Thursday, September 29, 2016

Costs and Benefits of Immigration to the US

Big new report from the National Academy of Sciences outlines some of the impact of immigration to the US:
The report suggests that immigration is not a clear-cut issue in which one side is right and the other wrong, but that there are both costs and benefits.

The crux of the problem is that the plusses and minuses are not distributed equally. The academy found, for example, that the willingness of less-skilled immigrants to work at low pay reduced consumption costs — the costs to consumers of goods and services like health care, child care, food preparation, house cleaning, repair and construction — for millions of Americans. This resulted in “positive net benefits to the U.S. economy during the last two decades of the 20th century.” These low-wage workers simultaneously generated “a redistribution of wealth from low- to high-skilled native-born workers.”

The frequent harshness of these trade-offs in real life is masked by the academic language of the report, which points out that native-born workers who are substitutes for immigrants “will experience negative wage effects” — in other words, lower wages.
This seems to sum up the conventional wisdom on immigration right now: on the whole it makes the nation richer and more vibrant, but it hurts the native born workers who compete with immigrants for jobs, driving down their wages. This may have the effect of worsening inequality:
Immigration lowers the wages of competing workers, while raising the return to capital and the wages of complementary workers. In other words, the immigration surplus does not accrue equally to everyone. It goes primarily to the owners of capital, which includes business and landowners and investors.
Immigration has been a major piece of background to the economy of the past 40 years. Along with free trade and lower taxes, it has led to a country full of bold people doing exciting things, with a vast diversity in food, music, and entertainment, the world's most innovative companies, a disproportionate share of Nobel Prize winners, and so on. Immigrant ambition drives the meritocracy toward ever greater competitiveness; immigrant muscle builds the gleaming office towers where the meritocrats have their spiffy offices. Ordinary Americans have benefited from this economy in many ways, from smart phones to smart cars, but our incomes have stagnated and our debts have grown. Americans on the margins – poor, ill-educated, mentally ill – have suffered as immigrants have bid down the price of low-skill labor and bid up the cost of housing, while the meritocrats have increasingly thumbed their noses at the useless 47 percent.

I am ambivalent about the role of immigration in all of this. On the one hand I see that in old cities like New York or Washington, the most vibrant neighborhoods are the ones full of immigrants. Many of the movers and shakers in American business, science and technology have been immigrants, from Nikola Tesla to Sergey Brin. Since I work along the margins of the construction industry I work with immigrants all the time, and I have always been impressed by the diligence and professionalism of immigrant workers.

On the other hand, I suspect that the flood of cheap, willing laborers from Latin America really has pushed our economy back toward the Gilded Age, which was also a time when mansion-dwelling millionaires benefited from the labor of millions of hungry new arrivals.

But even if it were true that immigration was a major cause of rising inequality, what would we do about it? The people arriving in the US legally are mostly on the high-skill side, like the ambitious Nigerians I wrote about a few days ago. (Or else they are refugees, a completely separate issue.) The people who drive wages down by taking work at any wage are largely illegal. We could, obviously, make it very difficult for undocumented people to live and work in America, but I think the price would be very high. For example, we could issue biometric national ID cards coded with our retina scans and require that they be used for almost everything. I suspect Americans would rebel. Many people who hate immigration would also hate a regime that punished small contractors for paying day laborers in cash when they needed some quick help. So long as that is the attitude, we can never keep illegal immigrants from finding work.

The notion of rounding up 10 million people and forcibly deporting them turns my stomach.

I would support some changes in immigration policy, such as perhaps a reduction in legal immigration and a shift in its focus toward highly skilled people rather than family unification – especially if that could be made part of a general effort to reduce inequality that also included higher taxes on the wealthy, a higher minimum wage, and larger wage subsidies for poor families. But immigrants are not responsible for our problems, and I resist any effort to blame them for things like crime and the decline of old manufacturing cities. It is really this irrational anger that has made most of the American left so pro-immigrant of late, on the principle that whatever Trump supporters hate must be a great thing. I won't be drawn into that sort of shouting match. Immigration has powerful impacts on our nation, and we ought to think about it carefully and design our policies to make those impacts as positive as possible.

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