Bryan Caplan  

Borjas, Wages, and Immigration: The Complete Story

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George Borjas is the source of the widely-quoted factoid that immigration has reduced the wages of low-skilled natives by 8%. So I was quite surprised to discover the following table when I was flipping through Borjas' labor textbook:

Short Run Long Run
All native workers -3.4% 0.0%
High school dropouts -8.2% -4.8%
High school graduates -2.2% +1.2%
Some college -2.7% +0.7%
College graduates -3.9% -0.5%
The -8% is right there in bold. What is striking are all the numbers that didn't become factoids, but should have:

  1. The long-run effect on all native wages is zero. Immigration has enabled millions to live vastly better lives with no long-run effect on average wages.

  2. The long-run negative effect on native high school drop-outs is roughly half the short-run effect.

  3. The long-run wage losers from immigration are native dropouts and college grads. Native workers in the middle of the skill distribution actually gain.

And this is what passes in economics for pessimistic estimates of the effect of immigration.


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COMMENTS (16 to date)

But in the long run, we're......

just kidding - but it's worth pointing out that real wages are only a part of the story. Mass immigration has an effect on housing prices, local ecology, traffic, government expenditures, native racism, and most importantly, social cohesion.

Matt writes:

What is the long run? Is he assuming immigration levels drop off? How can constant levels of high immigration not continue hurting high school dropouts in the long run?

Arnold Kriegbaum writes:

Doesn't this show that something about the United States allows basically anyone to make their life much better off just by moving here?

Tino writes:

”And this is what passes in economics for pessimistic estimates of the effect of immigration.”

Give me a break. This is hardly the pessimistic estimate of the effect of low skill immigration.

The pessimistic effects are the effect on the crime rate (especially in the second and third generation Hispanics commit 3-4 times as much violent crime as whites), hundreds of billions of dollars directly in higher taxes (30% of Mexicans on some form of welfare program), perhaps trillions more indirectly in more government spending (Hispanics tend to support expanded state even more than blacks) and the lack of convergence.

Do not forget that the claim made by pro-unskilled immigration people is that immigration is economically GOOD for native Americans. Borjas demonstrating that the direct effect is close to zero in the aggregate and somewhat negative for the low income is therefore a cold shower for anyone who takes economics seriously.

Martin writes:

"Borjas demonstrating that the direct effect is close to zero in the aggregate and somewhat negative for the low income is therefore a cold shower for anyone who takes economics seriously."

Amen to that, Tino.

But Caplan's an ideologue who has to make facts fit the ideology, so really he, Cowen, Roberts, Klein and the ringmaster Boudreaux are to the science of economics what Soviet psychiatrists were to the science of psychiatry.

Martin writes:

Sorry, Bryan, there's another observation I forgot.

Like all proper economists, Borjas works off data - you know, facts and stuff. The sorry nature of facts is that they have a bad habit of changing over time.

If immigration continues at its present rate, it would be very interesting to note what the figures might be if a suitably qualified individual (not being a proper economist but an ideologue willing to bend and distort facts to his own purpose, I would not describe you as such) were to revisit Borjas's study and methodology in 2017.

Then we might have a slightly clearer picture.

If the USA still has an English language printing press.

superdestroyer writes:

I will believe that pro-immigration economist when I see them investing their own money in places like El Paso Texas. If unlimited immigration is good for an economy, a city like El Paso should be a boomtown full of business opprotunities. That reality is just the oppositie does not reflect very well on the prediction capabilities of those pro-immigration economist.

Lioni writes:

What is the long run? Is he assuming immigration levels drop off? How can constant levels of high immigration not continue hurting high school dropouts in the long run?

Tom West writes:

But Caplan's an ideologue who has to make facts fit the ideology

I have to disagree here. While this article indicates that immigration doesn't hurt the nation as a whole, Bryan's main thesis has been that it's the net gain to all, not the net gain to Americans, that counts. He's made it clear that he does not believe that Americans have the moral right to decide who moves to America.

I don't think he distorts the truth to fit his agenda, I just think his agenda is rather far from the mainstream.

From the other side of the fence.

Migration is not a cause, it’s a consequence. What is the net migration rate from Italy to USA today? Same from Chile.

The problem to address is what US foreign policy should be to help diminish the efficient cause of the problem. People does not migrate, they flee from lack of opportunities.

