Klein Answers the Davos Question

Lol, Steve Sailer is teh troll.

Bryan,

Do you have any papers of your own, or references to others, that address the question of immigration’s economic impact on native-born unskilled workers?

I used to be a WSJ/open-borders guy but looking at the economic situation of inner-city blacks changed my mind.

I don’t doubt that many of these immigrants are often better workers and contributors to our society than the native-born lower-class people whose labor they substitute for. The problem I see is that as a society we are still stuck with the economic and ethical bill.

If we take these into account, I wonder whether the higher productivity of immigrants offsets the costs of policing, incarceration, section 8 housing, free healthcare, etc. that are needed to prevent these bantustans from boiling over into functional parts of society.

Also, I wonder if the accounts of economic contributions of unskilled immigrants take into account the large percentage of wages that are remitted to family in the home country. Do all of these come back to us eventually via exports, or should these be considered as the equivalent of imports?

I would be very interested to see a reasonably scholarly article looking at any of these questions. FWIW I think the US needs a lot more skilled immigration, and a lot less unskilled, not unlike the Canadian system.

I would love to tackle the immigration question, because I am much more concerned with keeping my costs down (which immigration does) than uncertain tax costs. But I want to answer the question.

I would change the educational system to reflect that fact that only about 20% of our jobs require a college degree. Over 50% of our projected job growth (we are talking about millions of jobs here) are in the skilled trades, which require some education but not a degree. I would emphasize mechanical aptitude and problem solving ability, not academics. This change needs to be done primarily in high school, allowing college to regain its place as the high quality and high standard institution it once was.

My answer: get rid of all the economists (sorry man).

Did you know that in Swahili, “economist” means “rich man’s codpiece”?

Oh, but de-regulating drug trials is a great idea, particularly for terminal or severely debilitating diseases. Give people a chance, FDA!

Alex J.,

I would argue that the substitution of superior immigrant labor for native labor is not the same as free trade in cost-benefit analysis. If French wines become dramatically cheaper than domestic ones and put California vintners out of business, with their talent and capital being redeployed to more productive ends.

However, if high-quality, inexpensive El Salvadorean labor reduces legitimate job opportunities for unskilled citizens, there is nowhere for them to go except crime or the public dole, both of which impose significant costs on society.

The one area which is open to question in my book is how much crowding-out is really going on. I.e., if high-quality Mexican dishwashers were not available at $8/hr, how many restaurants would hire lower-quality American ones, and how many would buy Hobart dishwashing machines instead?

Compared to low skilled immigrants, low skilled Americans have the advantages of English proficiency, cultural familiarity and local contacts. So one would expect the locals to move out of the kitchen and up to the counter.

Regarding public schools: school state separation.

Regarding crime and politics:

One does not govern well and, especially not cheaply, when one has no competition to fear, when the ruled are deprived of the right of freely choosing their rulers. Grant a grocer the exclusive right to supply a neighborhood, prevent the inhabitants of this neighborhood from buying any goods from other grocers in the vicinity, or even from supplying their own groceries, and you will see what detestable rubbish the privileged grocer will end up selling and at what prices! … Well! What is true for the lowliest services is no less true for the loftiest. The monopoly of government is worth no more than that of a grocer’s shop. The production of security inevitably becomes costly and bad when it is organized as a monopoly.

I guess you guys haven’t noticed at all that 50% of the foreclosures and maybe 75% of the dollar value of defaulted mortgages are in four heavily immigrant states: California, Florida, Nevada, and Arizona.

Minorities got 50% of the subprime dollars in 2004-2007. Total mortgage lending, prime and subprime, to Hispanics more than septupled from 1999 to 2006, versus only a little more than doubling for whites.

Immigration is intimately implicated in the roots of the Housing Bubble that set off the current financial collapse. It’s time to wake up and smell the coffee.

If capital from rich country and cheap workers from poor country have to meet, it is almost certainly better to move capital than people. On that way poor country benefits of infrastructure, taxes, spending of employees and it is not depleted for human (even genetic) material. The cultural changes are smoother and families are kept togethe. Unlike people, capital doesn’t suffer if it leaves the country.

So it might be better to discourage immigration and direct equivalent investments to the poorest of the poor countries.

I’d love to see a more rigorous analysis either for or against my viewpoint. I’m hoping on a blog like this I can get more than rote recitations of shibboleths.

You can find a short summary of the major players in an Economist piece. The go-to guy for the anti-immigrant crowd is George Borjas, whose 2005 work finds that a 10% increase in population due to immigration causes a 4.8% decline in average wage of low skilled native workers and a 0.1% increase in average native wage overall. The go-to studies for the pro-immigrant crowd find that the hit to low skilled native wages is practically nil. From a recent article…

Using our estimates and Census data we find that immigration (1990-2006) had small negative effects in the short run on native workers with no high school degree (-0.7%) and on average wages (-0.4%) while it had small positive effects on native workers with no high school degree (+0.3%) and on average native wages (+0.6%) in the long run. These results are perfectly in line with the estimated aggregate elasticities in the labor literature since Katz and Murphy (1992). We also find a wage effect of new immigrants on previous immigrants in the order of negative 6%.

At best for opponents of immigration, the economic argument against immigration is a wash: There is a mild upside for the economy as a whole due to immigration and a mild hit to low skilled workers in direct competition with new immigrants.

But notice that that argument considers only the members of the current society. When you add in the well beings of the immigrants themselves, immigration provides astonishing economic gains.

Why is it when immigration comes up, everyone exclusively focuses on unskilled labor? The United States is shooting itself in the foot by severely restricting the inflow skilled labor (doctors, programmers, etc.). The U.S. could even go out and recruit! Other countries foot the bill for the education, and then the peeps move here! Perhaps illegal immigration and unskilled labor are too big of a distraction for the U.S. to gobble up this free lunch. I believe this would also coincide well with a lot of Romer’s research on growth.

Continuing what has been said above, one of the few legitimate anti-immigration arguments I have heard points out that a large influx of immigrants in a democratic country could result (from their votes) in a negative change in rule of law and property rights. Possible, yes, but is it likely? I don’t know.

The author advocates free immigration out of some sort of Davosesque religious conviction, not because he has the data to defend the idea. As Steve Sailer pointed out, how is free immigration working in California? I only need to drive 1 mile to be east of the 405, where there’s several foreclosures on every block. Strangely, I don’t see any in the “white” areas of Los Angeles. Oh well. Fantasy is fun!