How Many Immigrants?

Gary Becker and Richard Posner have a very interesting discussion about the immigration bill in their blog. Becker makes a particularly strong argument in favor of "large-scale" high-skill immigration for the usual economic reasons: they contribute more to productivity; they pay more in taxes; they  reduce wage inequality because more high skill immigration lowers wages for high-skill workers; they draw fewer benefits, etc.

One particular detail stuck in my mind. Here's what Becker says:

By "large-scale" I mean one million or more skilled immigrants per year. This may seem like a lot, but currently the United States takes about 1 million legal immigrants each year. With a total population of over 300 million, this country should not have difficulties in absorbing one million skilled immigrants annually. The Senate bill does provide for 200,000 temporary guest workers per year plus a much smaller number of employment-based visas each year for the next 10 years...So the Senate bill is on much too small a scale, and gives insufficient emphasis to skilled workers, which is where immigration reform should be centered.

And this got me thinking. The economic case for high-skill immigration is very strong--and, I think, few economists will disagree with the proposition that high-skill immigration is more beneficial for the United States than low-skill immigration. But all those economic studies provide little--if any--practical guidance about what the "optimal number" of immigrants should be. Put bluntly: Is one million too little or too much?

The typical economist's answer to the question would be: the United States should keep admitting high-skill immigrants as long as the marginal benefit exceeds the marginal cost--that is, as long as the last immigrant admitted contributes more than the cost he imposes.

I've never seen anyone try to answer this "optimal number" question explicitly. It's definitely worth doing, but it is clearly a very difficult thing to do.

Just consider the problems in calculating the contribution of the last immigrant admitted. The contribution to what? To the income accruing to the native population? To the immigrant's well being? To world GDP?

Similarly, when we measure the marginal cost, how much emphasis should we place on the wage losses that high-skill workers in the United States will inevitably suffer? And that's without getting into the really difficult questions. What about: Cultural effects? Environmental and crowding costs? The national security impact if many high-skill workers from less-than-friendly nations cluster in such fields as nuclear engineering? The impact of a brain drain on the well-being of those left behind in poorer countries? And on and on and on.

So Becker's proposal of 1,000,000+ high-skill immigrants is clearly based on a set of objectives that are seldom defined explicitly. And it is the definition of these objectives that much of the immigration debate is about.

Comments

[Tino]

You also have to question if there are one million plus highly skilled immigrants that want to leave their countries every year.

Example:

Eastern Europe and Russia, probably the best source of high skill immigrants that most easily can/want to assimilate and that are poor enough to move, has a working age population of about 150 million people.
If we that the US accepts any eastern European with an IQ above 115 and that one third of them would move (a very high figure, more than the share of Porto Ricans that moved to the US), that would mean 7-8 million people. Can take similar Indians, but even if half of them move that’s 10 million more workers. Than what? Import all smart Chinese? Will that many want to move 20-30 years from now?

I guess initially the US would have no problem of finding 1 million skilled people per year, but after a few years the pool of truly high-skilled immigrants would seriously shrink.

“The national security impact”

US Muslims are on average high skill. 15% of young Muslim men and women in the US believe that suicide bombings against civilians is often justified. This is almost exactly the same figure as Europe (France 19%, Germany 13%)

http://pewresearch.org/assets/pdf/muslim-americans.pdf

“wage losses that high-skill workers in the United States will inevitably suffer?”

This one problem could largely be solved, if you sell the rights to immigrate at a good price.

[Andrea Moro]

If I recall correctly, a paper by Kjetil Storesletten, I think in the JPE, computed the number of immigrants the USA would need to sustain social security. It was a high number , something in the order of 1.5 million young high skilled workers

[Torben]

Yes Moro Kjetil says "One particular feasible policy
involves admitting 1.6 million 40{44 year old high-skilled immigrants annually." Here is a free link to the paper http://folk.uio.no/kjstore/papers/sfpti.pdf

And also here is a link to the paper that he analysed for Sweden, high welfare state. http://folk.uio.no/kjstore/papers/fiinpvc.pdf

[gborjas]

Torben and Moro,

You are both right. I'd forgotten about the Storesletten paper. His calculation is within a narrow setting, though, and it's far from simple. Imagine bringing in the factors that I mention in my post (and others).

