David R. Henderson  

Case for Immigration

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In this month's Feature Article, Suffolk University economist Ben Powell makes an economic case for immigration. He takes on the following myths: (1) that immigrants are a drag on the economy, (2) that immigrants "take our jobs," and (3) that immigrants systematically depress the wages of the native-born. One striking point Ben makes is the following:

The native-born population makes up around one third of adults in the United States without a high school diploma. A large portion of new Ph.D.s is awarded to foreign-born people.

Ben also challenges Milton Friedman's view that the welfare state is enough of a reason to restrict immigration and points out that immigration restrictions violate the freedom of association of Americans.

Update: Thank you to commenter Richard A. for your skepticism. If you look above, you'll see that a correction has been made.


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COMMENTS (35 to date)
Dan Klein writes:

Nice piece by Powell, especially the section on the welfare state.

Richard A. writes:
  • On the other end of the skill spectrum, the native-born account for fewer than 30% of the Ph.D.s in the United States.

While this might be true for a few STEM fields like computer science or engineering, I don't think this is true for Ph.D.s in general.

david writes:

For the STEM fields, the native-born account for fewer than ~20%. The number 30% across all Ph.D.s sounds about right.

Richard A. writes:

The full Friedman quote.

BRIMELOW Where does the Wall Street Journal's editorial page campaign for fixed exchange rates fit into this?

FRIEDMAN You got me! I think that's just an aberration. My God, how the hell can they stick with that? They've just got an idée fixe about it. Like they've got on immigration. It's just obvious that you can't have free immigration and a welfare state.

The debate about floating exchange rates has been won by the floaters, other than [Columbia University economist Robert] Mundell, who is a nonfloater among major American economists.

MikeP writes:

Another Friedman quote:

"If you have free immigration, in the way we had it before 1914, everybody benefited. The people who were here benefited. The people who came benefited. Because nobody would come unless he, or his family, thought he would do better here than he would elsewhere. And, the new immigrants provided additional resources, provided additional possibilities for the people already here. So everybody can mutually benefit."

"But on the other hand, if you come under circumstances where each person is entitled to a pro-rata share of the pot, to take an extreme example, or even to a low level or the pie, than the effect of that situation is that free immigration, would mean a reduction of everybody to the same, uniform level. Of course, I'm exaggerating, it wouldn't go quite that far, but it would go in that direction. And it is that perception, that leads people to adopt what at first seems like inconsistent values."

"Look, for example, at the obvious, immediate, practical example of illegal Mexican immigration. Now, that Mexican immigration, over the border, is a good thing. It's a good thing for the illegal immigrants. It's a good thing for the United States. It's a good thing for the citizens of the country. But, it's only good so long as its illegal."

"That's an interesting paradox to think about. Make it legal and it's no good. Why? Because as long as it's illegal the people who come in do not qualify for welfare, they don't qualify for social security, they don't qualify for the other myriad of benefits that we pour out from our left pocket to our right pocket. So long as they don't qualify they migrate to jobs. They take jobs that most residents of this country are unwilling to take. They provide employers with the kind of workers that they cannot get. They're hard workers, they're good workers, and they are clearly better off."

MikeDC writes:

I find the idea that immigration restrictions violate the freedom of association of Americans pretty absurd.

Being an American, itself, is already an association.

That is, for every American who wants to associate with an immigrant, there might be another who does not. Why should the latter be forced to associate with a newcomer to the benefit of the former?

Obviously in the real world immigration can't require unanimous consent any more than most other acts of collective choice we think should ideally be governed by Pareto optimality, but I still don't see why it shouldn't be the goal to approximate.

Deciding who's a part of the polity seems to be a legitimate function of the polity, no?

MikeP writes:

Deciding who's a part of the polity seems to be a legitimate function of the polity, no?

Deciding who's a decision maker in the polity is a legitimate function of the polity. I.e., citizens can decide the requirements of citizenship.

But there is no legitimate way the polity can claim an effective ownership right over all persons and property within its claimed dominion such that it can deny either the rights of people and property holders to associate with whomever they want or the rights of individuals to live and work wherever they can find mutually agreeable terms.

BenG writes:

Honestly, this is a pretty poor scholarship. Immigration has been an extensively debated topic, and simplistic theoretical arguments aren't going persuade anyone from the opposing side.

Two huge red flags that make it impossible to understand his numbers actually mean.

1)There's no distinction between legal and illegal immigrants. Statistics on illegals are much more complicated because they often operate in the underground economy.

2)How are US born children of immigrants counted? There are real costs associated with them, are they counted against his net immigrant contribution?

Next he misquotes Boras on immigration being a net benefit to the US, when mistakenly conflates income gains with net income gains. This is poor scholarship.

