The Ricardo effect in Europe (Germany fact of the day)

by on January 1, 2013 at 1:18 pm in Economics | Permalink

Six percent of the value of all mowers sold in Germany are now robotic, and the country’s automatic mower market is growing in “double digits,” according to research company GfK Retail and Technology GmbH…

The market for hands-free mowers, which expanded by more than 30 percent last year, offers a rare bright spot in Europe’s consumer climate. The European market may grow as much as 20 percent annually over the next five years, Olsson said. Most of the customers are in Sweden, Germany, France and Switzerland — countries that have so far proven resilient to the debt crisis.

Demand for the garden robots has “exploded the last couple of years,” said Mats Gustafsson, owner of Moheda Jarnhandels AB, a hardware store in the southern Swedish town of Moheda. Gustafsson said he’s sold almost 60 robomowers this year, compared with fewer than 10 five years ago.

They cost about 1,700 euros, with falling prices, and they work like this:

The mowers use sensor technology to stay within a defined area of the yard, and are typically able to avoid obstacles such as trees and lawn furniture. Some of the mowers, including those made by Husqvarna, move around in random patterns, while others such as Bosch machines follow distinct lines.

For obvious reasons, this technology is less widespread in the United States.  By the way, for those of you who doubt whether machinery can exert a negative effect on wages, it is still worth reading David Ricardo’s chapter “On Machinery.”

The article is here, and hat tip goes to the excellent Daniel Lippman.

dearieme January 1, 2013 at 1:32 pm

“For obvious reasons…”: is that a case of funk?

Claudia January 1, 2013 at 1:51 pm

the robo-mowers sound like roombas to me. German mowers (small yards, garden plots) are more like vacuum cleaners than the average suburban mower (larger, open access yards); plus different regulations of labor and maybe even noise ordinances (still can’t believe you can’t mow on Sunday in Germany) … might all push to more technology.

Rahul January 1, 2013 at 2:02 pm

The automatic ones are usually designed to cut every day. Ergo they can be smaller / less power / less noise. The lawns can be American sized but the mower just gets more time to do its job.

Dismalist January 1, 2013 at 6:03 pm

Claudia, you can’t hang your wash out on Sundays [according to near unviersal local ordinances]! My HOA, writ large.

Frank Youell January 1, 2013 at 2:45 pm

The “obvious reasons” are massive unskilled (legal and illegal) immigration into the U.S. vs. Germany. Cheap labor always depresses innovation and productivity. Nothing new about it. See “What the history of the electric dynamo teaches about the future of the computer.” (http://www.slate.com/articles/arts/the_undercover_economist/2007/06/the_shock_of_the_new.html). Quote

“David showed that World War I, which led to immigration controls and choked off the supply of cheap but untrained immigrant workers, was one of the spurs to make these changes. U.S. productivity growth eventually leapt in the 1920s, four decades after the commercialization of electricity. Productivity growth rates in U.S. manufacturing in the 1920s were more than 5 percent per year, a rate that makes the “new economy” look laughable, at least for now.”

Rahul January 1, 2013 at 2:51 pm

Isn’t the Roomba that competes successfully against $10-an-hour labor more innovative than one that thrives in a $30-an-hour market?

Frank Youell January 1, 2013 at 3:20 pm

Rahul,

Below you will find comments suggesting that the Roomba is not all that competitive…

However, the real issue is the extent to which cheap labor has depressed innovation in the U.S. Clearly it has. At one time (before Open Borders) the U.S. was the world leader in advanced agricultural machinery and labor saving practices. Now the U.S. is a widely recognized as a laggard. Why? Do you need to ask?

Europe now leads the U.S. in farm mechanization. Type ‘grape picking machine’ into Google and you will see what I mean. Pretty appalling for the nation that invented the combine and gave rise to John Deere and International Harvester. However, not all that surprising either.

Rahul January 1, 2013 at 3:39 pm

And yet isn’t most of agriculture in western Europe a pack of cards propped up on mostly subsidies? I’d say the American ag sector is in far better shape than EU agriculture.