[alex]

GB: The economic case for high-skill immigration is very strong--and, I think, few economists will disagree with the proposition that high-skill immigration is more beneficial for the United States than low-skill immigration.

This non-economist also agrees. However, Becker says "the United States would benefit greatly from immigration of many engineers, computer experts, scientists, and other highly skilled men and women".

Like the immigration bill's STEM provisions, Becker assumes that most high-skill immigrants would be engineers, computer experts, and scientists. Yet there is no objective evidence that there's a shortage of such people. Pay isn't rising faster than wages in general, and unemployment rates are higher than for other professions requiring comparable levels of education. IT employment is still 12% below its peak in 2000, and about half of the people with Ph.D.'s in the hard sciences don't have jobs that require that level of immigration.

Why did Becker and the authors of the immigration bill make these assumptions? What about high-skill people like doctors, lawyers, accountants and economists?

I'm all in favor of skills based immigration, but only if it uses a mechanism to objectively determine what skills are in short supply. Otherwise it's just a way to target a different part of the labor market based on political influence.

The H-1B hi-tech guest worker program is a classic example of this. The only evidence that there was a shortage of people with the targeted skills was the claims of Microsoft, Intel, IBM, etc. When the GAO used BLS data, it concluded that there was no justification for the program. Perhaps needless to say, that didn't influence our bought and paid for Congress.

[HA]

GB: What about determining the optimal point in terms of the "biggest bang for our buck"?

[Robert C]

If one million is good, why not two million? Is there some optimal absorption function by type of labor? How is the 1 million Becker suggests or the numbers flying around in proposals determined. By the way, France is getting tough on immigration. Interestingly, they are disucssing a system whereby they pay illegal immigrants to leave--now that is indeed novel.......

[gborjas]

Robert,
The French experience is really interesting. I've been meaning to blog on it. And your comment suggests it's about time. So look for the post tomorrow.

[Mariano]

So, immigration of the highly skilled is good, among other things, because it reduces inequality *by lowering the wages of highly skilled workers*? And that's a good thing?

[Mr. Econotarian]

Maybe socialism should be illegal rather than aliens.

[Gordon J. Johnson]

I find this topic the most fascinating of all of those I have read. The correct solution has been suggested that immigrants should be admitted until the marginal cost of the last immigrant exceeds his or her marginal benefit. I would narrowly define the cost and benefit to be only that which pertains to the U.S. with perhaps some overtones related to world population growth and climate change.

Of course, to identify all the costs and benefits is all but impossible. Some we can identify but not quantify. I would suggest though that the concept of a limit should be our guiding principle. The limit of finite natural resources per capita as population grows without bounds is zero. The question then becomes how far down that road do we want to go. This can only be answered with a marginal cost benefit analysis the results of which are sure to be controversial and in dispute from the get go.

Nevertheless, this sounds like a good topic for a doctoral dissertation. Even an imperfect analysis would shed some light on this problem and perhaps bring the U.S. and the world to a more rational view of the sustainability of population driven economic growth.

Others have written about the limits of growth and the decline of fisheries and other natural resources. Given the critical importance of this topic I am puzzled why politicians and economists avoid it like the plague as though there might be something wrong with adopting population, tax, and immigration policies that might offer some benefit to the U.S. citizens and to the citizens of the world at large.

I would pose the question: Is it feasible to achieve a stable population concurrently with a soft- landing for our economy?

What value is there to adding more people to the U.S. and to the world's population given the finite nature of natural resources? If we spread those resources over more people, there will be less for everyone leading, it seems to me, to an inevitable decline in the U.S. standard of living and quality of life.

[Gordon J. Johnson]

Doesn't the ability of our country to absorb more than a million new skilled immigrants every year ignore the fact that these high skilled immigrants will also become conspicuous consumer like the rest of our our population thereby hastening the decline of our standard of living as natural resources like oil, arable land and water are consumed at an ever increasing rate. What about the possibilities of reducing the total U.S. production of pollutants, estimated at a minimum of 20 metric tons per capita per year, at the same time our population of high consumers is doubling? 200 - 300 million more people will add 4 -6 billion more tons of pollutants per year by the end of this century even if we can reduce the per capita emissions by 20% over the same period.

Strange but no one talks about this. This is one of the marginal costs of population growth. Environmentalists avoid any discussion of population growth as though it was a sin to even consider this root cause of pollution.

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