The Borjas Blog

Rearrangement of Migration Flows

The WSJ has a very interesting article:

The Great U-Turn: The developed world, which for decades has offered a difficult but promising path to upward mobility, appears to be losing its allure. Unemployment is rising, and backlashes against foreign workers are mounting.The result is potentially the biggest turnaround in migration flows since the Great Depression...

I have no doubt that worsening economic conditions in much of the developed world has contributed mightily to this trend. But there are a couple of extra factors to consider in the U.S. context.

Much of the legal migration to the U.S. goes through the family preference system. There are very long queues in some of those categories. I doubt that current economic conditions have deterred too many of those legal migrants whose number just came up after waiting around for years.

On the other hand, a very large portion of the migration flow (at least a third) is made up of illegal immigrants. I suspect that the illegal immigrants are much more sensitive to changing economic conditions. So much of what we are seeing in U.S. trends is probably driven by illegal immigration.

Trends in Illegal Immigration

The Pew Hispanic Center has an interesting report on the illegal immigrant population in the United States. The Los Angeles Times emphasizes one particularly interesting tidbit:

After years of rapid growth, illegal immigration is slowing down in California, with the state's share of the nation's estimated 11.9 million undocumented migrants dropping to 22% from 42% in 1990, the study showed.

That's quite a drop in California's magnetic attraction for illegal immigrants. The Pew study uses data for March 2008--so whatever is going on has nothing to do with the current economic crisis. Moreover, I don't think California took any actions making it more unpleasant for illegal immigrants to work in that state in recent years (as neighboring Arizona did). So a very interesting question arises: why exactly has the proportion of illegal immigrants living in California dropped from 42% to 22%?

Maybe the very large number of low-skill immigrants in California reduced economic opportunities for this group so much that the more recent flows of illegal immigrants decided they could be better off elsewhere. That's a shocker: Maybe the laws of supply and demand work after all.

Smearing CIS

I've been following the work of the Center for Immigration Studies since the mid-1990s. They regularly publish empirical research on immigration, and I happen to be friends with both the head of the center, Mark Krikorian, and its research director, Steve Camarota. So it is with bizarre fascination that I watch from afar as the Southern Poverty Law Center attempts to tarnish what CIS does.

In fact, CIS has made it possible for me to disseminate my technical research to a much wider audience. At least two or three times, I have taken some of my technical work, rewritten it in English, and this readable version has been distributed as a CIS backgrounder. It seems to me that the smearing effort's objective is simply to silence a group that has been an influential critic of current immigration policy.

A labor economist friend--who is very well known in the profession--was once doing some research and asked me if I knew of any other credible data on a particular topic aside from the one that had been published in a backgrounder authored by Steve Camarota. He then added that he trusted the factual evidence that CIS publishes in its internally produced backgrounders. Why, I asked. For a very simple reason, he said: there were tons of people out there trying to discredit CIS and it would really help their cause if CIS was sloppy in its empirical work. So he was pretty sure that the empirical evidence went through far more layers of check and double-check than the stuff that regularly comes out in academic journals.

Even if one disagrees with how CIS interprets the evidence, their research is credible, reliable, and in no way anti-Hispanic. In fact, I think it helps to inform the immigration debate. What's wrong with letting a thousand flowers bloom?

...And Some New Research

I've been thinking for some time about the theoretical underpinnings of how immigration affects labor market conditions in sending and receiving countries. It seems to me there is a lot of confusion--some of it needless, some of it deliberate--and all kinds of conceptual claims tend to be thrown around.

So I sat down a few months ago and began to construct a model that summarized--in a relatively "simple" framework--what it is that economics has to say about the labor market impact of immigration. The paper--available here--is really written for math geeks who like old-fashioned Chicago-style price theory. But here is the abstract for those of you who don't want to look at a lot of Greek letters and symbols:

The theory of factor demand has important implications for the study of the impact of immigration on wages in both sending and receiving countries. This paper examines the implications of the theory in the context of a model of a competitive labor market where the wage impact of immigration is influenced by such factors as the elasticity of product demand, the rate at which the consumer base expands as immigrants enter the country, the elasticity of supply of capital, and the elasticity of substitution across inputs of production. The analysis reveals that the short-run wage effect of immigration is negative in a wide array of possible scenarios, and that even the long run effect of immigration may be negative if the impact of immigration on the potential size of the consumer base is smaller than its impact on the size of the workforce. The closed-form solutions permit numerical back-of-the-envelope calculations of the wage elasticity. The constraints imposed by the theory can be used to check the plausibility of the many contradictory claims that appear throughout the immigration literature.

