Categories:
Labor Mobility, Immigration, Outsourcing
Alex Tabarrok composed a letter to the political community from the economics community on immigration. He has posted the letter. Here is an excerpt:
Immigrants do not take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.
MRV alert–Bryan would recognize this is an example of economists differing from the general public because the latter suffer from make-work bias, which is the belief that jobs are scarce and we need to worry about preserving them.
READER COMMENTS
John T. Kennedy
May 17 2006 at 9:21am
The very phrase “American jobs” implies that jobs belong to America. But jobs belong to the people offering them. If every employer decided to replace american employees with mexicans that would be their business.
CS
May 17 2006 at 12:58pm
Immigrants can’t destroy net jobs by putting themselves on the market, but (as Bryan well knows) they can do so with their votes.
If the Senate bill adds 100 million citizens with lower IQs and education levels, and thus lower economic literacy, they may well produce dramatically increased unemployment by voting for anti-gringo socialist policies a la Venezuela, Peru, etc. Severe labor market regulation, government support for unionization, price controls, and high taxes on wages and investment could all destroy net jobs.
Mark Seecof
May 17 2006 at 2:08pm
So all those photos of unemployed men selling apples or pencils in 1935 were faked?
The number of jobs in the country isn’t fixed, but it changes in response to many factors. Availability of “willing workers” is just one of those factors, quite often (even over meaningful stretches of time) nowhere near the most important.
Besides, Tabarrok is leaving out price again. Few people want to work honest jobs that pay less than some combination of welfare, crime, and subjective-value-of-leisure-time. Right now, the lowest-paid work goes to illegal immigrants because their alternatives are worse. If we legalize all of them, they won’t want to work for very low wages any more. In fact, we can expect them to assimilate promptly to the behaviours of their cousins who got amnestied in 1986–welfare and crime!
So, you say, “abolish welfare and crime.” Well, the best way to do that is to allow wages for honest work to rise–that is, by stopping the influx of low-wage workers.
Actually, increasing the marginal cost of labor at the low end would almost certainly spur productivity improvements in labor-dependent businesses such as agriculture (by capital-for-labor substitution). Looking at trends over time, the tendency of “higher productivity to boost wages” is much stronger than the tendency of “labor-availability to boost employment.”
Dezakin
May 17 2006 at 2:13pm
“If the Senate bill adds 100 million citizens with lower IQs and education levels, and thus lower economic literacy, they may well produce dramatically increased unemployment by voting for anti-gringo socialist policies a la Venezuela, Peru, etc. Severe labor market regulation, government support for unionization, price controls, and high taxes on wages and investment could all destroy net jobs.”
Its really hard for me to see this paranoid view as anything more than racist fearmongering. Any rational view of the socialist movements in Latin America would see it as a response to corruption tied to the hip with very public lip service (and little more) of neoliberal policies that exaserbate poverty.
Last I checked Americans don’t vote based on rational economic policy anyways. I think Brian actually has something to say about this…
IZ
May 17 2006 at 4:00pm
The letter just mentions “immigration” without any qualification. Is this about legal immigrants, or illegal immigrants, or both? Why is it that economists always seem to be so vague about the distinction?
Scott
May 17 2006 at 4:16pm
IZ asks:
I would say that it is because the distinction doesn’t matter and its arbitary. Illegal is just a choice of politicians. At one point no one was illegal, then all Chinese were illegal, then it was people who didn’t fit under the arbitrary quota program. Illegal doesn’t matter because it can change every time the wind blows. Congress could make all Indians illegal or Japanese, or Italians or people over 35 or whatever they felt they could drum up votes with.
Half Sigma
May 17 2006 at 4:38pm
Barriers to entry such as tenure and the need for a PhD protect economics professors from immigrant competition.
If economics professors had to compete for their jobs in a true free market, maybe they’d be singing a different tune.
Mr. Econotarian
May 17 2006 at 5:02pm
Don’t people with more higher education (and thus you would assume higher IQ) tend to vote Democrat (and probably hold more socialist beliefs?) It is highly unclear to me that high-IQ translates into high economic literacy. Indeed, we seem to have an abundance of intelligent and well-spoken socialists in this country as compared to our free market supporters!
IQ is the ability to learn and process data, it does not give you magical access to perfect information. No doubt there were some high-IQ Nazis.
I wish the Republicans would stand up for the free market, accept immigrants into their arms, and in the process help educate immigrants about the economy that they are expanding.
alcibiades
May 17 2006 at 5:18pm
This blog seems to have a lot of topic-specific readership — ie, people that aren’t necessarily libertarian. I wonder why, versus say, a blog like marginalrevolution, where everyone seems to agree with its authors…
Matt
May 17 2006 at 7:43pm
No, this is economic bias alert.
How could a group of economists studying supply and demand discover that what the majority of people demand is not what they demand? I mean, if there is such a majority against more immigration, then there must be a hidden cost to immigration that the the so called science of markets is missing.
