Does immigration account for relatively stagnant median income?

by on February 1, 2011 at 10:38 am in Economics | Permalink

It's a common claim that increasing immigration accounts for the slowdown in U.S. median income growth.  No, I don't mean the claim that immigrants lower wages.  Even according to George Borjas, that effect isn't large enough to much budge the median and most of it is concentrated on workers without a high school degree.  Rather I am referring to the mere addition of immigrants to the rolls, which itself shifts the median of the distribution.

I don't see that the immigration effect explains much of the data.

1. Look at Dew-Becker and Gordon, p.62.  They consider panel data for hourly compensation, and they still find a stagnant median.  Also see p.78, where they summarize their results that the stagnation extends upward through the 90th percentile of the income distribution.  The U.S. didn't come close to taking in enough immigrants to produce that result.

2. Look at Lane Kenworthy's figures, p.41.  Median income growth for the category "White, non-Hispanic" is only barely better than for the general population.

3. This paper measures the effect of immigration on the Gini coefficient and finds that a given year's worth of immigration has a peak effect on the Gini at four years' time and the effect disappears altogether within six years' time.

4. Researchers who work in this field are well aware of the phenomenon of immigration and generally they do not use it to dismiss the issue of declining median income growth.

I've heard from one reader that the eBook is now available in France, from another that it is in Australia, but Canada will take a little more time.

a meanie February 1, 2011 at 6:47 am

Scientific! Clearly one can compare our existing universe with one in which different levels of immigration took place through the magic of linear regression. Great work, Dr. Science!

Sergey Kurdakov February 1, 2011 at 7:09 am

there was an article back a while which had computed, that Japan has a good growth per working persons in last decades.

so how aging of population would affect the growth figures (remember baby boomers)? seems at least partially this will make transition to stagnation to be less pronounced

Chris February 1, 2011 at 7:20 am

Look at state-by-state data. States with many immigrants have had stagnant median wages. States with low immigration have seen median wage growth.

E. Barandiaran February 1, 2011 at 7:29 am

Cherry-picking economics is not good at any time, but specially in winter.

BTW, I could buy the book on January 25, delivered at home in Providencia, Santiago, Chile. I paid $5.20 and I assume that Amazon charged me a fee for international delivery. I used the Kindle Reading Apps for Mac, and in one minute it was in both my MacBook and Kindle.

Chris February 1, 2011 at 7:40 am

umm. I think you're reading Dew-Becker and Gordon's Table 10 from their panel data wrongly. http://www.brookings.edu/es/commentary/journals/b

It shows real income more or less doubling over the time period that you're talking about for all income quantiles. If anything, it proves exactly the opposite to what you're suggesting.

Chris February 1, 2011 at 7:51 am

ah. it seems that table 9, not the one referenced on p62, is the one you are actually referring to.

android_user February 1, 2011 at 8:33 am

When will you release an ePub version of the book? I'll buy it when you do.

Steve Sailer February 1, 2011 at 10:21 am

Tyler is slowly coming around to my Benjamin Franklinish point of view: e.g., the Wall Street Journal summarizes his new book thusly:

"What does he mean by low-hanging fruit? He lists three major forms — free land, technological breakthroughs (specifically during the 1880-1940 period), and smart, uneducated kids — and two minor ones, cheap fossil fuels and the U.S. Constitution."

"Free land" is just a hyberbolic version of the affordable family formation that Franklin cited in 1751 as contributing to the greater happiness of Americans over Europeans. As for "smart, uneducated kids," well …

But, there are a few points where Tyler's thinking, while improving, still needs to become more sophisticated.

1. As we've seen, much of this debate gets sidetracked into unproductive absolute comparisons of imponderables: Is the median person better off today than in 1965 because he or she now has Twitter? Or worse off because both Mom and Dad have to have jobs to pay the mortgage? From an economist's point of view, the question is one of opportunity costs. Ceteris paribus, does mass illegal immigration make the median American citizen better or worse off? Framed correctly, the question is obviously much less of a slam dunk than the typical libertarian assumes. You can leave Twitter out of the equation.

2. This discussion over-focuses on wages and misses the bigger picture, which is the relation of income to the cost of living.

3. The cost of living has isn't just the cost of entertaining yourself. There's no question that entertainment hasn't gotten cheaper due to electronics. The big issue from the fundamental, Darwinian point of view, is not the cost of entertaining yourself, however, it's the cost of sustaining yourself into future generations.

In America, the cost of marriage and children is, typically, the price of a house with a yard and a satisfactory education for the children. The cost of of having a middle class family in 1947-1973 was remarkably low. For example, a house with a yard in the San Fernando Valley was in the 20-30k range, the LAUSD public schools were fine, and UCLA was pretty easy to get into and tuition was almost nothing. Today, not so much …

The result is that average Americans marry later, have fewer children, and live more stressed out lives because they need both parents to work to afford a house in a "good" school district.