What Powell states:

How big is the net benefit of immigration to the native-born population? Harvard Economist George Borjas is probably the most established academic critic of immigration. But even he admits that immigrants create net benefits for the native-born and, in the Concise Encyclopedia of Economics, puts this gain at $22 billion a year.2 Using his method of calculation and updating for more recent immigrant flows puts the number at more than $36 billion.

Versus what Boras actually says:


Although the entry of immigrants reduces the wages of comparable natives, it increases slightly the income of U.S. natives overall. Using a well-known formula in economics (a variation on the theme of the so-called Harberger triangle), we can estimate that immigration increases the real income of natives, but only by about 0.2 percent. U.S. natives’ economic gains from immigration, therefore, are relatively small: about $22 billion per year (in 2003 dollars). Of course, not everyone benefits equally from immigration; workers with competing skills lose, while owners of land and capital gain.

Many people believe that because a large percentage of immigrants go on welfare, the costs to American taxpayers may wipe out the gains from immigration. Increasingly, the evidence tends to indicate that because of these fiscal impacts, immigration is essentially a wash for the U.S. economy. The National Academy of Sciences estimated in 1997 that the typical native household pays somewhere between $195 and $265 in additional taxes (in 2003 dollars) because of immigration. There are around ninety million native households in the United States, which puts the national fiscal burden somewhere between $18 billion and $24 billion per year. In the short run, therefore, there is little support for the argument that immigration is a great boon for the country.
Les writes:

The quote that says: "immigration restrictions violate the freedom of association of Americans" seems odd.

First, people restricted from immigrating can still visit here as tourists, and Americans can visit the home countries of people restricted from immigrating to the USA. So freedom of association is not violated.

Second, how likely to meet Americans are people restricted from immigrating to the USA? Not very likely. So how can immigration restrictions violate the freedom of association of Americans to associate with people they have never even met?

agnostic writes:

"On the other end of the skill spectrum, the native-born account for fewer than 30% of the Ph.D.s in the United States."

To use Sailer's phrase, I was wondering where all those Mixtec-speaking drywallers from Chiapas have gone since the housing bubble burst -- Ph.D. programs!

Jeremy, Alabama writes:

"..[I]t is likely true that completely open borders would result in a tremendous drain on the welfare state...Instead of advocating further interventions in the market to preserve the welfare state, they should, instead, spend their time trying to repeal the welfare state."

To me, this is not a challenge to Friedman's view about the welfare state and immigration, but total agreement. And I disagree that conservatives are trying to "preserve the welfare state", they are trying to preserve the state, while they take on the rather unpromising repeal of welfare.

MikeP writes:

The quote that says: "immigration restrictions violate the freedom of association of Americans" seems odd.

Only to those with a very limited definition of "association".

Just to name the most obvious, employment and leasing an apartment are two examples of association.

Dog of Justice writes:

Roughly what fraction of overall immigration to the US is legal vs. illegal?

What fraction of non-native-born Ph.D. recipients are legal immigrants, vs. illegal?

(Granted, the latter number is a little bit distorted because citizenship/background is generally checked in the graduate admissions process, but how many actual illegal immigrants do you think are affected by that?)

Bottom line is, your statistics make a case for immigration... of the restricted form only.


The Milton Friedman quote on low-skill illegal Mexican immigration being good only as long as it's illegal is interesting, and I might agree if it weren't for the combination of 14th Amendment birthright citizenship ending the arrangement and the extremely poor performance of America's school system and culture in assimilating the illegal immigrants' kids. (More precisely, I have no problem with a Singapore-style guest worker system, but I recognize that it conflicts with some American values.)

Carter writes:

[Comment removed for ad hominem remarks. --Econlib Ed.]

Mercer writes:

From the article:

"Instead of advocating further interventions in the market to preserve the welfare state, they should, instead, spend their time trying to repeal the welfare state."

What should people who care about taxpayers do when this fails? It is telling that he never mentions that the welfare state expanded this year with the passage of Obamacare. It shows he ignores what actually happens in the real world and spends his time in a libertarian dream world.

"If wages needed to be higher to get Americans to take the jobs, many of these jobs would have gone overseas."

An American resident who has a low wage job will typically receive more in government benefits then they pay in taxes. I do not see why you want to encourage low skilled Latinos to come to the US to do low paid work. The Latinos will not pay much in taxes but will receive health care paid by the government and their kids will receive publicly funded education. Look at California to see this played out.

Stephen Krueger writes:

Prisons also violate my God Given Right to associate with criminals. I hope Econlog will help me fight against prisons.

