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A new paper on immigration and wages
It is basically pro-imigration, finding positive wage effects for most U.S. workers and only slight negative effects for the unskilled. It uses a general equilibrium model related to that of Borjas, but models physical capital more explicitly. I've yet to read it. Find it here. Hat tip to New Economist blog, here is the abstract.
Posted by Tyler Cowen on August 1, 2006 at 02:41 AM in Data Source | Permalink
Comments
immigration seems like the economist's version of the perpetual motion
machine. Bringing another human into the system is a biologically
inefficient move. She will use less than one percent of sustaining
energy for any particular output. When resources were bountiful this
could be justified. Now we need to reduce the numbers of top predators.
Posted by: leapfrog at Aug 1, 2006 10:23:40 AM
I haven’t read the entire paper yet. However, in a few seconds I found a material empirical error that undermines their entire thesis. P/O are still claiming that 90% of US workers are high school graduates. Were it only so. In fact, only about 70% of US young people graduate from high school. See Jay Greene at http://www.manhattan-institute.org/html/ewp_03.htm for a detailed review of the data. Note that the black and Hispanic graduation rates are in the low 50s. The graduation rate peaked back in the late 1960s at around 77% and has since fallen to 72% (in 2001) (see http://nces.ed.gov/programs/digest/d03/tables/dt102.asp). See http://www.wsipp.wa.gov/rptfiles/05-03-2201.pdf for a chart of this data.
Of course, the truth is much, much worse. Sadly, in much of the US you can get a high school “diploma” without having learned much of anything. Roughly 26% of 12th graders are “below basic” in reading and 35% are “below basic” in math. A realistic high school graduation rate for the US would be somewhere below 50%. How far below isn’t clear. Using the same methodology, black and Hispanic high school graduation rates are around 25%, a tragic state of affairs. See http://nces.ed.gov/nationsreportcard/nde/criteria.asp for the raw data.
This rather large factual error calls into question the entire P/O thesis. P/O claim that almost all American workers are not competing with low-skill immigrants. Were it only so. In fact, low-skill immigrants are competing with most Americans across the board. Not just in jobs, but in housing (immigration has given California the most affordable housing in the US… Sure it has), education, mobility, etc.
Of course, the elite plutocracy benefits… Along with the racial special interest groups…
Of course, the real world data demolishes even the minimal claims of P/O. The normally very pro-Open Borders Los Angeles Times, published an article of late that trashes any claims as to how low-skill immigration is “helping” the US. The article makes it rather clear that mass immigration is turning the US into a third world slum. Don’t believe me? Check out what the immigrants have to say:
”Her sister Alejandra was the first to leave. In Los Angeles, she and her husband were barely able to make ends meet. As in Mexico, ‘there was little work and it's poorly paid,’ she said.”
”Eight years ago, she and her family moved to Kentucky, where a friend said there was more work and were fewer Mexican immigrants bidding down the wages for unskilled jobs.’
"'What we weren't able to do in many years in California,' Alejandra said, 'we've done quickly here. We're in a state where there's nothing but Americans. The police control the streets. It's clean, no gangs. California now resembles Mexico—everyone thinks like in Mexico. California's broken.'"
From http://www.latimes.com/news/local/la-me-quadruplets28jul28,0,931508.story?coll=la-home-headlines
Now please tell me why we should allow Open Borders to “break” all of America they mass immigration has wrecked California.
Posted by: Peter Schaeffer at Aug 1, 2006 2:14:55 PM
”Eight years ago, she and her family moved to Kentucky, where a friend said there was more work and were fewer Mexican immigrants bidding down the wages for unskilled jobs.’
Sounds like immigrants are competing with immigrants.
Now please tell me why we should allow Open Borders to “break” all of America they mass immigration has wrecked California.
Perhaps to allow folks like those in the story to better themselves rather than sentence them to the lives they left in Mexico? I suspect Kentucky will do well with an influx of eager new blood.
Of course, California suffers from the kind of wreckage much of the rest of the country aspires to. And is generally priced to match such demand.
Posted by: shecky at Aug 1, 2006 2:49:09 PM
An argument is as good as the statistics it uses. I'm not an economist, but the NYTimes story yesterday on the growing percentage of males who no longer seek work causes me to wonder when it is appropriate to use unemployment statistics instead of percent of population in workforce in these sorts of arguments? I assume that unemployment statistics are more readily available.
The implication yesterday was that people were withdrawing from work instead of moving down the ladder to find available jobs.
Posted by: Bill Harshaw at Aug 1, 2006 3:21:13 PM
I think Peter Schaeffer is usually a crank on this issue,
and seems to ascribe unwarranted blame on immigration for changes
we've seen in labor markets; changes that have many causes.