I don’t see how farm mechanization by itself is a good goal. Agricultural productivity is a better goal; and using whatever combination of inputs that’s optimal is fine. The moment using grape picking machines become cheaper than labor, American farms will buy those up in a jiffy.

Jan January 1, 2013 at 4:31 pm

Exactly, mechanization for its own sake isn’t helpful.

Frank Youell January 1, 2013 at 5:09 pm

Rahul,

“And yet isn’t most of agriculture in western Europe a pack of cards propped up on mostly subsidies?”

Yes and no. Without subsidies, European rural land prices would fall and farms would consolidate (fewer but larger producers). Food prices would decline. However, Western Europe is fertile, generally flat, well irrigated with natural rainfall, and technologically sophisticated. In other words, crop production would continue on essentially the current scale without the CAP.

“The moment using grape picking machines become cheaper than labor, American farms will buy those up in a jiffy.”

That would be thirty years ago if farmers were actually paying for the costs they impose on America by hiring illegals. The economic concept is “externalities”. Let me quote from “That glass of OJ is squeezing back Huge hidden costs of cheap labor are borne by welfare agencies, schools, hospitals, police – you.” (http://www2.palmbeachpost.com/moderndayslavery/reports/realcost1209.html). Quote

“But cheap labor also generates significant hidden costs, costs that one national labor expert says are so staggering that an 8-ounce glass of fresh orange juice that retails for 42 cents from the carton really costs Florida taxpayers a whole lot more”

‘If any other U.S. industry used business practices that caused long-term social costs on this scale … Congress would hit them with an impact fee or regulate the practices out of existence.’

and from Ron Unz (http://www.theamericanconservative.com/articles/immigration-republicans-and-the-end-of-white-america-singlepage/)

“Immigration critics have persuasively argued that the current system amounts to the classic case of economic special interests managing to privatize profits while socializing costs, wherein immigrant employers receive the full benefits of the labor done by their low-wage workforce while pushing many of the costs—including explicit income subsidies—onto the taxpayers. Obviously, all these same factors are equally true for non-immigrant Americans who fall into the category of working-poor, but the large continuing inflow of low-wage workers greatly exacerbates this basic fiscal problem.”

DocMerlin January 1, 2013 at 10:06 pm

Actually, borders where *more* open then than now.

Frank Youell January 2, 2013 at 12:03 am

DM,

“Actually, borders where *more* open then than now.”

Actually, no. The legal restrictions on immigration were lower. However, the economic restrictions were much high. So high in fact, that at the beginning of the 19th century, immigrants to the United States were typically highly skilled from high income European countries because they were the only people who could afford to immigrate. Over the course of the 19th century, transportation costs fell making possible large scale unskilled immigration. As that transition took place, public opinion shifted rapidly against mass immigration. See Claudia Goldin on the subject.

Claudia January 1, 2013 at 2:52 pm

I agree that the labor part is important…though I think the physical spaces are too and there’s a cultural angle. These robo-mowers should be prestige objects in Germany, revered for their cutting-edge (made-in-Germany) technology. In the US the riding mower, something big and powerful conveys more of that vibe. I have been amazed at how teched up a middle-class German kitchen is relative to the US, they put more money is put into such tech products. Objects like electric bread/meat cutters and vacuum packing machines are on every German counter and I see them rarely in the US. So yes, of course, labor costs are important but that’s not it. There’s a control/precision issue and a love of tech that’s at play too, imo.

Frank Youell January 1, 2013 at 3:08 pm

Claudia,

There is a different real estate vs. gadgets trade off in Germany vs. the US. Real estate is more expensive, so incremental dollars (Euros) go to gadgets vs. better housing. It’s the New York City effect. NYC has above average incomes compared to the rest of the U.S. (in nominal dollars) but even higher (by far) real estate costs. Hence everyone can afford an iPad, but only the top 0.1% can afford a decent place to live. Of course, the school situation in NYC is another matter altogether…

It’s a trivial case of Econ 101. Tradeable costs have approximately equal prices everywhere. Real estate is not tradeable. Hence, consumptions shifts towards tradeable goods where real estate is scarce.