Immigration is better analyzed by the biological science of habitats. We should ask the question, how can we rearrange 500 million squirrels in North America so the poduction and supply of acorns is more efficient. Answer this question and you have solved the riddle of immigration.
carl marks
May 17 2006 at 7:51pm
Half Sigma – Its not a barrier to entry, its rather the choice of schools to hire those with PhDs. There are no laws that say schools cannot hire those with only a Masters. Rather, the school recognize the value of someone with a PhD.
By your reasoning, almost all jobs in America have “barriers” to entry because they require people to speak english.
Its not a barrier, but rather a hurdle one has to jump over if they want to be competitive in the job market of their chosen field.
TLB
May 17 2006 at 11:44pm
Click here to read my response to the letter.
There are huge, extremely important difference between legal and illegal immigration, but they gloss over the difference.
Remittances (money sent from immigrants to their home countries) are like making candy your main staple, yet they think they’re wonderful.
They don’t even give a nod to the fact that most of our immigrants are coming from one country and that that country used to own part of our country.
And, they don’t even give a nod to the political power that Mexico has been able to obtain in our country and their continual meddling in our laws.
Wouldn’t you expect someone to do a bit of research before signing on to or promoting something like this?
CS
May 18 2006 at 1:44am
http://www.amazon.com/gp/product/0385503024/103-2331240-8399016?v=glance&n=283155
Amy Chua’s “World on Fire: How Free Market Democracy Breeds Ethnic Hatred and Global Instability” is an interesting tour of ‘market-dominant minorities,’ i.e. racial or ethnic minority groups that tremendously outperform the majorities: Chinese throughout SE Asia, Lebanese and Indians in China, whites in Latin America, Brahmins/Parsis other ‘privileged castes’ in India, Ashkenazi Jews in Israel and Russia.
These minorities have tremendous productivity,and end up building or managing most of the local economy. The theory of comparative advantage still holds, and average incomes are often substantially higher for the majority because of the minority presence, but still you get pogroms and genocide or minority-backed authoritarianism.
Anti-Semitism took off again in Russia when Jewish ‘oligarchs’ made out like bandits in the privatizations (I say this as a Jew myself). Indonesia post-Suharto was racked with anti-Chinese murder and expropriation. Zimbabwe has been run into the ground (most of the workforce has fled the country), as Mugabe expropriated the white farmers who ran the commercial farming sector, the country’s big source of foreign exchange. In Venezuela the largely Spaniard managers of the national oil company were sacked, significantly lowering its efficiency (counterbalanced by the huge surge in oil prices). People are naturally envious, it’s an evolutionary holdover from socialist sharing of the meat from hunting in tribal bands. When you combine that natural anti-market tendency with low IQ and education (Bryan’s research shows that economic literacy *does* rise with advanced degrees, remember that a lot of PhDs are working for Google or Pfizer or Shell, and it’s only the nuttiest ones who choose to go into X_Studies or post-modernist gobbledegook), and a visibly different racial group to be envious of, well, that’s a nasty combination.
Free market types (I like to consider myself one of them) should focus on lowering barriers trade in labor-intensive goods and services. Singapore has an incredibly open economy, and an incredibly productive Chinese majority, but if it granted citizenship to millions of Malay workers how long would its top-notch institutions last? Malaysia has a PPP income of $10,400 per capita and a Heritage Economic Freedom ranking of 68th, while Singapore has a PPP income of 29,700 and an economic freedom ranking of 2nd. Malaysia is 24% Chinese, while Singapore is 77% Chinese.
Wages for low skill labor are low, so the direct efficiency costs of deporting (or encouraging to leave through employer sanctions) unskilled illegals will be moderate: Wal-Mart will expand automated RFID checkout, McDonalds will let you order with a kiosk, Roombas will vacuum the floors, unemployed African-Americans will be brought back into the labor force, and some jobs will be inefficiently removed.
Compare those costs to public school expenditures of tens of thousands per child, massive increases in unfunded liabilities for Social Security and Medicare (new claimants with lower productivity, and they won’t all be workers due to family reunification.) Worse, compare them to the efficiency costs of having not only a new Democratic supermajority controlling Congress plus the Presidency, but one which is dramatically more socialist economically and conservative socially than today’s Democratic Party. The secular liberal urbanites will be marginalized relative to the new influx (100 million plus over twenty years, perhaps more, especially when the tens of millions of new citizens vote for even more open immigration from their home countries), and their issues will go with them.
Mexican immigrants are much less interested in issues like separation of church and state, environmentalism, marijuana decriminalization and feminism/abortion. As a bonus, Latinos in America are more homophobic (and more opposed to equal treatment of gay marriages), anti-Semitic (according to the Anti-Defamation-League’s 2002 survey), and less educated.
I don’t want to live in that kind of United States. I don’t want the institutions and unusually high electoral support for free markets that makes the US so much more productive than Europe or Japan to disappear. I don’t want the loss of that productivity to slow the growth of the world economy and technological progress, hurting everyone. What I WOULD like is the following:
1. Start building fences across the entirety of both borders (including my native country, Canada).
2. Tell the IRS to stop issuing tax numbers to people with fake SSN’s, so that employers will be able to comply with the law, and then start sanctioning those who don’t pay taxes on their workforce. By reducing the economic incentive to enter you encourage people to go home.