This paper is actually part of a much bigger project--so I would particularly appreciate hearing any comments, reactions, and suggestions that readers may have.

Some Old Research...

I've been meaning to post that the paper that Jeff Grogger, Gordon Hanson and I wrote on the impact of immigration on the African-American community is now in final form. Here is the abstract:

The employment rate of black men, and particularly of low-skill black men, fell precipitously from 1960 to 2000. At the same time, their incarceration rate rose. This paper examines the relation between immigration and these trends in employment and incarceration. Using data from the 1960-2000 U.S. Censuses, we find that a 10-percent immigration-induced increase in the supply of workers in a particular skill group reduced the black wage of that group by 2.5 percent, lowered the employment rate by 5.9 percentage points, and increased the incarceration rate by 1.3 percentage points.

Labor Economics, Fifth Edition

I can hardly believe it, but the fifth edition of my textbook just came out. It seems like only yesterday that I decided to begin to work on a textbook. Here's a link to McGraw-Hill's website containing information on all the supplementary material available.

An Offer You Can Refuse

What's the world coming to?

First, I read about American Express offering some of its customers $300 to close their accounts. (Note to AMEX: how come I didn't get the offer?). Now I see the same sort of thing happening in the immigration market.

Spain has decided to encourage return migration by paying some of its unemployed immigrants to return home AND not come back.

Non-European Union foreigners are being offered a deal: they can cash in their unemployment benefits for a lump sum of around 10,000 euros. In exchange, they go home and agree not to come back to Spain for at least three years.

The plan, however, has not been a sterling success:

But so far only 700 people in the whole of the country have been tempted to accept. For most Latinos, leaving is out of the question.

I'm not surprised. The present value of the gains from moving out of a low-income country far exceed the offer the Spanish government is making--even for unemployed workers.

(Witold: thanks for the tip).

Indian Immigration

There's a very interesting article in Forbes about Indian immigration to the United States.

Most Americans know only one thing about Indians--they are really good at spelling bees. When Sameer Mishra correctly spelled guerdon last May to win the 2008 Scripps National Spelling Bee, he became the sixth Indian-American winner in the past 10 years...

Indian Americans are in fact a new "model minority."...In 2007, the median income of households headed by an Indian American was approximately $83,000, compared with $61,000 for East Asians and $55,000 for whites...

So why do Indian Americans perform so well? A natural answer is self-selection. Someone willing to pull up roots and move halfway around the world will tend to be more ambitious and hardworking than the average person. But people want to come to the U.S. for many reasons, some of which--being reunited with other family members, for example--have little to do with industriousness. Ultimately, immigration policy decides which kinds of qualities our immigrants possess...

A much clearer implication of Indian-American success is that immigrants need not be unskilled, nor must their economic integration take generations to achieve. In sharp contrast to Indian Americans, most U.S. immigrants, especially Mexican, are much less wealthy and educated than U.S. natives, even after many years in the country.

A new immigration policy that prioritizes skills over family reunification could bring more successful immigrants to the U.S...There is nothing inevitable about immigration. Who immigrates each year is a policy decision, free to be modified at any time by Congress. Constructing new legislation is always difficult, but I propose a simple starting point for immigration selection: Anyone who can spell guerdon is in!

The author is Jason Richwine, a student of mine who is getting his doctorate this year. Jason is now at the American Enterprise Institute. I am certain that his continuing insights on immigration are going to be provocative and insightful--and worth keeping an eye on.

Let me say a couple of things about Jason's selection rule. First, I would have failed it. Second, I want to amend it: A.R. Rahman can get a green card anytime he wants regardless of whether he can spell or not.

Los Angeles and Welfare

Having lived in California for a long time, I followed the budget crisis there with some interest. Last night, I ran across this item in Instapundit: "20% in Los Angeles County receive public aid."

