The nail test for Donald Trump: America needs fair wages


German Economic News, Michael Bernegger Published: 20.11.16 15:53 hrs.

Without immigrants, the US economy could no longer work. But the workers do not generally benefit from the growth of the economy. This contradiction is the core task of the economic policy of Donald Trump.

In the election campaign, Donald Trump promised the blue of heaven. Like Obama eight years ago (‘Yes we can’), he has found a catchy slogan (‘Make America great again’), which perfectly covers the Zeitgeist and, above all, conveys a vision (or ‘retroversion’). Now he or the future government must develop a coherent program from it. This is not an easy task. In reality, some of the promises promised are already contradictory. As a whole, I. Several of them are simply incompatible. In addition, political feasibility must be ensured.

It is to be emphasized that there will also be a great deal of uncertainty about future policy. Trump has won with a populist program that is partly not the Republican program. He just won it. The Republican Party establishment has been played on the wall by an outsider because its own program is absolutely incoherent and destructive.

Two articles outlined the possible focal points in industrial policy and tax and spending policy as a result of Trump’s election campaign. First, a few other core points are to be mentioned. In this article, we will focus on domestic policy issues. A further article will outline the implications for the global economy and the financial markets.

Immigration was a very big issue in the election campaign. Illegal immigration is to be prevented. To this end, a continuous, insurmountable wall is to be built on the border to Mexico. It is to be funded by Mexico. The illegally present foreigners are to be picked up and returned to their homelands. This requirement was extremely popular. It reflects a deep-seated malaise, expressed in open and hidden strangers. Here are some facts:

According to American statistics, some 42 million foreigners live in the United States. Their share of the total population has risen drastically over the past three decades – since the 1980s and especially in the 1990s and 2000s.


These statistics even undermine the true weight of immigrants, especially in the international context. For the US-born children of these foreigners who live in the USA are expected to be US citizens in the USA, even if the immigrants are illegally, I. Without a residence permit, in the USA. This is a big difference from the practice in most European countries, where the naturalization of the children can often only take place after a period of several years, possibly a decade or so. The available estimates show this population as a whole with 81 million foreigners and their children born in the USA. This is enormous, it is equivalent to a quarter of the total population. Such a strong immigration has existed only in a few European countries. The unwanted immigration to the United Kingdom, a main theme of Bruit, is not comparable to it.

Of these 42 million foreigners, around 11.4 million are currently illegally present. This appears to be relatively unimportant, but the real importance of illegal immigration appears to be too small. For parts of the illegal immigrants have received a residence permit over time. The number of illegally resident foreigners has slightly declined since the financial crisis, which seems plausible.

Immigration is by no means distributed evenly across the United States. Rather, it focuses on a few large federal states, where it reaches a high share of the population.


The graph clearly shows that immigration is concentrated in California, Texas, New York, New Jersey, Florida and Illinois. In these states the share of foreigners is also very high. If the foreigners born in the United States were still counted, this would be quite considerable shares. In California, 27 percent of the population is foreigners. This would be more than 40 percent for children. These states also represent the growth regions of the past 20 to 30 years on the west and east coasts and in the south and north of the United States. In them, modern growth industries such as IT, energy, financial industry are located. In the election campaign, illegal immigration played an important role. The largest group of illegal foreigners are the Mexicans (56 percent), followed by other Central and Latin American (13 percent). They also focus on these growth regions. With the exception of Texas, these states have all voted for Hillary Clinton in the presidential election, some of them with sporadic distances to Donald Trump. The phenomenon of rejection of immigration is therefore very similar to that in the United Kingdom. Where the share of foreigners in the growth regions (London, Greater London) is very high, there were fewer reservations when voting on the Bruit. Where the proportion of foreigners was small and small, the Brexit was advocated.

However, the rejection of immigration is probably not related to illegal immigration. Behind it is much more a social question. Immigration is therefore politically so controversial, because parallel to the immigration, the average salaries of the employed have stagnated – over more than 30 years. However, this applies only to the paid-out Reals. For many employees this means a slipping from the middle class, especially since the turn of the millennium. The following chart shows the enormous structural break-up since the 1980s and explains why many people look back on the past. It should be pointed out here that consumer prices, and thus also the reallos, pose considerable measurement problems – especially in the long term. Inflation measurement in the early 1980s, for example, had a structural break. Presumably, the rollers did not record the losses in the 1970s, which the graphic suggests. There are also very different developments behind the stagnation for individual groups and segments of employees.


An addition, the employment of the working age population has declined significantly since about 2001. Many of the industry and related services have withdrawn from the labor market due to a lack of prospects, but would like to work. But the temporal congruence of accelerated immigration and stagnating living standards does not mean effective causality. The immigration has not compressed the Reals. The US is historically the country of immigration par excellence. Such long periods of strong immigration have traditionally been accompanied by strong macroeconomic growth, high investment, accelerated productivity growth, and rising rallies. The Nobel laureate Simon Kuznets, who developed the national accounts and was the first to appreciate the long-term and consistent in the US, has given the Kuznets cycles to these growth-driven growth phases. The development since the 1980s has been completely in tune with this experience of American economic history.


Labor productivity in the United States has risen sharply, with the exception of the years since the turn of the millennium, and especially since the financial crisis. But the real labor costs have not continued any longer since the 1980s. An enormous gap has opened up. The real labor costs also include the unpaid benefits of employers, such as contributions to health insurance. The gap has widened in the 2000s. Since the turn of the century, economic growth has therefore passed the majority of the population – in whole or in part.

Up until the turn of the millennium, this gap was not felt so strongly. The majority of households earned more than before. This was done for two reasons: the women’s employment rate had increased considerably, so that a second income was added. On the other hand, parts of the population had switched to second and third jobs to improve the stagnating initial income.

The growth rate of labor productivity has declined significantly since 2002. Part of this is difficulty of statistical coverage. But labor productivity has grown decisively even in the most likely underestimated data. Despite some strong economic growth, the realer have stagnated. Why this? There is, of course, a huge scientific discussion on this subject. We will find in a following article: US governments have put too much money into useless wars – and neglected important areas such as education and infrastructure. This is the biggest challenge for Donald Trump’s economic program – and probably his only chance.

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