Immigrants boost the GDP of the countries that receive them, usually by more than the immigrants earn. Immigrants bring new customs and new perspectives, adding to cultural diversity. Immigration expands opportunities to mix and mingle. Moreover, inter-ethnic violence, like all other violence, is generally declining in the world. So why has immigration become such a polarizing issue in the EU and the U.S.?
From an elite perspective, the main problem is “sore losers”: lower-class citizens who lack the skills to compete in a globalized economy, are infected with racial and ethnic prejudice, and unfairly blame immigrants for their woes. In Hillary Clinton’s words, their behavior makes them “deplorable” and their attitudes “irredeemable”. The only appropriate response is contempt.
However, what if the “sore losers” do lose substantially from immigration? What if low-skilled immigrants lower their wages, drain their social services and de facto transfer wealth to capitalists and high-skilled workers? What if immigrants stay apart, assimilating only slowly and corroding the broader sense of community? Should elites not then feel some empathy for losers’ soreness and dial down their contempt? Should we not then consider proposals to slow immigration of the low-skilled while protecting immigration of the high-skilled?
A new book We Wanted Workers: Unravelling the Immigration Narrative supports the latter interpretation. The author George Borjas is a Harvard professor, an expert in immigration economics, and an immigrant himself. His main conclusions may be summarized as follows:
- ■ Immigrants self-select. They weigh the expected advantages in economics and freedom against the high psychic costs of moving. Absent administrative curbs, the expansion of social benefits in developed countries increasingly attracts low-skilled workers because that’s who the benefits favor.
- ■ Economic assimilation tends to take about three generations, with roughly 40% of the incoming wage/skill differential eroding each generation. That’s true for both high-skilled immigrants and low-skilled immigrants. Muting large ethnic differences takes on the order of a century rather than a decade.
- ■ Assimilation is speedier for small immigrant groups than large ones; the comfort and support of large groups retards mixing. Modern immigration has favored large clusters – e.g. Mexicans in the U.S. – so future assimilation may slow.
- ■ Between wages and social benefits, low-skilled immigrants provide little net economic benefit to the rest of the population. They do however lower wages in the fields they enter, with a 10% increase in labor supply triggering at least a 3% decrease in wages. The lower wages increase profits for capital and wages for skilled labor.
- ■ The induced wealth transfers dwarf the net benefits to natives. For the U.S. in 2015, Borjas estimates that immigrants contributed USD 2100 billion to GDP, pocketed about the same, and transferred USD 500 billion from native workers to native firms.
Borjas criticizes the politicization of his field. Most immigration scholars seem so eager to paint the benefits of immigration that they distort the evidence. For example, a case study of Cuban influx (“Marielitors”) into Miami in the early 1990s has been widely used to show that immigrants have no impact on domestic wages. However, the Marielitos were predominantly unskilled, many of them released from Cuban jails. The studies looked at wages over all skill levels. Borjas found that wages at the lowest skill level fell precipitously, perhaps one-for-one with every percentage increase in the low-skilled labor supply.
Moreover, the basic equations of neoclassical economics, which relate expected wage impacts to estimated elasticities of labor substitution and labor shares in income, imply on the order of a 3%-5% reduction in wages for a 10% increase in relevant labor supply. Claiming zero impact is a huge theoretical puzzle and inconsistent with a host of other evidence. Moreover, there is no necessary connection between claims of zero impact and support for foreign-born workers. The last major U.S. ban on immigrant labor came in the 1960s at the behest of the predominantly Hispanic United Farm Workers Union, supported by other unions and left-leaning churches and community groups. It ended the Bracero program that imported temporary Mexican farm workers.
None of this means that immigration is bad. Even when immigrants don’t enrich natives economically, they enrich themselves and can enrich their host countries’ culture. Moreover, globalization presses down low-skilled wages in developed countries with or without immigration; higher wages would trigger more outsourcing. However, policymakers do need to be mindful of disparate impacts and disparate perceptions.
The best way to build and maintain broad support for immigration in developed countries is to consciously favor skilled immigrants over unskilled immigrants. Canada and Australia both do this; they have higher percentages of foreign-born workers than any other large country and yet experience relatively little protest against immigration. That also disproves the notion that white colonial supremacism is driving anti-immigration sentiment, since both countries are heavily white/colonialist by tradition and Australia long imposed strict quotas against Asian immigrants.
Developed countries should also more actively encourage assimilation of the immigrants already within their borders. For the EU today, the biggest impediment to the assimilation of millions of Muslim immigrants is radical Islam. It discourages education of women; it discourages mixing and intermarriage with non-Muslim natives. Radical Islam in turn triggers more fear and hostility from non-Muslims.
Does that mean the EU should foster racism or Islamophobia? Of course not; those are obstacles to assimilation too. But neither should the EU pretend that immigration is an unalloyed blessing or dismiss middle-class concerns as bigotry. When high-skilled Germans don’t raise enough high-skilled children to provide high productivity and pay high taxes, low-skilled children of immigrants can’t fill the gaps – not because they’re immigrants but because they’re low-skilled. Neither can schools bridge those skill gaps within a generation, as parental influence matters too.
As for the U.S., Borjas contends that it will never curb the influx of low-skilled immigrants through Mexico until it builds a wall, penalizes illegal immigrants more aggressively or imposes harsher penalties on employers. A broad amnesty in 1986 coupled with employer controls encouraged more immigration, not less, as employers were not required to verify the documents that employees presented. The only way to keep the vast majority of immigrants legal without deporting millions is to curb new illegal flows while providing amnesties for long-term residents.
By Kent Osband