I am sure that I'm not the only one who's noticed how almost all of the discussion over California's budget problems managed to avoid using such words as "immigrant" or "illegal". So I decided to do a few calculations using the 2008 Current Population Survey to follow up on Instapundit's remark. Well, here are some interesting results for your perusal--no remarks are needed:

All statistics give the fraction of households in the LA metro area that receive some type of assistance--either cash, food stamps, or Medicaid:

All households: 20.9%
Native households: 12.7%
Immigrant households:  33.2%
Immigrant households with a citizen head: 26.4%
Immigrant households with a non-citizen head: 40.1%

Just to put things in context, 40% of households in the LA metro area are immigrant households.

(For the computing geeks amongst you who want to see the documentation, here is the computer file summarizing the results. The data is the publicly available 2008 March CPS file from IPUMS. A household is defined as a native or immigrant household based on the status of the household head.)

Some Advice for President Obama

Immigration, both legal and illegal, was the silent issue in the presidential campaign--despite the rapidly deteriorating economic conditions. I suspect that the worsening labor market will force President Obama to wrestle with the immigration issue sooner rather than later. It'll be hard to justify a system that lets in nearly 1.5 million new immigrants each year at a time when millions of Americans are losing their jobs.

The editors at the New York Post asked me if I had any constructive advice to give our new president about how one could approach the problem. Here is an excerpt:

,,,Our economic woes also create an opportunity - for they will encourage many illegals to return home, potentially removing a red flag that has made rational policymaking politically impossible.

The failure of the Bush "comprehensive immigration reform" shows us that many Americans are unwilling to provide amnesty (under any name) to 12 million illegals, especially when the border remains porous and we would simply have to consider yet another amnesty a few years down the road. A real solution is one that resolves the issue for the long term - several decades, at the least.

How does the downturn make it easier to address this issue? Simply put, illegal immigration is highly responsive to economic conditions - when times are bad, fewer come (and more return home).

President Obama can take a very simple step to complement this "natural" reduction: speed up the widespread adoption of the E-Verify program. This program lets employers compare the records of their new hires with more than 500 million records held by the Department of Homeland Security and the Social Security Administration.

A simple scan - no more complex than scanning your bank card at the grocery store - would quickly tell employers if their new hire is authorized to work.

Many employers will object - especially those who prefer to hide behind claims that they don't know if any given worker is illegal. Nor does expanding E-Verify provide the "showy" symbol that some politicians prefer - like building a taller and stronger fence on the Mexican border. But any fence, no matter how tall and strong, is bound to be ineffective. Around 40 percent of illegal immigrants don't enter through that border.

Instead, E-Verify detects illegal immigrants at the place where such detection is costliest to them - as they try to get a job. It also makes employers more accountable for their actions. It should greatly slow down the number of illegals entering the country.

With those tensions reduced, Americans would be much more willing to revisit the issue of what to do with the illegals already here. And a little patience and benign neglect can have a large payoff in this matter.

A widespread amnesty may not be needed in just a few years. The deep recession and stricter enforcement will encourage many illegal immigrants to return.

Meanwhile, millions of those who remain will sprout deep roots by marrying and having children (who will be US citizens by birth). These family ties will make many illegal immigrants eligible for legal status within existing law.

And in a world with greatly reduced illegal immigration, it would be easier to enact minor changes in current law to speed up the granting of permanent visas to relatives of citizens.

The economy also presents a unique opportunity for reforming legal immigration. Most of the legal immigrants enter the country without regard to how their skills match our labor-market needs. The lack of any skill filters - combined with the high volume of low-skill illegal immigration - aggravates the economic hardships faced by disadvantaged Americans.

We can both improve the status of our low-skill workforce and substantially increase the economic benefits to the nation from immigration by adopting a system that encourages the entry of high-skill immigrants. Surely, in time of economic duress, it's wise to fashion immigration policy in a way that is most beneficial to the country.

One little-noticed provision in the failed Bush proposal was the introduction of what is called a "point system" - which awards points to applicants with particular skills, and grants visas only to those who exceed a threshold level of points...Used wisely, immigration policy can be a tool that can help Americans even during difficult times. The new president has a historic opportunity to set the system right.