Freedom of association is not an absolute right. Just like liberty is not an absolute right to commit murder or steal. Killing and stealing affects others. Immigration has consequences for other Americans--not just those demanding freedom of association.

Kurbla writes:

As far as I see, Powell does not analyse influence of immigration on the source country -- and that could be the most important part of the whole story. For example, what could happen if only one developed country allows unlimited (and subsidised) immigration for all medical doctors and agronomists from Africa? Something very bad, I think.

One might believe that only freedom of movement matters, but Powell analysed economic issues, however, he restricted himself on target country.

ajb writes:

Powell addressed the low hanging fruit not the hard questions: What about restricting immigration through family reunification and increasing the quotas for high education immigrants? What about trading off Hispanic immigrants for the rest of the world? Marginal benefits to US increase dramatically.

He also punts on real social costs, especially re: language and assimilation.

I'm sorry: illegal South Americans bringing in family do NOT equal Ukrainian Phds.

David R. Henderson writes:

ajb,
He didn't address your questions because they aren't relevant to what he proposes: open immigration. He doesn't have to say whether he would favor family reunification vs. high education immigrants because he advocates, as his article makes clear, allowing both in.
Your statement is like saying to someone like Walter Williams, after he has advocated ending the minimum wage, "Would you like to drop the minimum wage to $6.00 and hour or to $5.00 an hour?"
I agree with you, though, that he does not address language and assimilation.

MikeDC writes:

MikeP you said:
But there is no legitimate way the polity can claim an effective ownership right over all persons and property within its claimed dominion such that it can deny either the rights of people and property holders to associate with whomever they want or the rights of individuals to live and work wherever they can find mutually agreeable terms.

In principle, I suppose, if you have something like Arnold Kling's non-monopolistic government. Which would be nice.

Within the context of traditional countries, however, this is a non-starter whether anyone thinks it's legitimate or not. I'd argue one of the more legitimate, as in sensible, ways to frame a normal government is to say it is basically a basic property right we hold in common with our countrymen.

Richard A. writes:

Is an agriculture worker on an h-2a visa allowed to freely associate (take a job) with an employer outside of agriculture? Of course not -- they will lose their visa. The employer based guest worker concept is very close to slavery. Indeed, it's just another form of corporate welfare. What too many in the business community want is the free flow of indentured labor.

Richard A. writes:

According to an NFS study, as of 1995 41% of PH.D engineers were non-native born. For most other fields this figure would be much lower.

For engineers, the long run supply elasticity seems to be somewhere between 2 and 3. For migrant farm labor the supply elasticity appears to be greater than 2.5. As a guesstimate the demand elasticity is probably around -0.3.

IOWs
supply elasticity >> |demand elasticity|

What the above implies is that an attempt to increase the size of these two occupations with foreign workers in isolation of the rest of the work force will be mostly offset by the natives moving out of these occupations.

mulp writes:

After commenting about before 1914, Friedman is quoted as
"But on the other hand, if you come under circumstances where each person is entitled to a pro-rata share of the pot, to take an extreme example, or even to a low level or the pie, than the effect of that situation is that free immigration, would mean a reduction of everybody to the same, uniform level. Of course, I'm exaggerating, it wouldn't go quite that far, but it would go in that direction. And it is that perception, that leads people to adopt what at first seems like inconsistent values."

But most or many of the immigrant came to get a slice of the pie, the pie of the native people's land, but the US before 1920 was very much a welfare state that handed out the land taken in the massive redistribute the native people's wealth land reform program.

The very first immigration law (not naturalization related law) was passed in response to the lack of government land grants which caused economic hard times blamed on immigrants.

The transcontinental railroad was a race to get land from the government, so immigrants from China were welcome. They were welcome as part of the California gold rush, which also involved government handing out land. Once railroad was complete, the flood of land from the government dried up, and little new gold opportunity remained, so the Chinese were seen as taking away jobs, and thus resulted in the Chinese Exclusion act, the first law restricting immigration.

With the west coast opened up, development expanded in the west as railroads expanded, and the government gave away a lot of land making immigration beneficial. But with the "dust bowl" it was clear that the land welfare of the past was ended, and now immigration restrictions were expanded more generally in immigration laws.

If the US were to invade and annex Canada and Mexico, and the land confiscated by the government, immigration increases would be promoted to, if nothing else to back fill the towns vacated by people going after land in those new territories.

How can people think the US wasn't a welfare state from the very beginning? People came to the US for economic gain that required government to provide land to most immigrants in the early years, and later on, the expansion into land the government handed out generated lots of jobs for immigrants.

And the native peoples tried to restrict immigration because the immigrants were thieves, rapists, and murderers. They were very happy to engage in free market capitalism, and allow immigration of those who respected their rights - the French traders were allies because trade was mutually beneficial.

