyone involved.

As I have said many times, ending prohibitions — including the prohibition in migrant labor — is not hard. A legalize-and-tax approach ends the related pathologies in short order. We can fix the border and provide legal status for long-time undocumented residents, but we have to use the standard and proven market-based approach. It is the only one which works.

Tyler Durden
Mon, 09/13/2021 – 22:40

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Author: Tyler Durden