The Lords Have Spoken

A committee of the House of Lords in Great Britain has been examining the economic impact of immigration for a few months. The Lords have spoken and the words sound familiar:

Whenever a minister is asked about high levels of immigration, the same answer is trotted out: migrants boost the economy, fill jobs that Britons cannot or will not do, and pay taxes that benefit the exchequer...

Yet an inquiry by a House of Lords committee into the economic impact of immigration - which I chaired, and reports today - found fundamental flaws in these claims. We found no evidence that net immigration (immigration minus emigration) generates significant economic benefits for the existing UK population.

The government told the inquiry that migrants contributed £6bn to Britain's GDP in 2006. Sounds great, but it's completely meaningless...the key measure of a country's standard of living is GDP per head, not total GDP. In percentage terms, immigration has increased Britain's population almost in step with the impact on GDP. So the effect on GDP per head has been roughly zero.

...Surely immigration is needed for jobs Britons refuse to do, the government argues. But they refuse to do these jobs only at current pay rates. In many cases, higher wages - never popular with employers - could solve the "shortage". In other cases increased mechanisation could bypass the need for migrant labour. Many employers today rely on the skills and hard work of migrants. But in the longer run, when wages can be increased and production methods changed, there is no valid argument for continued high net immigration.

Related to this is the effect on wages. While immigration was found to deliver a small gain in the wages of the highly paid, it has a slightly negative effect on the wages of the lowest paid, as many migrants compete for relatively low-skilled jobs. Any negative effect for people earning little more than the minimum wage must be taken seriously.

Let's see: (1) the net benefits from immigration to the pre-existing population are trivially small and (2) immigration redistributes wealth, and low-skill workers end up on the losing end. Where have I heard all this before?

(Here is a pdf of the report).

Comments

[c.o. jones]

But Sen. McCain says "they enrich our culture." I mean, aren't you happy to be paying higher taxes for all that enrichment? I know that I, for one, am very pleased with the "enrichment" going on just down the street from my house at the Home Depot, with those men loitering and urinating in public, "enriching" my neighborhood.

[Morten]

So, lets see, not much change for the current population. Huge gains for the immigrants (why else would they migrate)... no, sounds like a bad idea. Let them eat cake in Poland/Mexico.

[Robert Hume]

Well, Morton, how many would you admit? Until the average wage of the citizens is reduced by 10%? 20%? ... Or perhaps until first world wages are equal to those of the third world?

And do the citizens themselves have to agree to reduce their wages? Or can this be just imposed by those who want to improve the lot of non-citizens with out reference to those who are supposed to be represented by the politicians they elect?

And what about non-economic items such as low crowding at homes and at national parks. How about cultural questions such as risk of sharia?

Why should the average citizen run these risks for the benefit of non-citizens? are we a democracy or a charity?

[MT]

And who will run the curry houses to feed the Brits??

[Jim]

Dr. Borjas,

I'm familiar with much of your research, and that of your opponents such as David Card. You argue convincingly that there is not a lot of evidence that immigration provides significant benefits to natives, on average, but rather than it provides some benefits to some natives -- more often higher income natives, and that it provides increased costs to other natives -- such as lower wages for unskilled native laborers. Dr. Card does not agree with you, but I'll admit that theory is on you side -- more workers in the market SHOULD lower wages among similarly skilled workers, all else held constant. There are still a few ways to challenge you on that, but I'd like to make a more more general criticism of your policy advocacy positions instead.

If it is true that there is not a lot of evidence that immigration provides either significant benefits, on average, or significant costs, on average, but instead that the effects of immigration are distributional and concentrated, then you are essentially saying that native beneficiaries of immigration are not paying the true costs of immigration imposed on those who suffer from it. That's a simple externality problem, isn't it? And one pretty easy way to solve externality problems is by requiring beneficiaries to pay the sufferers, either through set fees collected by the government, or by a market mechanism such as that which exists for pollution credits. And since by your own evidence, and correct me if I'm wrong, the net average cost is not likely to be very large, it also seems reasonable that the total burden imposed upon the fiscal resources of nation's native population can be remedied by a imposing relatively modest additional immigration fee, collected from immigrants themselves. In other words, if the problems and benefits of immigration are truly distributional, there are easy distributional remedies to those problems that do not require the implementation difficulties of trying to stop people from living where they want to.

Wouldn't a policy that merely compensates those who suffer from immigration while also allowing anyone who desires to become and American to do so be more closely aligned with our core national values of human liberty?