Claudia January 1, 2013 at 3:42 pm

so Frank, you agree with me? there’s more than labor costs at play here. good. thanks, I got the econ 101 under control…I meant “amazes me” as in wow, that’s a difference, not that’s impossible for me to understand. got some thoughts on the culture-tech-differences? you seem to want to pin much on (illegal) immigration to the US. would you like an econ lesson on that one? free trade and immigration may be disruptive, but they support a dynamic, competitive economy. oh and per your comment to Rahul above I got to admire my brother’s latest farm machinery acquisitions last week…US farms are still innovating quite well.

technology is not an end, it’s a means to an end. there’s more than one way to get the lawn mowed.

Frank Youell January 1, 2013 at 5:17 pm

“free trade and immigration may be disruptive, but they support a dynamic, competitive economy.”

From “What the history of the electric dynamo teaches about the future of the computer.” (http://www.slate.com/articles/arts/the_undercover_economist/2007/06/the_shock_of_the_new.html). Quote

“David showed that World War I, which led to immigration controls and choked off the supply of cheap but untrained immigrant workers, was one of the spurs to make these changes. U.S. productivity growth eventually leapt in the 1920s, four decades after the commercialization of electricity. Productivity growth rates in U.S. manufacturing in the 1920s were more than 5 percent per year, a rate that makes the “new economy” look laughable, at least for now.”

and

“The Impact of Immigration on New Technology Adoption in U.S. Manufacturing” (http://www.phil.frb.org/research-and-data/events/2005/immigration/papers/Lewis.pdf). Quote

“Using detailed plant- level data from the 1988 and 1993 Surveys of Manufacturing Technology,
this paper examines the impact of skill mix in U.S. local labor markets on the use and adoption
of automation technologies in manufacturing. The level of automation differs widely across U.S. metropolitan areas. In both 1988 and 1993, in markets with a higher relative availability of less skilled labor, comparable plants – even plants in the same narrow (4-digit SIC) industries – used systematically less automation. Moreover, between 1988 and 1993 plants in areas experiencing faster less-skilled relative labor supply growth adopted automation technology more slowly both overall and relative to expectations, and even de-adoption was not uncommon. This relationship is stronger when examining an arguably exogenous component of local less-skilled labor supply derived from historical regional settlement patterns of less-skilled immigrants.”

In Europe and in the USA, immigration restriction promotes innovation. Cheap labor restrains technological advances. Sorry that the facts don’t support your preferred worldview.

Claudia January 1, 2013 at 5:43 pm

no sorries, sir. do you really care about innovation or do you just care about protecting the natives (aka you and yours)? at least my world view has some semblance of coherence (and plenty of supportive facts, thank you). your articles are interesting snapshots and I don’t deny there are tradeoffs. where’s your big picture? I think that the US experience shows that managed immigration has supported our productive capacity, institutions, and culture.

Dismalist January 1, 2013 at 6:11 pm

The serious grain of the argument is that scarce labor spurs innovation. No kidding! But if the scarcity is contrived, the innovation is wasteful.

The externalities argument is simply false. Especially illegal immigrant labor produces positive externalities!

And when did your family immigrate to the States?

Frank Youell January 1, 2013 at 6:54 pm

Claudia,

“no sorries, sir. do you really care about innovation”

I care about the economics of immigration and the non-economic impact. The adverse impact on innovation is one part of the poor economics of mass immigration. Not the only part to be sure. Unemployment, inequality, higher taxes, lower wages, higher prices, etc. are all part of the picture.

“do you just care about protecting the natives (aka you and yours)?”

The business of government is defending citizens from threats foreign and domestic. That includes controlling immigration and enforcing borders.