Richard A. writes:

There is one problem with complete open borders -- the minimum wage gets in the way. Millions upon millions of foreign workers would be willing to work for 1 or 2 dollars an hour -- but employers would be effectively barred from hiring them because of the minimum wage.

Pensatulla writes:

This situation is completely upside-down. The USA is at the downslope of immigrant assimilation; there is such a thing as ingress/egress. We've taken in and now it's time to move out. Americans need to be emigrating, to Mexico, Africa, even India and China. We can move our skills to these countries and make them move up in the world. It's time for people in developing countries to let go their cultures that believe: (1) that immigrants are a drag on their economy, (2) that immigrants "take their jobs," and (3) that immigrants systematically depress the wages of the native-born," as Powell says. Americans know this, other parts of world do not.

Richard A. writes:

Employed doctoral scientists and engineers, by citizenship status: 2003

Native born ....... 75.2%
Naturalized ....... 14.8%
Non U.S. citizen .. 10.0%

This shows that 75.2% of STEM Ph.D.s are native born and 24.8% are foreign born.

Where did Benjamin Powell get his Ph.D. figure?

David Henderson Author Profile Page writes:

Dear Richard A.,
Thanks for your fact-checking on this. An appropriate change has been made.
Best,
David

ziel writes:

David, I don't understand the open-borders concept.

There are about 6 billion people in this world (give or take a few hundred million) who are poorer than Americans. So how does that work - will people continue to immigrate until the U.S. standard of living reaches equilibrium with the rest of the world? What will define this equilibrium point - when the average standard of living in the U.S. equals the average standard of living in the world, or when the standard of living has been reduced to the level of the marginal immigrant. Has anyone attempted to model how many immigrants it will take to achieve this equilibrium? If based on the last individual willing to immigrate, that implies a very low equilibrium level of standard-of-living and an awful lot of immigrants (I'd guess it would likely be in 9 figures).

MikeP writes:

What will define this equilibrium point - when the average standard of living in the U.S. equals the average standard of living in the world, or when the standard of living has been reduced to the level of the marginal immigrant.

The equilibrium point is found when the standard of living of the marginal immigrant has been reduced to the standard of living -- broadly considered -- of the marginal prospective immigrant.

When you consider rent alone, that puts a floor on the marginal immigrant: he has to have a job that pays enough to live in the US.

The first 10 million over a period of a few years will find that easily. The next 10 million will have more difficulty. At some point the demand in the US for lower skilled workers at wages that are higher than rent will be satisfied, and prospective immigrants will be better off remaining in their home countries with their familiarity, connections, and lower rents. As the years pass, some of the prior immigrants will move up to higher wage positions and others return home, opening space in the economy where wages exceed rent.

Note that this argument takes it for granted that (a) lower skilled immigration does not harm the average economic well being of natives, as the anchor article ably covers, and (b) higher skilled immigrants improve the average economic well being of natives, as anyone who believes in positive sum economics would recognize.

ziel writes:

We've gotten over 10 million already from a relatively wealthy Mexico, and that's paying coyotes thousands of dollars and sneaking over the border packed in truck trailers - I think we could expect many, many more if our borders were opened to the whole, deeply impoverished world.

MikeP writes:

Indeed, those 10 million generally command higher than minimum wage, so there is quite a bit of room for more labor under them yet above the wages required to pay rent.

I'd put the number of immigrants that would be absorbed over 5 years at 30 million or so, with per year numbers moderating after that once all the low skilled positions have been filled.

Needless to say, the economic boom from this new labor and the demand on US goods and services would be superb.

Mercer writes:

"the demand on US goods and services would be superb."

So you think an additional 30 million people eligible for Medicaid is superb?

MikeP writes:

Clearly they can't be eligible for Medicaid.

If the US legalizes what would today be illegal immigrants, they get the individualized welfare that today's illegal immigrants get -- i.e., none.

Mercer writes:

MikeP,

Their children born in the US will be eligible under current law. Dems will push to make all the adults eligible. All their children will be eligible for public education which costs over ten thousand per year in many states.

MikeP writes:

The law should be changed so that citizen children of immigrants get targeted welfare only on the schedule of their parents.

Public schooling, as it is not targeted but rather universally offered, is a different story. But the concern here is that a migrant would live in the US to educate their children and then take their children back to their home countries after the schooling is over. Surely any argument about the state's spending money to educate children as an investment in future adults, in state schools that are phenomenally inefficient users of that money, applies independent of residency status.

But just as I would be quite happy to see free migration used as leverage to reduce the welfare state, I would be happy to see free migration used as leverage to break the state's monopoly on education.

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