The Gist: Who benefits – and who suffers – from immigration to the U.S.
A review of We Wanted Workers by George Borjas.
Cui bono? Who benefits? This useful Latin question was the ancient Roman equivalent of “Follow the money!”
George Borjas asks the question about immigration to the United States. Himself an immigrant, Borjas now researches and teaches immigration economics at Harvard. In We Wanted Workers, Borjas reveals who benefits – and who suffers – from immigration to the United States.
Imagine that you are hiring. It doesn’t really matter what for – maid or mathematician, farmhand or pharmacist. Now consider two scenarios: in the first, you have 2 similarly-qualified candidates apply; in the second, you have 25 similarly-qualified candidates apply. Which scenario would you prefer? In which scenario would you be more likely to end up paying your hire less?
Figure 1. Like, what if the Bachelor could choose between only two romantic interests? How could he possibly find true love for the few months after his season ends?
Generally, the more competition the better for the consumer – in this case, you, the person hiring. If you have lots and lots of people who want to work for you and they’re all similarly-qualified, you enjoy a buyer’s market, can freely choose whom you like, and can more or less dictate salary. You naturally benefit by not spending as much – and you can divert that extra money to alternative uses that benefit others, whether it’s hiring another person you might not have, passing along your savings to your own consumers, buying something, investing, or even just putting it in a bank to be lent out. You may also be able to increase your productivity by spending more of your time on what you do best and (cheaply) delegating the rest.
But, if the roles are reversed, and you are one of the candidates for the job, you may suffer as the employer benefits. Every additional similarly-qualified applicant for the job you want makes you both less likely to be hired in the first place and more likely to command a lower salary if you are. “The most credible evidence—based solely on the data—suggests that a 10 percent increase in the size of a skill group probably reduces the wage of that group by at least 3 percent.” If the place where you live has lots of candidates for every job, then you still might enjoy the benefits of lower prices or cheaper loans – but neither of those benefits will matter if you can’t secure an income.
There is the basic economic dilemma of immigration: employers benefit from cheaper and more plentiful labor, consumers benefit from lower prices, immigrants benefit from higher wages than from where they came, but similarly-qualified natives suffer from lower wages and fewer opportunities to be employed. To the degree that economists acknowledge that it’s a trade-off at all, most believe immigration is net-positive, growing the economy and making it more efficient. These economists argue that the immigrants make a country richer by saving natives money and allowing natives to become more productive with their time, by being additional consumers for goods and services often provided by natives, and by being additional sources of innovation, including starting businesses that hire natives.
Figure 2. Things get more complicated for natives if employers redirect their savings from hiring immigrants toward taking foreign tropical vacations clad in swimsuits made in China.
Borjas concedes benefits of immigration but invites us to take a closer look at three aspects:
- What we’ve already seen: the economic benefits of immigration fall unevenly on the population, with natives of similar skills suffering the most.
- The missing part of the equation: What we save in labor costs we may lose in an increased tax burden to pay for a larger welfare state supporting both natives and immigrants.
- What’s not in the formula at all: Immigrants are more than robots we program to do a job – they impact our culture in meaningful ways.
Let’s explore those in detail.
Borjas argues that “immigrant participation in the workforce redistributes wealth from those who compete with immigrants to those who use immigrants.” During the 2016 presidential campaign, Ted Cruz ran a clever television ad that featured men and women in business attire running across the border as the candidate bellowed that if lawyers and bankers and journalists were immigrating in mass to the United States, there would be instant political momentum for change. The reality instead is that America’s lowest-skilled natives suffer in political obscurity. Borjas relates a story of a federal immigration raid of a chicken-processing plant that resulted in 75% of its workforce disappearing. To survive, the company raised wages by a dollar an hour and wound up aggressively recruiting local US citizens – the biggest beneficiaries were low-skilled African Americans. Borjas concludes: “It is not that immigrants do jobs that natives don’t want to do. It is instead that immigrants do jobs that natives don’t want to do at the going wage.”
