The Borjas Blog

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.

Immigrants Or Robots

I've long been interested in the Japanese reaction to the "shortage" of low-skill workers. Unlike the United States, they've chosen not to import such immigrants. Instead, they decided to build robots:

Robots could fill the jobs of 3.5 million people in graying Japan by 2025, a thinktank says, helping to avert worker shortages as the country's population shrinks.

Japan faces a 16 percent slide in the size of its workforce by 2030 while the number of elderly will mushroom, the government estimates, raising worries about who will do the work in a country unused to, and unwilling to contemplate, large-scale immigration.

The thinktank, the Machine Industry Memorial Foundation, says robots could help fill the gaps, ranging from microsized capsules that detect lesions to high-tech vacuum cleaners.

Which path is most beneficial for the pre-existing population of the country? Importing low-skill immigrants? Or building robots? And is the difference in the economic benefits between the two alternative policies big enough that one should pay more careful attention to this choice?

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).

Eliot Spitzer Is Unemployed

Michael Ramirez summarizes the situation. What can one possibly add?

Let A Thousand Flowers Bloom

For several decades, the federal government more or less looked the other way as the illegal immigration problem worsened--particularly during the Bush II years when the trend rapidly accelerated. Not surprisingly, somebody has to step into the vacuum:

State lawmakers around the country are proposing hundreds of bills this year aimed at curbing illegal immigration, but experts say the cost and public opposition will keep many from becoming law.

Lawmakers in at least eight states are now sponsoring legislation similar to Oklahoma, which last May passed the nation's most comprehensive anti-immigration law.

It restricts illegal immigrants' access to driver's licenses and other IDs, limits public benefits, penalizes employers who hire them and boosts ties between local police and federal immigration authorities.

The bills are among more than 350 immigration-related proposals unveiled in state legislatures in the first two months of this year, according to a count by The Associated Press.

If nothing else, this is a collective jobs bill for academic economists. Just think of the many papers waiting to be written comparing the impact of the various provisions across states. I shudder to think how many times I will have to hear the words "natural experiment" in academic seminars as newly minted Ph.D.'s use their newly created data to examine the impact of statutory restrictions on the setttlement of illegal immigrants in the state, on the settlement of legal immigrants, on wages, on capital flows, etc.

Reason #13,243,478 Why The Bush Administration Can't Be Trusted

They can't even build a 28-mile fence!

The Bush administration has scaled back plans to quickly build a "virtual fence" along the U.S.-Mexico border, delaying completion of the first phase of the project by at least three years and shifting away from a network of tower-mounted sensors and surveillance gear, federal officials said yesterday.

Technical problems discovered in a 28-mile pilot project south of Tucson prompted the change in plans, Department of Homeland Security officials and congressional auditors told a House subcommittee.

Did anybody outside the Bush administration actually think this would work? Even more interesting, did anybody in the Bush administration actually think this would work?

Noonan On Immigration

I've been a long-time fan of Peggy Noonan's work. Her latest ruminations on immigration are a gem:

It is clear in Iowa that immigration is the great issue that won't go away. Members of the American elite, including U.S. senators, continue to do damage to the public debate on immigration. They do not view it as a crucial question of America's continuance. They view it as an onerous issue that might upset their personal plans, an issue dominated by pro-immigration groups and power centers on the one hand, and the pesky American people, with their limited and quasi-racist concerns, on the other.

Because politicians see immigration as just another issue in "the game," they feel compelled to speak of it not with honest indifference but with hot words and images. With a lack of sympathy. This is in contrast to normal Americans, who do not use hot words, and just want the problem handled and the rule of law returned to the borders.

Politicians, that is, distort the debate, not because they care so much but because they care so little...

A real and felt concern among the candidates about immigration is a rare thing. And people can tell. They can tell with both parties. This is the real source of bitterness in this debate. It's not regnant racism. It's knowing the political class is incapable of caring, and so repairing.

The Arizona Experiment

I guess we will soon find out if employer sanctions work:

Arizona businesses are firing Hispanic immigrants, moving operations to Mexico and freezing expansion plans ahead of a new law that cracks down on employers who hire undocumented workers.

The law, set to take effect on Jan. 1, thrusts Arizona into the heart of the national debate on illegal immigration, which has become a hot topic on the presidential campaign trail. Republican candidates, in particular, have been battling to show how tough they are on the issue.

Arizona's law, believed to be the strictest in the nation, is shaping up as a test of how employers will react when faced with real sanctions for hiring undocumented labor. It is being closely watched by businesses across the country. While proponents say the crackdown will save the state money on services for illegal immigrants, some businesspeople fear Arizona's economic growth may be at risk.

Under the law, people will be encouraged to contact a county sheriff's or county attorney's office to report businesses they suspect of employing an illegal immigrant. After the sheriff investigates, the county attorney can then seek to suspend and ultimately revoke the business license of an employer who knowingly hires an illegal immigrant. The measure would also require all Arizona businesses to use E-Verify, a federal online database, to confirm that new hires have valid Social Security numbers and are eligible for employment.

The WSJ article also makes reference to a University of Arizona study that allegedly predicts what will happen to Arizona's economy. Here is the summary:

A University of Arizona study released earlier this year concluded that economic output would drop 8.2% annually if noncitizen foreign-born workers were removed from the labor force. Researchers estimate about two-thirds of the workers in that category are in the state illegally.

"Getting rid of these workers means we are deciding as a matter of policy to shrink our economy," says Judith Gans, an immigration scholar at the university's Udall Center. "They're filling vital gaps in our labor force."

It doesn't take a doctorate in nuclear physics to deduce that GDP will fall when the labor force shrinks. But a more relevant question is: what happens to per-capita GDP? If one takes economic theory seriously (and if the aggregate production function in Arizona has constant returns) one would expect no change in per-capita income as a result of this newly found enthusiasm for employer sanctions.

Having read too many of these types of studies, I know which adjectives to look for to figure out the spin the writers are trying to push. The give-away adjective here is "vital." As far as I know, the concept of "vital workers" is not defined or mentioned in any of the leading textbooks in labor economics.