In the Dominican Republic, with a per capita of US$3,247 and 9.0 million people we have one million+ illegal Haitian immigrants fleeing from a $415 per capita and 9.0 million people. The solution is not here. The migration solution is not inside the US either.

Robert Speirs writes:

Can it really be true that someone else has lumped illegal and legal immigration together to make a polemical point? But perhaps the numbers make another point - if you concede that legal immigrants are positively good for the economy, ignoring crime and public goods costs, you have just admitted, by these numbers, that illegals are a net minus.

Matt writes:

If you're a high school dropout, and immigration causes your wages to drop 8.2 percent in the short run, but only 4.8 percent in the long run, how does that happen? Either you have gained skills and moved up, in which case he isn't measuring immigration, or he's assuming immigration levels drop off. But if immigration is constant, there is no long run. There are always unskilled workers entering the workforce and they compete head to head with new arrivals. The fact that the wage effects diminish as workers specialize and spread out geographically is not an argument for never-ending immigration, only short-run immigration.

Again, how the heck does the wage effect of constant (and now increasing) levels of immigration change in the long run if the short-run never ends?

Bill writes:

Mass immigration has an effect on housing prices, local ecology, traffic, government expenditures, native racism, and most importantly, social cohesion.

I don't care much for the economic argument; that is, whether it helps or hurts incomes. I know, I'm weird. I do care about the effects stated above (and I'm a native Californian, who likes hispanic immigrants more than US migrants from east of the Rockies), except for the "social cohesion" part; it's just another word for groupthink, which is primitive and often harmful.

Justin writes:

Again, how the heck does the wage effect of constant (and now increasing) levels of immigration change in the long run if the short-run never ends?

If you know ANYTHING about economics you know that there is a HUGE difference between short-run and long-run consequences. The short run only comprises the time when we assume the economy is unable/unwilling to change (due to contracts, opportunity costs, etc). In the long-run, the economy will adapt to these circumstances causing the short-run effects to mitigate. It is the same as the effects of globalization, in the short people/industries may lose jobs due to outsourcing, but in the long-run new jobs will be created and industries will adapt. The world is continuously changing. It is ignorant to think that economies will not adapt to changing circumstances.

Marco writes:

It seems to me that Borjas has ignored far too many factors in drawing his conclusion. The effects of immigration, as it has occurred, resulted, in part, from the nature of our regulation of that phenomenon. As we don't really know what percentage of immigrants to this country have been illegal, and as we don't know how many illegals are presently in this country, there are huge gaps in our data. Regardless, the data may present a very different picture had our immigration laws allowed higher levels of legal immigration, rather than allowing, or being unable or unwilling to prevent, high levels of illegal immigration.

The issues of crime and social cohesion are complicated, but I think the history of our country demonstrates that legal immigrants, and their descendants have been quite good at integration. That most immigration is now illegal , due to legal restrictions that were not present when my grandfather immigrated, may be a significant factor in determining levels of crime and integration of immigrants and their offspring. These effects cannot be ignored. One's immigration status, or that of one's parents, has an effect on the choices and behavior of immigrant populations. Persons with no opportunity to legalize their status have little incentive to learn English, integrate into social networks, and have less ability to send their children to college. A man who lives in fear of arrest and deportation simply will not make the same investment in our society as a man who is told that he can get in line, learn English, and become a citizen.

Borjas also ignores the tendency of lower labor costs in the U.S. to exert downward pressure on the prices of many goods and services consumed by Americans. Further, emigration from poorer countries exerts upward pressure on wages in those countries, and leads to increased consumption of American goods and services in the long run. The full effects of this may not appear in the data over the short spaces of time considered by Borjas.

Philip Nolan writes:

The problem with many of these analyses is that they are taking a snapshot of current conditions.

Let's look at some facts that most people ignore.
1) Much of the value to Americans of illegal immigration, is that fact that it is illegal. If these workers had to come fully above ground then the cost of their labors would not be as cheap or attractive. If they became legal (e.g. by an amnesty program) then many are going to want full employment benefits and, at a minimum, minimum wages. That will make them less attractive as workers and many will be unemployable.

2) There are still business cycles. Even though the economy is presently very strong, there will, sooner or later, be a downturn. Then many of these low skilled workers will be out of work and they will be wanting all sorts of social safety net benefits, such as unemployment insurance, welfare, medicare, etc. And they will be entitled to them because the amnesty program made them all legal.

This huge influx of no and low skilled immmigration does not benefit the country now or in the long term.

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