“where’s your big picture? I think that the US experience shows that managed immigration has supported our productive capacity, institutions, and culture.”

America’s greatest growth, prosperity, and national cohesion came in the decades after mass immigration ended. Since mass immigration resumed, the trend-lines have gone decisively in the other direction. Brian Caplan regards the destruction of society by mass immigration as a virtue. Others disagree.

Dismalist,

“The externalities argument is simply false.”

Gravity is a myth.

“Especially illegal immigrant labor produces positive externalities!”

You might be able to fool some people by using the economics of illegal immigration to justify Open Borders. However, that won’t work with anyone with more than a trifling knowledge of the subject. Open Borders means unlimited legal immigration and unlimited welfare utilization from day one. Of course, even illegals have children (automatically citizens under current law) how become burdens from the moment they are born. Essentially 100% of anchor babies are born at taxpayer expense.

albatross January 2, 2013 at 10:53 am

The obvious reasons would seem to be bigger lawns and cheaper labor in the US, right? There may be other reasons (liability concerns, cultural affinity for doing yard work, restrictive HOA regs, different strains of grass typically planted in the US vs Germany), but they aren’t obvious.

Anonymous January 1, 2013 at 1:34 pm

It’s depressing when he says “For obvious reasons” and then I can’t think of the obvious reasons…

affenkopf January 1, 2013 at 1:39 pm

Me neither. Maybe Talyor can enlighten us.

Frank Youell January 1, 2013 at 2:49 pm

Duplicate comments

The “obvious reasons” are massive unskilled (legal and illegal) immigration into the U.S. vs. Germany. Cheap labor always depresses innovation and productivity. Nothing new about it. See “What the history of the electric dynamo teaches about the future of the computer.” (http://www.slate.com/articles/arts/the_undercover_economist/2007/06/the_shock_of_the_new.html). Quote

“David showed that World War I, which led to immigration controls and choked off the supply of cheap but untrained immigrant workers, was one of the spurs to make these changes. U.S. productivity growth eventually leapt in the 1920s, four decades after the commercialization of electricity. Productivity growth rates in U.S. manufacturing in the 1920s were more than 5 percent per year, a rate that makes the “new economy” look laughable, at least for now.”

Ntrust January 2, 2013 at 6:37 am

I thought the “obvious reason” was that Americans prefer to cut their own lawns, like Hank Hill. Maybe I’m just thinking of a certain kind of American.

Todd January 1, 2013 at 1:53 pm

The article mentions:

1. Americans use landscaping services to a much greater degree
2. These machines have finer blades, which don’t work so great on tougher N. American grasses

I also thought of what I imagine to be the much larger acreage to mow in the average American lawn compared to European.

Not sure that any of these reasons are obvious; nor am I sure why landscaping companies cannot use these machines, and why manufactures cannot put more substantial blades in them.

The Anti-Gnostic January 1, 2013 at 1:56 pm

Because super-abundant labor is cheaper than the capital investment. Get with the program.

Brian Donohue January 1, 2013 at 2:08 pm

From what I’ve seen, landscaping has been transformed in this country, cheap labor or not.

Everything is industrial-strength nowadays, such as those bad-ass Segway-like mowers.

anon January 1, 2013 at 5:11 pm

During the mid-1980s, one of my younger brothers put himself through college (all expenses at a big state school) with his lawn mowing service. He also bought a a new Honda Accord in his sophomore year. He had about 100 customers for his service, which he started when he was in middle school.

He worked very hard all summer, and he did hire other kids to work with him. Most of them didn’t last long. The late spring and early fall were the hardest times for him as school was in session and he still had to take care of his lawns.

When he graduated, he owed nothing, had paid for all of his schooling and living expenses himself, he owned a good car, he owned a truck and all of his equipment, and he had money in the bank. And he was in very good shape.

After he graduated he got a “real” job. Years later he admitted not keeping the lawn business going was a big mistake.