What role does mass immigration play in this? A fair amount, especially in driving up home costs in the remaining "good" school districts.

And equally importantly, illegal immigration is one factor that American policy-makers have more control over than just about any other factor. We don't know how to "fix the schools," but we do know how to cut illegal immigration. It ain't that complicated. But elites haven't wanted to fix this problem because it's not their problem, it's the average American's problem.

Bill February 1, 2011 at 11:05 am

Always look for the qualifying comment to a statement so that you are not tempted to dispute it because the point was offhandedly conceded in the opening.

Case in point: "that effect [of illegal immigration] isn't large enough to much budge the median and most of it is concentrated on workers without a high school degree."

If you were a worker without a high school degree, or one with a job that did not require a high school education, how would you react to the comment that the effect of immigration "is concentrated on workers without a high school degree."

That's the point, isn't it: that illegal immigration supresses the income of poorly educated workers or workers whose job doesn't require an education.

josh February 1, 2011 at 11:48 am

Steve,

Some Americans are still having kids:
http://anepigone.blogspot.com/2011/01/educational

dirk February 1, 2011 at 12:34 pm

"In America, the cost of marriage and children is, typically, the price of a house with a yard and a satisfactory education for the children. The cost of of having a middle class family in 1947-1973 was remarkably low."

Isn't the rise in the cost of marriage and children due more to status competition than anything else? The average new house size in 1950 was 1000 sq ft, in 1975, 1500 sq ft and in 2000, 2000 sq ft. Why are we buying bigger and bigger houses if, in theory, we can afford them less and less? Because of immigration? Seems far-fetched.

DK February 1, 2011 at 4:08 pm

I don't mean the claim that immigrants lower wages. Even according to George Borjas, that effect isn't large enough to much budge the median and most of it is concentrated on workers without a high school degree.

Wrong. H1B visas and immigrant PhDs and PhD students strongly depressed wages in many science and technology sectors. If economists disagree with this well known fact, it only means that they live in the alternate reality.

dirk February 1, 2011 at 5:00 pm

Steve Sailer has a single thesis he's been pounding on for years. When the facts don't support his position, he refuses to revise it.

Evan February 1, 2011 at 5:18 pm

"Steve Sailer has a single thesis he's been pounding on for years. When the facts don't support his position, he refuses to revise it."

What is Steve Sailer's single thesis?

What Steve Sailer appears to have is an interest in the one element of affairs that is deliberately, desperately, urgently left out of every "respectable" conversation. He lacks an obsession or single thesis. He discusses everything, includes race, and where race is seen to be basically important he declines to ignore it.

Paradoxically, his critics are the ones obsessed with race and biology. They turn up the volume and look away whenever they hear its chain rattle.

Ricardo February 1, 2011 at 5:59 pm

Total fertility rate in California in 2005 according to demographer Hans P. Johnson of the Public Policy Institute of California:

Foreign-born Latinas: 3.7
American-born Asian women: 1.4

Nice cherry-picking, Steve. How about we look at all the figures at once?

Foreign-born total: 3.1
Foreign-born Latina: 3.7
Foreign-born white: ~2.0
Foreign-born Asian: ~2.0

American-born total: 1.7
American-born Latina: 2.1
American-born whites: 1.6
American-born Asians: 1.4

Steve Sailer February 1, 2011 at 6:46 pm

Dear Eric: I think your argument is with Tyler, who bemoans the new shortage of smart, uneducated kids.

California has had multiple generations of experience with the descendants of illegal immigrants. Look up the numbers on school achievement by 2nd through 5th generation Mexican-Americans in big longitudinal study featured in "Generations of Exclusion" by the UCLA Chicano Studies Center. Fourth generation Mexican-Americans had a 6% college graduation rate, compared to 35% for non-Hispanic whites of the same cohort.

For a summary of this study, see: http://www.vdare.com/sailer/080601_barone.htm

dirk February 1, 2011 at 6:54 pm

Even if you do believe the welfare of non-Americans isn't worth consideration, it isn't clear that immigration isn't a net positive for average Americans.

I don't give a shit about the spics, the niggers, the chinks or the Californians. Sailer has no monopoly on non-PC thought here. Nor does he have a monopoly on facts.

ladderff February 1, 2011 at 6:57 pm

Eric: Whatever Steve's personal or ideological failings, I do not count a lack of clarity or forthrightness among them. Also, I think people ought to be able to argue for any proposition for which they can muster legitimate evidence. Outrage ("I don't understand how anyone could actually propose hypothesis X!!!") is a poor filter for truth.

dirk February 1, 2011 at 7:16 pm

@Steve

What good would restricting immigration do for the average American? Be concise.

