The Consumer Price Index and weekly earnings figures published Tuesday by the Bureau of Labor Statistics showed a disquieting trend: while consumer prices in the year to July 2005 increased by 3.2 percent, average weekly earnings increased by only 2.7 percent over the preceding year. In spite of solid economic growth, the average U.S. worker has become worse off.

This is not a new trend. Median real personal income for those over 25 has grown only slowly since 1973: up 15 percent in 1990-2003, according to the Census Bureau, but only 7 percent, a mere 0.24 percent per annum, in 1973-2003. The median real personal income of men over 25 indeed declined by 5 percent (0.16 percent per annum) during the 30 year period 1973-2003, while that of women over 25 increased by 68 percent (1.74 percent per annum).

At the bottom end of the educational scale, the median real personal income for those over 25 with grade school education only was down 8 percent (0.29 percent per annum) in 1973-2003, for those with some high school it was down 29 percent (down 1.13 percent per annum) for those with high school diplomas it was down 18 percent (0.66 percent per annum), and for those with some college by 10 percent (0.37 percent per annum.) Only for those who graduated from a 4 year college did the 30 year period 1973-2003 show real income improvement, by 6 percent (0.20 percent per annum). Note that the income change for each educational segment is at or below the overall average; much of the movement in 1973-2003 has consisted of people investing more money and time in their education than their predecessors, for little or no improvement in net income.

Just a reminder: Real Gross Domestic Product per capita increased over the 1973-2003 period from $20,484 in 2000 dollars to $35,456, an increase of 73 percent, or 1.85 percent per annum, a greater increase than the income of any of the groups listed, including women as a whole. In other words, since 1973 there has been a huge shift from labor to capital in national income, together with a modest shift from the private sector to government, so that individual incomes have benefited scarcely at all from the healthy “top line” economic growth that successive governments have trumpeted. Not surprising therefore that in the midst of economic prosperity the average American family, particularly the family of modest educational attainments, feels impoverished and runs ever more deeply into debt.

In the mostly free market of the United States, a decline in the relative reward for labor can only come from two sources: a reduction in the demand for that labor or an increase in its supply. Other factors would tend to increase wages: labor productivity has continued to increase, technology has continued to surge ahead, and the demographic picture has been favorable to those of working age (real wage gains may be very hard to come by around 2025, with the baby boomers’ retirement and medical costs weighing on the system.)

On the demand side, the rapidly increasing capability of other countries – most recently China and India, but in earlier years Japan, East Asia and even Europe – has eroded the comparative advantage of the U.S. labor force. In a world of free trade, not only have U.S. jobs been outsourced to countries with cheaper labor, but U.S. exports of manufactured goods have been replaced by those of foreign competitors – in 1973, General Motors was by far the largest automobile manufacturer in the world and Boeing was completely dominant in the passenger aircraft market.

Protectionism would not have helped here; it would only have allowed foreign manufacturers to compete even more effectively against U.S. competitors who had been rendered flabby by their protected domestic market. The U.S. workforce might have had a larger dollar income than it enjoys today – but the dollar would have been trading at $5 to the euro (compared with $1.24 Friday) in order to allow the remnants of U.S. exports to compete in international markets. Real U.S. living standards would be lower, as would living standards everywhere else. This is the solution of the 1930s; it doesn’t work.

The other force depressing U.S. wage costs has been the huge increase in both legal and illegal immigration since 1973, in particular the immigration of low skill workers who are highly substitutable for low skill domestic labor. This is why wage rates at the bottom of the skill scale have been affected more than those higher up; outsourcing of whole industries to foreign competitors tends to affect living standards more or less equally across the board.

Here the political class, egged on by employers who see a benefit to the bottom line from abundant supplies of cheap labor, has thrown up its hands helplessly, and announced that little can be done to alleviate the problem. In Herndon Va., for example, the local council Wednesday voted to construct a taxpayer-funded center for day laborers, in demand from the crazed house-building boom that has afflicted the Washington suburbs, after a spirited discussion, in spite of the agreement by both sides that a high proportion of such day laborers are illegal immigrants. Council members described themselves to the Washington Post as “helpless” in the face of the federal failure to police U.S. borders.

Draconian methods to deter illegal immigrants are not the answer; they involve inflicting hardship and danger on impoverished people who are simply trying to improve their economic lot. It is much more effective to sanction those employers who hire illegal immigrants, particularly those who do so repeatedly, or in large numbers, or who, like Herndon Va. construction companies, arrange their business affairs so as to maximize the hiring of illegal immigrants.

Currently, the maximum fine for hiring illegal aliens is a mere $2,000 per alien for a first offense. Meanwhile, Immigration and Naturalization Service enforcement of these provisions has been decimated since 9/11, as illegal immigrant workers, being mostly Hispanic are regarded as less of a security threat than other groups. Furthermore, employers who take their workforce policing responsibilities seriously are subjected to fines from the Justice Department’s Office of Special Counsel if they demand excessive documentation from legal immigrant employees. Naturally, therefore, fines for employing illegal immigrants are regarded simply as a “cost of doing business,” and the flood of illegal immigrants – now estimated at 8-10 million — continues unabated.

In this area, drastic reform is needed. The Justice Department rules against adequate checking of documentation should be abolished; any extreme cases of abuse can perfectly well be covered by civil rights statutes. On the other side, enforcement needs to include not just fines but in extreme cases imprisonment of corporate officers for lengthy terms. If a simple accounting fraud such as WorldCom results in 24 years of imprisonment for its Chairman Bernie Ebbers, immigration fraud, which because of its scope is far more damaging to the U.S. economy and to the living standards of U.S. workers, needs to be commensurately punished. A large employer, perhaps a large discount retailer such as WalMart or a large homebuilding company, which is proved to have persistently hired illegal immigrants should see its top officers thrown in prison for a decade or more. Like Ebbers, officers of large employers of illegal immigrant labor are structuring their business around a fraud, hiring labor illegally, that is immensely damaging to honest employers and the U.S. public.

Needless to say, a few high profile cases in which top executives of major companies were sent to jail would, even without an immigration equivalent of the Sarbanes-Oxley Act, quickly remove employment opportunities for illegal immigrants, thereby within a year or so stemming and eventually reversing the flood of these unfortunates. There would be a huge outcry by the Chamber of Commerce crowd about the need for “essential labor” but this unskilled or semi-skilled labor is in abundant supply domestically – wages simply need to be increased enough to make the jobs attractive for domestic workers. The hysterics about “pricing the United States out of the world market” would be equally loud, and equally ill-founded – in retailing and construction, the two major sectors using illegal immigrant labor, the service needs to be performed near the customer, and so there is no possibility of the business disappearing abroad.

Immigration enforcement is an area in which rich politically correct liberals have formed an alliance of staggering hypocrisy with unscrupulous employers to assault the living standards of the American people. It needs immediate reform.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

This article originally appeared on United Press International.