Subbing for Andrew Sullivan, David Frum rehashes the lump of labor fallacy

But here’s a crucial fact that Brookings omits: that 125,000 per month increase in the US labor force is not a law of nature. In fact, during the Bush years, more than half the growth in the US labor force was due to the arrival of immigrant labor.

Immigrants now make up some 15% of the US labor force. They are concentrated in the less skilled portion of the labor force and in industries hardest hit, especially construction.

If immigration levels were curtailed, the job gap would be a lot smaller. And if illegal immigrants returned home, rather than being put on a “path to citizenship,” the problem of putting the unemployed back to work would be smaller and easier.

The US population and thus the number of job seekers has grown fairly remarkably over the last 200 years. Why is it that unemployment hasn’t grown steadily as well?

Because every worker is also a consumer. When you send a immigrant worker packing you are sending his consumption packing with him. For those who have trouble with the abstract interwovenness of the economy think about it this way: Is the one thing our economy really needs right now fewer residents and thus less demand for housing?

If anything we have a construction industry which is predicated on a large and growing population. Perhaps  faster growing than we can maintain, but in any case, slowing down growth is not likely to improve matters.

Ryan Avent has made some important points about the structural problems in the labor force. And, this is something that I hope I’ll get a chance to address directly.

But, I will reiterate, we didn’t get smacked with some grand structural calamity in the last 24 months. We got smacked with a huge increase in liquidity demand and federal funds rate stuck a zero.

Innovative monetary policy is the solution1. Not the 2010 Smoot-Hawley labor trade restriction act.

(1) I am not rejecting fiscal policy as fiscal and monetary policy become mixed at the Zero Lower Bound.

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