Rahul February 1, 2011 at 8:20 pm

@Steve:

So you say immigration is bad for the average American. Has it always been bad? If not, then when would you say it became bad? Can you pick a year, say, at which if the US had prohibited immigration, then the average American would have been much better off? At what point did the trajectories of immigration and American prosperity diverge?

@DK:

>>>Wrong. H1B visas and immigrant PhDs and PhD students strongly depressed wages in many science and technology sectors.<<<

Is wage depression necessarily bad? Maybe PhD's were overpriced before and now the average american (who is NOT a PhD, of course) is enjoying the fruit of PhD labor at a better price.

Wage depression can also mean cheaper goods and services. ergo a higher standard of living.

Rahul February 1, 2011 at 8:26 pm

@DK:

>>>Could you perhaps give your address? I know a homeless couple and they would LOVE to move in to live with you. You sound like of course you won't mind at all.<<<

Let's stretch your offer to the other extreme. I know lots of old, ailing, sick ( read "non productive") Americans. Their, umm…. "removal" from the economy would surely boost it a bit. Want to lend a hand in this project?

There is a moral angle to a lot of immigration debates. Economics is important but just a part of this. And harm by inaction is no less culpable than harm by action.

albert magnus February 2, 2011 at 5:44 am

If your goal is to raise the prestige of scientists, strongly depressing their wages is a bad idea. Has innovation really improved in the last 30 years with the flood of foreign PhDs? Not according to Tyler. Its made medicine super expensive that's for sure.

If PhDs are so valuable, why aren't India and China hording them? Its not like labs are that expensive to set-up especially when you have massive amounts of cheap labor.

Evan February 2, 2011 at 11:23 am

One additional thought. I said, "Reistricting immigration would limit [Americans'] displacement as a people."

More fully, it would limit their displacement as a people, *with everything that implies.*

To those who view people as individual interchangeable automatons and cogs in the global marketplace, it implies nothing, or very little.

bracketcreep February 2, 2011 at 4:04 pm

"What good would restricting immigration do for the average American? Be concise."

Ask anyone who spends several hours a day in endless traffic to and from work whether a slowdown in population growth will be welcome.

Descartes February 2, 2011 at 11:13 pm

"What Steve Sailer appears to have is an interest in the one element of affairs that is deliberately, desperately, urgently left out of every "respectable" conversation. He lacks an obsession or single thesis. He discusses everything, includes race, and where race is seen to be basically important he declines to ignore it."

Good reason for that too. Biological intelligence isn't on solid ground, with the emergence of such phenomena as for example the Flynn Effect, Pygmalion effect, and one noted study where differences in test scores among females were higher for ones that wrote values essays, in contrast to the studies that show biological consistency doesn't yet establish firm facts.

Its much easier however, to explore other reasons and criteria then creating a biological determinanist argument based on non-solid evidence.

Evan February 3, 2011 at 6:50 am

"Good reason for that too. Biological intelligence isn't on solid ground, with the emergence of such phenomena as for example the Flynn Effect, Pygmalion effect, and one noted study where differences in test scores among females were higher for ones that wrote values essays, in contrast to the studies that show biological consistency doesn't yet establish firm facts."

Excuse me? What "firm facts" has anthropoligical egalitarianism established? If your standards are fit for the goose the apply equally to the gander.

"Its much easier however, to explore other reasons and criteria then creating a biological determinanist argument based on non-solid evidence."

Red herring. Sailer and sociobiologist types in general do not traffic in determinism.

Steve Sailer February 3, 2011 at 7:27 am

Thanks.

I address a small part of your insightful critique in my upcoming review of Tyler's new book at VDARE.com.

Rafal Smigrodzki February 4, 2011 at 4:25 pm

Obviously, immigration, illegal or not, is a net benefit for native-born Americans, since you obtain the benefits of trade with adults who are usually above-average in terms of work ethic and intelligence compared to their original populations, while the considerable costs of raising prospective immigrants from helpless childhood to productive adulthood are borne by (usually less affluent) foreigners. It is the case even for the most stupid and useless Americans who benefit from various trickle-down effects, such as the bloated welfare state made in part possible by taxing immigrants. This is a simple analysis from first principles and should be the beginning of anybody's rational analysis of the issue. Unfortunately many succumb to their inborn xenophobia and end up, by various circuitous and contrived arguments, blaming foreigners for the diverse ills that befall America, such as state-controlled education, state-enforced racist policies, large numbers of useless natives, and many others, most of which can be traced to the voting patterns of US citizens. The illegals didn't vote for Obama. Or Bush, Carter, Nixon, FDR, or any other of the crooks who made this once very inspiring country into what it is now. Look in the mirror, Americans.

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