Tuesday, March 07, 2017

Immigration - It's About the Money Not the Race

More than any other issue, illegal immigration is the reason Trump won the presidency. The anti-immigrant vibe in the country has a lot of people whipped up into a righteous outrage, as they see it exclusively in terms of race, and view opposition to a porous border as racist.  Racism may be a motive to oppose immigration, but it aint the only reason.  Immigration, like any other issue, implies economic tradeoffs for the citizenry – it creates winners and losers.  If enough people feel they are on the losing side of the tradeoff, they will justifiably and quite rationally vote to curb their losses. 

There is an economist by the name of George Borjas, himself a Cuban immigrant, that has a short and interesting book called We Wanted Workers that provides the data and the facts surrounding the redistributional effects of immigration.  Borjas put it bluntly: “Devoid of all the ideological trappings and all the deliberate obfuscations, immigration can be viewed for what it plainly is: another redistributive social policy.”  However, the redistribution in this case is from the working poor to the well off.

Whether you win or lose with immigration largely depends upon where you sit in comparison to the dominant immigrant group flowing into the labor market. When the immigrant influx is dominated by low-skill workers, as the wave of illegal immigration over the last twenty years had been, the losers from this are other low-skilled workers who see their wages and employment opportunities depressed.  The winners are the immigrants themselves, who come here for better employment prospects, and those in the workforce whose skill sets are such that they face no increased competition from said workers, but benefit from lower prices for services that they can and do outsource to low-skill labor. 

Every week I have teams of non-English speaking landscapers who manicure my lawn on the cheap, and clean the house.  Take those people out of the labor pool, the price of these services go up, and I let the lawn and the house go to hell, or I otherwise have to divert time away from making no money writing pointless blog posts for free.  Come to think of it, I’m not sure that would be a bad thing.  But still you get the point – it’s all at least potential upside for the Hatcher on the consumer side.  On the community side, the relative affluence of the hood keeps the public schools largely self-segregated by income, and therefore there is no downside of the schools being inundated with non-English speaking kids that create resource allocation issues for the schools.  Now, in private a guy like me could be a flaming racist, but the economics make a guy like me favor the immigration status quo.

If you are a high school dropout, you are in the opposite situation.  You compete directly against the incoming immigrants, and moreover you live in the same neighborhoods that feed into the same schools.  As a landscaper yourself, you don’t relish the fact that now you can have your lawn mowed on the cheap, as the same is true for all of your customers who are either beating you down on price or dropping your service.  From an economic standpoint, it’s all downside for you.  You could be the most racially tolerant guy on the planet, but the economics of the issue for you are such that you will fight against the immigration status quo tooth and nail. 

It is flattering for me in my community to say keep the border open (even as you need a code to get into my neighborhood) because I am open-minded and not a racist hick.  And if I am prone to pointing out the flaws in others, I might also accuse anyone who is against the status quo as being a racist hick.  All of this appears to be consistent with other pieces of evidence. For example, I live in an urban region, while all of these hicks are living in rural areas where everyone talks real slow.  I went to college where the administration carefully cultivated a diverse campus environment so that we could all pat ourselves on the back for our high-mindedness, whereas the high school dropouts on the farm only see black people on TV.  All of the evidence points to me as open-minded, and them as racist.  But all of the economic evidence also points to me as a clear economic beneficiary of immigration, and to them as clear losers.  Racist or not, they have a beef.

What is startling about the immigration debate is the lengths people go to in order to deny this underlying economic dynamic.  The laissez faire immigration policy (or lack thereof) carries with it massive redistribution effects on the citizenry that simply are ignored or glossed over.  If the same redistribution were achieved via a combination of tax and subsidy, it would be considered an outrage by most on the left who are concerned with income inequality, as it amounts to a tax on poor citizens to the benefit of well-off citizens. 

What’s the bottom line on immigration?  According to Borjas, once you factor in the increased reliance on welfare among the immigrant population, there is no net economic benefit to the native population.  However, there is a $500 billion redistribution from the lower-skilled native workers who compete against the dominant immigrant labor group, to the native population that faces no such competition.  If you assume this cost accrues evenly to a quarter of the native population (approximately 75 million people), this comes to $6,667 per person; that is no small tax.  Borjas boils one’s stance on immigration down to one question:  “In the end, the choice of an immigration policy is driven by the answer to: Who are you rooting for?”

Borjas also chronicles the efforts to ignore, deny, or obscure this evidence by pro-immigration media outlets (which include the Wall Street Journal – i.e., it’s not all liberal media; any libertarian leaning or pro-business leaning media will also be in this camp), which of course is not surprising.  In general, the people who comprise the media are not intelligent enough to follow and discern the economic debate among professionals, and therefore if there are professional economists who give the media the pro-immigration answer that they seek, they run with this as settled science.

Unfortunately, there is no lack of well-credentialed economists from reputable institutions with publications in refereed journals that cloud the issue.  Borjas makes quick and easy work of exposing the obvious flaws in the methodologies of the studies that purport, for example, to show that immigrant labor has had no effect on the wages of domestic labor.  One famous study that purported to show no effect involved a look at the labor market in Miami in the aftermath of the Mariel boat lift, when 125,000 Cubans immigrated to the Miami area in the early 1980s, almost two-thirds of which were high school dropouts.  The study looked at the wages for a broad group of native workers, rather than at the wages of the labor group that one would predict would be most affected by the competition with the Cuban immigrants – that of native born high school dropouts.  When Borjas revisited the issue and narrowed the focus to the correct labor group, of course he found a profound and negative effect on its wages. 

The pro-immigration economists, rather than being agnostic scientists going wherever the evidence leads, are also not shy about the fact that they are hell-bent on reaching a certain conclusion.  Borjas quotes two economists who have argued against Borjas’ analysis of the Mariel boatlift:  “We think the final goal of the economic profession should be to agree that . . . we do not find any significant evidence of a negative wage and employment effect of the Miami boatlift.”  Another economist, who looked at the issue and was surprised to find everyone sweeping the redistributive aspects of immigration under the rug, noticed the same: “A rabid collection of xenophobes and racists who are hostile to immigrants lose no opportunity to argue that migration is bad for indigenous populations. Understandably, this has triggered a reaction: desperate not to give succor to these groups, social scientists have strained every muscle to show that migration is good for everyone.”


Blogger Victor Matheson said...

Ok, I am willing to read this, but Ideas Hatched really needs to consider the fact that both the internet as a whole and blogging in particular has rarely been effective as a long form medium. Maybe consider more frequent 400-600 word posts and less frequent 1500 word ones.

That being said, at least part of the liberal, libertarian, and Christian response to the cost-benefit analysis of immigration is to put at least some weight on the benefits earned by the immigrants themselves. The outcry over the refugee ban isn't that I am unhappy about losing a cheap source of lawn guys. It's that I place value on the lives of children in warzones. And I assume any good conservative would think Cuban immigrants escaping the socialist hell of Cuba would be better off here.

So, faced with $500 billion in benefits for rich Americans and $500 billion in costs to poor Americans, yes liberals shouldn't typically be happy with that trade. But faced with $500 billion in benefits to rich Americans, $500 billion in costs to poor Americans, and, say, $500 billion in benefits to the (poor) immigrants themselves, a liberal would be much more likely to take that trade, especially if they are simultaneously trying to correct the general income inequities in other ways.

2:15 PM  

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