However, when I looked at Schaeffer's comment on high scool
graduation rates and looked at the paper, I realized something.
Yes, 90% of people in the labor force have high school degrees,
as Ottaviano and Peri contend, but that just shows that native
high school dropouts leave the labor force in higher numbers.
It looks to me like Ottaviano and Peri make no adjustment for the
selection effect of discouraged native workers leaving the labor
force. At least a quick search on the word "selection" in the pdf
didn't show anything.
If that's the case, then Ottaviano and Peri are probably
overestimating the wage gains from immigration and underestimating
the wage losses.
I think Ottaviano and Peri make an important contribution by
estimating a general equilibrium model, but because they
have no adjustment for discouraged native workers, their estimates
likely provide an upper bound estimate on the wage benefits from
immigration.
Eventually, somebody will have to combine a general equilibrium
model with some sort of selection model. Sounds hard to me.
Good luck, PhD students!
Posted by: Keith at Aug 1, 2006 3:26:50 PM
Shecky,
With a <50% high school graduation rate, and decades of declining wages for American workers, it is NOT just a matter of immigrants competing with immigrants. Even if it was, why exactly should legal immigrants have their lives ripped apart by illegals? So the posturing elites can feel good about what they are doing for poor people in Mexico? While enjoying cheap nannies and lawn care and bleeding about how much they care?
Of course, there is empirical proof (like it or not) that we are not just talking about cross immigrant competition. Americans have been net leaving California for years. If immigration is really such a blessing, why aren’t Americans flocking to California to enjoy the immigration provided bounty? We all know why. There is only the endless pain of Open Borders and mass immigration.
You have stated your willingness to “break” America to help Mexicans. Let me be the very first to question your loyalty to your country. However, I have a more practical issue. What exactly are you willing to give up, to help poor Mexicans? It sure looks like your solicitude goes as far as sacrificing every poor American on the altar of Open Borders and no further.
Your claim that immigrants will help Kentucky would be laughable if it weren’t so absurd. According to the immigrants, Open Borders has ruined California but somehow it will help Kentucky. I don’t think my ten year old daughter would fall for such nonsense.
By the way, Americans don’t aspire to turn their states into California’s. 50 years ago they did. That was before the devastation of Open Borders became unbearable.
Why is that ordinarily sensible people loose their marbles when the subject of immigration comes up? Actually, the answer is depressing clear. Immigration is the creationism of the libertarian right (and political left). Because it is a religion, no body of facts can sway the true believers. Faith triumphs over logic.
Posted by: Peter Schaeffer at Aug 1, 2006 3:33:07 PM
With a <50% high school graduation rate, and decades of declining wages for American workers, it is NOT just a matter of immigrants competing with immigrants.
Why should the government subsidize citizens and legal immigrants who can't be bothered to finish high school with job protectionism?
By the way, Americans don’t aspire to turn their states into California’s. 50 years ago they did. That was before the devastation of Open Borders became unbearable.
Kentucky, as California, has open borders. The fantastic thing about the concept is that it regulates itself. The way people flocked to CA to persue economic dreams, they now leave to other places. Should folks have been restricted from coming to CA in the first place? The notion that central planning can take care of such market forces is silly.
Of course the notion that CA is now somehow unbearable is a drama not matched by reality.
The fundamental flaw is thinking of the US economy as a zero sum game.
Posted by: shecky at Aug 1, 2006 3:55:45 PM
Peter,
Save your breath.
You're trying to debate with an ideologue.
Posted by: Martin Kelly at Aug 1, 2006 4:15:59 PM
Keith,
The schism between the P/O native labor force high school graduate fraction (90%) and the overall high school graduation rate (70%) is only partially explained by differential labor force participation. It is true that college graduates have higher LFP (77.6% according to the BLS) than high school dropouts (45.9%). However, that doesn’t account for all or even most of the 20 point spread. The real problem is that the BLS is treating GEDs (General Equivalency Diploma) as high school graduates. Numerous studies have shown that GEDs have life trajectories comparable to dropouts, not high school graduates. See Jay Greene for a detailed discussion of the subject.
A deeper point (as stated above) is that a high fraction of high school “graduates” aren’t. Students with below basic reading and math skills may be handed a diploma. However, that won’t enable them to participate in the economy at a high school level any more than me getting a PhD in physics, from a diploma, mill would qualify me for a position as a postdoc.
Let me commend you for pointing out the rather large population P/O exclude from their study, who are in direct competition with unskilled immigrants. The BLS identifies 28 million adults (some of whom are immigrants), 25 and over, with less than a high school diploma. Only 12.9 million are in the labor force. Raising their LFP to the high school graduate level would add 4.8 million workers to the labor force. Raising their LFP to the college level would 8.9 million workers.