Figure 3. There’s an old story that I first heard referencing George Bernard Shaw. Seated next to a beautiful young woman, he asked if she would sleep with him for $1,000,000. She giggled and said she would. He then asked if she would do it for $5. “Why, what kind of woman do you think I am?” she indignantly replied. “We’ve already established that,” Shaw observed. “Now we’re just haggling over price.”
The broader problem with low-skilled immigration is that it increases your tax burden: low-skilled American citizens face fewer and worse economic opportunities and the government responds with welfare programs that sustain joblessness. Yet it doesn’t end there: the government also subsidizes low-skilled immigrant households. With our debt, why should Americans continuously mass import a fiscal burden? It wasn’t always so. Borjas relates that, among the flinty Puritans, “as early as 1645, the Massachusetts Bay Colony began to prohibit the entry of paupers. In 1691, the Province of New York required a new entrant to ‘give sufficient surety that he shall not be a burden.’” In the 19th century, as the United States began experiencing new waves of immigration, the government legally prohibited immigrants who might become a public charge – and deported those who wound up receiving government benefits within a few years of their arrival. And this was a time when government benefits were rather few!
Figure 4. Virginia explorer, admiral, governor, mustache model John Smith decreed that “he that will not work shall not eat (except by sickness he be disabled). For the labors of thirty or forty honest and industrious men shall not be consumed to maintain a hundred and fifty idle loiterers.”
Today we should know the high cost of good intentions: in the 1960s we simultaneously opened the doors to mass immigration and dramatically extended the infrastructure of entitlements. But as Milton Friedman insisted, “it is one thing to have free immigration to jobs. It’s another thing to have free immigration to welfare.” Without welfare, if there are no jobs, immigrants leave – to Friedman, this was a functioning free labor market that benefits everyone. Instead, Borjas’ research concludes: “Despite the many restrictions on welfare use by immigrants, the evidence indicates that immigrant households are far more likely to receive [government] assistance than are native households.” This becomes all the more clear when we consider a special feature of America: non-citizens’ children born in the United States are automatically citizens – and therefore entitled to all the benefits and harms of the welfare state. Borjas finds that “46 percent of immigrant households received some type of public assistance.” Again, with our debt, why should Americans continuously mass import a fiscal burden?
Figure 5. Imagine your accountant – appropriately donning a green eye-shade – promises to save you money on most goods and services you consume. Sounds great! The only catch is you have to cosign all of his loans. Don’t worry! He has half your credit score but, with your help, he’s hopeful about bringing it up.
After extensive analysis, Borjas concludes that immigration has increased American GDP by a couple trillion dollars – but that “immigrants themselves get paid about 98% of this increase” and that, when you factor in government subsidies of immigrant households, immigration may be a “net economic wash.” And yet that’s not a necessary vice of immigration, only of our particular policies:
“If the typical immigrant was a high-skill person, outperforming others in the labor market, that immigrant would surely be defraying the cost of welfare programs [by contributing more than she took]. But if the typical immigrant was a low-skill person, performing worse than other workers, that immigrant would likely receive a net subsidy. Put bluntly, low-skill immigration is likely to be a drain on native taxpayers, while high-skill immigration is likely to be a boon.”
Unfortunately for the American taxpayer, the typical immigrant today – and for more than the last three decades – has been low-skilled. In 1960, before our present immigration laws, immigrants to the United States had similar education to natives and earned 11% less than the average native upon entry. By 1990 and continuing through today, immigrants are 3.5x more likely than natives to lack a high school degree or equivalent and earn 28% less than the average native upon entry – a reflection of their lack of skills. Worse, this wave is not the result of thoughtful policy but our inability to control our border. Because we tacitly favor immigrants in walking distance, we get more Mexicans (who tend to be low-skilled and earn on average 50% less than the average native upon entry) and fewer Germans (who tend to be high-skilled and earn 70% more).