Jan January 1, 2013 at 6:07 pm

Hope he paid taxes on all that fabulous income….

Dave Barnes January 1, 2013 at 1:40 pm

I have “Mexicans” mow my lawn. They take 3 minutes for our very small yard. $10/week means a decade of mowing at the same cost as a German robot.

Rahul January 1, 2013 at 1:50 pm

That’s just what I was calculating. I got a payback period of ~7 years without factoring electricity nor maintenance.

Hell, at that price-point couldn’t a German village afford to import one or two itinerant lawn-mowing Mexicans every year just for the summer?

PS. What do automatic mowers do to deter theft?

albatross January 2, 2013 at 10:47 am

Rahul:

Exist in a society with efficient police and courts?

Frank Youell January 1, 2013 at 2:35 pm

DB,

You pay $10 a week in mowing fees. How much do you pay in taxes to support low-skill immigrants? The Heritage foundation found that low-skill immigrant households impose huge tax costs on Americans. See “The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer” (http://bit.ly/98MAOo). The summary is

“In FY 2004, low-skill immigrant households received $30,160 per household in immediate benefits and services (direct benefits, means-tested benefits, education, and population-based services). In general, low-skill immigrant households received about $10,000 more in government benefits than did the average U.S. household, largely because of the higher level of means-tested welfare benefits received by low-skill immigrant households. In contrast, low-skill immigrant households pay less in taxes than do other households. On average, low-skill immigrant households paid only $10,573 in taxes in FY 2004. Thus, low-skill immigrant households received nearly three dollars in immediate benefits and services for each dollar in taxes paid. A household’s net fiscal deficit equals the cost of benefits and services received minus taxes paid. When the costs of direct and means-tested benefits, education, and population-based services are counted, the average low-skill household had a fiscal deficit of $19,588 (expenditures of $30,160 minus $10,573 in taxes).”

Bottom line is that unskilled immigrants can never offset the costs they impose on America.

However there is actually an even bigger economic cost. How much extra are you paying for housing to get away from poor people, including imported poor people? No less a liberal than Elizabeth Warren has commented that “many families have gone bankrupt trying to get their children into good schools in good neighborhoods.” Megan McCardle has mentioned the “arms race of families trying to buy their way into good neighborhoods”. No one wants to discuss it, but everyone knows what makes a neighborhood “good” or “bad”.

Zachary January 1, 2013 at 3:59 pm
Frank Youell January 1, 2013 at 4:40 pm

Z,

I have been reading Caplan for years. He commentary amounts to libertarian Open Borders zealotry minus any knowledge of, or regard for facts. Not impressive. The comments eviscerate Caplan nicely. J.X. wrote

“Caplan’s remarks about being “humane” on immigration were one sided entirely. He never considers the impact on quality of life for people living here. His argument to bring in more diversity to build distrust and reduce welfare spending is well-known by sociologists, but hardly a worthy goal. Perhaps we should first start in his neighborhood? Why would anyone want to live in an area where they distrust their neighbors? Why should this be the goal for social engineers? Is it humane to implement immigration policies that drive out those that live here and make them feel unsafe in their own neighborhoods?

Next then is the web of affirmative action programs the government has layered on society. Each new non-white immigrant is another affirmative action quota admission to a school or job promotion that a white student or worker needs to compete against. White discrimination takes place in school admissions and job promotions routinely and happens far more often than reported. Why should white citizens be punished at the expense of a relative new comer for the best jobs and schools?

Further, if these immigrants and their children are capable of performing so well (as Caplan asserts) then why are these programs even needed? What supposed injustice has been inflicted upon people that *chose* to come here that they should receive favored treatment? Why should they be admitted to the best schools with lower test scores if they are as academically gifted as the natives? Why should they get promoted for jobs when they perform lower on promotion exams? Looking at minority dropout rates nationally, it is clear that the children of many immigrants are not performing as well as others and nothing done so far can close this achievement gap. Quotas aren’t going to fix the problem as they punish native whites who did nothing wrong and lower our standards which hurts our ability to compete.”