Posted by: Peter Schaeffer at Aug 1, 2006 7:13:58 PM
I'd argue that the most important effect of immigration to measure is not the effect on wages, but rather what if any externalities the immigrants bring with them. If the only thing immigrants do is bid down wages, I'm not convinced that that's in and of itself a bad thing - it's not much different from the effects of free trade. (i.e. some losers but the country wins on net.) However, unlike goods, immigrants can bring significant externalities with them: increased criminality, disproportiate use of public services, costs due to not speaking the native language, and bidding up housing. As far as I can tell, the illegals we're currently tolerating do indeed have significant externalities that outweigh their benefits. It's kind of like pollution: businesses and consumers get the benefit of lower wages, while the surrounding community suffers. I'd say we need a qualification test with a low pass rate for allowing immigration, and then let anyone who wants to take the test. I understand Canada does something like this. Actually, since IQ is correlated with income and inversely correlated with criminality, an IQ test with a threshhold of 100 (or 110 or 120) might not be a bad place to start. Of course, it's a completely politically unfeasable idea.
Posted by: Ian E at Aug 1, 2006 11:16:22 PM
Ian E,
The externalities associated with the current generation of low-skill immigrants are negative and quite large. See "Seeing Today’s Immigrants Straight" by Heather MacDonald over at the Manhattan Institute (http://www.city-journal.com/html/16_3_immigration_reform.html). Section 4 contains the ugly truths that PC advocates of immigration don't dare talk about. Key quote
"If someone proposed a program to boost the number of Americans who lack a high school diploma, have children out of wedlock, sell drugs, steal, or use welfare, he’d be deemed mad. Yet liberalized immigration rules would do just that. The illegitimacy rate among Hispanics is high and rising faster than that of other ethnic groups; their dropout rate is the highest in the country; Hispanic children are joining gangs at younger and younger ages. Academic achievement is abysmal."
The details put Heather's succinct summary to shame.
Advocating low-skill immigration in America today requires blinkers and the thickest rose colored glasses known to man. It is act of creationist faith.
Thank you
Peter Schaeffer
Posted by: Peter Schaeffer at Aug 2, 2006 12:46:27 AM
Peter,
Would it be fair to say that you support limiting the immigration of Hispanics because of the costs that Hispanics impose on the rest of us? If so, how much do you estimate the cost of a the marginal immigrant to be to you personally? In other words, how much would you have to be compensated for each new Hispanic immigrant to make you indifferent to the costs imposed on you?
Posted by: Christopher Rasch at Aug 2, 2006 6:52:19 AM
If you haven't yet read Sam Quinones's great LA Times article on the illegal immigrant with triplets and quadruplets, drop everything and read it now:
http://www.latimes.com/news/local/la-me-quadruplets28jul28,0,931508.story?coll=la-home-headlines
Posted by: Steve Sailer at Aug 2, 2006 11:40:08 AM
Why should the government subsidize citizens and legal immigrants who can't be bothered to finish high school with job protectionism?
Border control prevents natives from having to be bear externalized costs. That is NOT the same thing as a subsidy.
Posted by: Ben Tillman at Aug 2, 2006 6:12:00 PM
Christopher Rasch,
I am not sure if I personally benefit or suffer from low-skill Hispanic immigration, measured in economic terms. Frankly, I have never thought about the issue that way. Since you asking, I can not claim any wages losses. I do gain from cheaper services, but also pay higher taxes. In California, the income statement would be negative. However, Texas doesn’t have an income tax, so the tax burden is presumably diminished. I would guess that I all still a net loser (of course, I pay Federal taxes).
I do not object to Hispanic immigrants. I object to high-cost, low-skill immigrants from anywhere/everywhere. Indeed, you can find a paper by Edward P. Lazear (“Mexican Assimilation in the United States”) that demonstrates that United States is simply importing the wrong Mexicans. Summary quote:
“By almost any measure, immigrants from Mexico have performed worse and become
assimilated more slowly than immigrants from other countries. Still, Mexico is a huge country, with many high ability people who could fare very well in the United States. Why have Mexicans done so badly? The answer is primarily immigration policy.”
To be honest, no amount of money would persuade me to accept the status quo. My concern is that my children grow up in safe, stable, prosperous, and unified country. My increasing fear is that the nation they will inherit will be a giant barrio turn asunder by tightly linked fault lines of class, race, and language. Such considerations are beyond price.
Posted by: Peter Schaeffer at Aug 2, 2006 11:56:10 PM
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