3. Stop ‘catch-and-release,’ allowing illegals from countries other than Mexico to stay in the US if they promise to go to a judicial hearing months later (obviously, few show up!). Homeland Security debacle if ever there was one.
4. Announce that illegals have 60 days to leave the United States without penalty. If they are found after that period they will be deported and never allowed to re-enter (such re-entry would be a felony.)
5. After the 60 days are up start offering a $1,000 award to local police who arrest illegals, just like the award for finding military deserters. Use market incentives to actually get the job done. Past experience indicates that in an actual crackdown many immigrants will leave on their own for each one deported.
6. NOW, after the borders are under control revamp legal immigration. Take the H1-B program which brings in computer programmers, scientists, doctors, and other professionals and expand it to 1 million visas a year. Allow those professionals to apply for permanent residency after they have worked in the US for 3 years straight and can pass a standardized test (English proficiency and IQ, perhaps use the GRE). Eliminate automatic family reunification: family members can become permanent residents without qualifying for a skiled worker visa by paying an appropriately high fee (the market premium for American citizenship in the Indian marriage market is ~$50,000 right now). This means that top engineers with dumb wives will not be discouraged from immigrating, but the system will bring overwhelmingly people capable of contributing more to the US and world economy than the median American (or than they could produce in their home countries.)
7. While skilled immigration should be the priority, a temporary unskilled guest worker program becomes possible when you have a way to actually make the ‘guests’ leave at the end of their visa. But the visa should not allow application for permanent residency or citizenship.
CS
May 18 2006 at 2:37am
http://www.businessweek.com/magazine/content/06_21/b3985070.htm
Apparently Mexico is now churning out 110,000 or so engineers annually, with a much higher proportion of students going into the field than in America. Why should the US provide an amnesty to 11 million low-skill workers, give citizenship to another 20 million or so through family reunification, and then take in an annual stream of 5 million without selection for skills when it could be draining the best brains from its southern neighbor and the rest of the world?
Steve Sailer
May 18 2006 at 3:00am
Tabarrok’s “open letter” is a greatest hits collection of sentimental cliches about immigration that even Oprah might find mawkish.
Scott
May 18 2006 at 8:33am
Any complaints that are based on the idea that Latino populations will come in to this country and dominate the electorate and vote for socialist, anti-women, anti-gay policies are a red-herring. The whole point of the constitution was to prevent the majority from using the government to silence and oppress the minority. The bill of rights was designed to give peeps the right to be left alone and do as they please as long as they aren’t directly hurting someone else, no matter what the majority of people are all about. The fact that politicians and their supporters have used the past 200 years to slips the bonds of the constitution isn’t the Latinos fault. And warning that Latinos will hasten the destruction of the constitution is a distraction, the fact is that Causcasians are doing a damn fine job of it on their own. IF you’re worried about people voting your rights away, strengthen the protections of the constitution, end redistribution of wealth, stop paying for other people’s children’s education, stop paying for other people’s retirement and healthcare. Then the number and origin of other people in your area has much less of an impact on your wealth, rights and freedoms.
rvman
May 18 2006 at 3:16pm
>Barriers to entry such as tenure and the need for a
>PhD protect economics professors from immigrant
>competition.
Snort. My class in grad school was 3 Americans, a Mexican, a Turk, a Japanese, about 5-6 Koreans, another half dozen from the People’s Republic of China, and a couple of random others. Of the 3 Americans, 1 has a PhD, 1 is still disserting, and one left within a few months. None of us could compete with the Koreans or the Chinese in Econometrics.
CS
May 18 2006 at 4:20pm
Scott, you are right that the Constitution was intended to check the federal government in innumerable ways, but that the FDR constitutional revolution eviscerated the 10th amendment, and a good deal of the rest of the Constitution. But you can’t use the Constitution to bludgeon a people into following libertarian values against their will: look at Latin America, where the various constitutions get rewritten or replaced every few years.
“IF you’re worried about people voting your rights away, strengthen the protections of the constitution, end redistribution of wealth, stop paying for other people’s children’s education, stop paying for other people’s retirement and healthcare.”
And I’ll give everyone a magic pony. Stop paying for other people’s retirement and healthcare? Do you plan to stop paying taxes and raise armed rebellion against the US? That rebellion would lose.
The only real way to cut redistribution and government regulation and get a government that abides by an originalist understanding of the Constitution is through the vote, and with the current electorate it would be an incredible long shot. In electoral politics demography is destiny to a very high degree. In 2004 the non-Cuban Hispanic population went more than 2/3rds Democratic, Add a hundred million 3rd World Immigrants and it will become a truly Herculean task. You’ll get Democratic majorities like unto those in the Great Depression, enough to amend the Constitution to anything at all, even if politicians felt a sudden urge to comply with it.
Yes, support for socialism is greater across the whole population than 100 years ago, although less than in the post-Depression period. And yes, the Constitution is getting weaker and weaker. But respect for free speech, free markets, and a host of other good things are still much greater here than in other OECD countries and overwhelmingly better than Latin American countries.
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