Figure 6. Concentrating on national origin can be a blunt instrument for understanding the data: Borjas says Mexico has plenty of college graduates – they just stay home because they earn double what someone without their degree can and wouldn’t make much more in the US of A. Low-skilled Mexicans come to the United States because the trip is relatively easy and they’re rewarded with better pay supplemented by government assistance. Compare this to the people who can’t walk here: “The average person in India has less than six years of schooling, but over 70 percent of Indian immigrants in the United States have a college or graduate degree.” Altogether, “The rule of thumb for immigrant selection is straightforward: the United States attracts high-skill workers from countries with egalitarian income distributions (those countries where high-skill workers do not do so well), and low-skill workers from countries with a lot of income inequality (those countries where low-skill workers do very poorly).”
Borjas advises: “If our goal is indeed to make natives as rich as possible, the accumulated knowledge from economic research tells us exactly how to get there: we should admit only high skilled immigrants.” They are more likely to contribute more than they take and more likely to innovate and start businesses that improve our lives. If making natives rich is too crass and we desire to be humanitarian, why do we privilege our relatively wealthy neighbors (who break our laws) rather than find the globe’s most needy?
And yet, as Pat Buchanan asked, “Is our country nothing more than an economy?” Borjas’ title “We Wanted Workers” references the idea that we simply desire jobs done but don’t think about what else the job-takers bring along with them. How does our country change when 40+ million foreign-born constitute more than 13% of the population – more than triple the proportion of 1970? How do our politics change when there are more foreign-born residents of California than people in Tennessee and Utah combined – and yet everyone gets counted by the census for divvying up power and money?
For Borjas, the question is: how do we make it in the interest of immigrants to assimilate and adopt the best American culture has to offer? He cites Samuel Huntington who feared that modern Latin American immigration presents a threefold assimilation challenge: the numbers are high, continuously growing, and concentrated in a few states. Borjas compares this to the early twentieth century, when we also had high levels of immigration – no single national origin dominated and then the government dramatically restricted the total inflow: now Mexicans alone account for over 30% of our immigrants, they tend to cluster in less diverse communities than that previous generation, modern technology enables easy keeping in touch with home, and there is no political consensus on what to do about immigration.
Whatever the reason, by at least one measure, we’re failing to integrate: Fairly consistently, about 30% of new immigrants speak English fluently. About 42% of those who arrived in the 1970s spoke English fluently by the end of their first decade in the country – a 12% gain. We might hope for more and yet we got less: Among those who arrived in the 1990s, only 33% spoke English fluently after a decade. What’s the point if you can get by without it?
Douglas Murray wrote a book about Europe’s far more challenging position of integrating significant Muslim immigration: “The world is coming into Europe at precisely the moment that Europe has lost sight of what it is. And while the movement of millions of people from other cultures into a strong and assertive culture might have worked, the movement of millions of people into a guilty, jaded and dying culture cannot.” We may have all come from somewhere else somewhere in our family tree, but what we forged was something special: Has America “lost faith in its beliefs, traditions and legitimacy” as well? Will America still be worth coming to if we lose them?
Borjas ultimately concludes that our path forward must start with controlling our borders and getting intentional about who we let in. “The fact that we have already had a major amnesty [in 1986] and that it did not work is partly the reason why the debate over ‘comprehensive immigration reform’ is so contentious.” He suspects that the only way to do that is “seriously penalizing lawbreaking employers” but is willing to offer a compromise: give employers the ability to rent guest workers and set the price appropriate to their total social cost. Otherwise, we have to decide what we really want out of immigration: who we want to benefit, who we are willing to let suffer. And that’s what makes immigration so hard. But maybe we could start with reforming welfare!
Figure 7. Click to acquire We Wanted Workers by George Borjas (9/10), a nuanced, technocratic take on immigration that digs into the nuts and bolts of data to find winners and losers.
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