Immigration Reform Truly Could Be A Free Lunch
February 13th 2010 16:11
Ezra Klein wrote a great blog post back in 2007 that effectively sums up some of the views I hold and have written about so far on this blog. I thought I would recap the findings here to show that I am not completely making stuff up.
1. The most prominent study on the impact of low-skilled immigration, by Harvard economist George Borjas, estimates a 7% decrease in wages for unskilled workers. For now, let us assume that is true. Anti-immigration advocates argue that, in order to keep low-skilled workers' wages a minor 7% higher, the United States should forgo the massive gains to immigrants and the considerable gain to the economy.
2. If we truly wanted to increase the income of those low-skilled domestic workers, this could be accomplished by less-damaging means than restricting immigration (Klein offers the Earned Income Tax Credit as his example.)
3. Now let us bring into question Borjas' findings. UC Davis economist Giovanni Peri analyzed the impact of immigrants in California's population, and he found far different results. From 1960-2004, immigrants with similar characteristics to natives did not damage the natives' employment perspectives. Also, from 1990-2004, there was no impact on the earnings of high school dropouts and a 3-7% INCREASE for workers with a high school diploma or higher. These results call into question whether immigrants do negatively impact earnings for low-skilled workers, which many people take as a given.
4. The reason for #3 is something I have talked about on this blog more than once: immigrants tend to complement, not substitute, for native workers. As low-skilled, cheap labor comes into the U.S., the domestic low-skilled labor moves into roles that either act as supervisors to the immigrants or other "interactive and coordinating tasks." This complementarity increases productivity, and thus wages.
5. Another reason for #3 is the demand-side effect of immigration. As more workers come into the economy and earn incomes, they consume more products and services. If this effect outweighs the supply-side effect of increasing labor, and decreasing wages, then the net effect is increasing earnings. This appears to have been the case in California over the past two decades.
If more Liberals would tout the poverty-reducing impact of immigration and more Conservatives would rally behind the positive economic impact of immigration, I see no reason why a more liberalized immigration policy could not be sold to the public.
Follow me on Twitter: @AGoldenDoor
1. The most prominent study on the impact of low-skilled immigration, by Harvard economist George Borjas, estimates a 7% decrease in wages for unskilled workers. For now, let us assume that is true. Anti-immigration advocates argue that, in order to keep low-skilled workers' wages a minor 7% higher, the United States should forgo the massive gains to immigrants and the considerable gain to the economy.
2. If we truly wanted to increase the income of those low-skilled domestic workers, this could be accomplished by less-damaging means than restricting immigration (Klein offers the Earned Income Tax Credit as his example.)
3. Now let us bring into question Borjas' findings. UC Davis economist Giovanni Peri analyzed the impact of immigrants in California's population, and he found far different results. From 1960-2004, immigrants with similar characteristics to natives did not damage the natives' employment perspectives. Also, from 1990-2004, there was no impact on the earnings of high school dropouts and a 3-7% INCREASE for workers with a high school diploma or higher. These results call into question whether immigrants do negatively impact earnings for low-skilled workers, which many people take as a given.
4. The reason for #3 is something I have talked about on this blog more than once: immigrants tend to complement, not substitute, for native workers. As low-skilled, cheap labor comes into the U.S., the domestic low-skilled labor moves into roles that either act as supervisors to the immigrants or other "interactive and coordinating tasks." This complementarity increases productivity, and thus wages.
5. Another reason for #3 is the demand-side effect of immigration. As more workers come into the economy and earn incomes, they consume more products and services. If this effect outweighs the supply-side effect of increasing labor, and decreasing wages, then the net effect is increasing earnings. This appears to have been the case in California over the past two decades.
If more Liberals would tout the poverty-reducing impact of immigration and more Conservatives would rally behind the positive economic impact of immigration, I see no reason why a more liberalized immigration policy could not be sold to the public.
Follow me on Twitter: @AGoldenDoor
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