And a lot more as well…

Claudia January 1, 2013 at 5:27 pm

first, thank you for not re-posting more of his diatribe. We are talking about the United States here—a country built by immigrants. go back enough generations and NO ONE except for a small minority can claim “native” status. Yes, competition is a bitch and yes there are losers from the process of bringing in and assimilating new people (and ideas and technology) to our country. I am blessed with my rights by being born in the U.S. but claiming this place as mine is not one of them. And since you claim to like knowledge and facts, I know about this first hand too. First, if all foreign born PhD economists were barred from the US labor market, I am sure I would have an ‘objectively better’ job. I lucky to be at a rare federal agency that can hire foreigners and it makes a huge difference. I am a better economist and do my job (to your benefit) better because of immigration. Oh, but that’s skilled folk…well my family’s farm would not be humming along as well without immigrants. Shoveling hog manure and working with sows who bite is not the stuff that “natives” jump over themselves to do regardless of the pay. If US farms become more productive with a mix of immigrant and native labor, then your food costs less, and your pay check goes further…and the American dream rolls on.

Peter Schaeffer January 1, 2013 at 7:10 pm

Claudia,

“We are talking about the United States here—a country built by immigrants”

Every place on earth is inhabited by people who came from somewhere else. So what? Until roughly 2000, most Americans were descended from out pre-1776 population.

“Yes, competition is a bitch”

The issue isn’t (only) competition but immigration that makes America and Americans poorer. When California’s schools loose out to Mississippi because of immigration, out nation has a problem. When taxpayers are gouged to support “cheap” labor for farmers, we have a problem. When “diversity” shreds national cohesion (see Putnam), we have a problem. When LFP plunges and the borders stay open, we have a problem. Dragging down poor working Americans is just one part of it.

“I am blessed with my rights by being born in the U.S. but claiming this place as mine is not one of them.”

You have the right to close your front door to anyone you with to keep out. So does the United States of America.

“well my family’s farm would not be humming along as well without immigrants”

Nice to hear that you are profiting from the burdens you are imposing on the American people. The plantation plutocracy has always had some rationale for its system of exploitation. Now we have the 2012 version.”

Claudia January 1, 2013 at 7:35 pm

Peter, come on. The original article was comparing Germany and the United States. You honestly want to tell me if you go back five generations in both you will get the same percent of ancestors born in the current country borders? Yes, if you want to go back to the land bridge we have all been on the move. I was just reading the poem on Lady Liberty again (to cheer up after these comments). Tell me what’s the equivalent monument in Germany or in other comparable countries? I am not saying the American way is better or the only way, but I am saying it’s pretty baked in the cake now. I want to see the study that immigration has made America poorer. I am fully aware that it has ill effects at times for certain groups, but what I have read suggests it is a net positive over the long run. I agree that immigration and assimilation needs to be managed (true for technological advances too). Oh and your “gouged taxpayers” happen to also be consumers who benefit big time from the cheap labor. Diversity is the fuel of innovation…a stress worth dealing with. The United States is not my house (or yours), I didn’t build that nor did any other person…it’s a collective effort. Finally I am so proud of my brother continuing the back-breaking work of feeding the American people. It’s real work and you’re lucky I am laughing to hard at your comments to give you the response you deserve.

Peter Schaeffer January 1, 2013 at 8:51 pm

Claudia,

The Lazarus poem was added to the Statue of Liberty (not Open Borders) in 1905 as Open Borders propaganda. Congress had already passed highly restrictive immigration legislation at that point because the America people were fed up with the consequences of mass immigration (See Claudia Goldin). Lazarus was overtly contemptuous of working Americans. In some respects, the Open Borders lobby never changes. Quote

‘She bemoaned the “wretched quality of work performed by the majority of American mechanics and domestic servants,” as well as the “false sense of pride that revolted at the very name of servant as derogatory to the freeborn American.’”

In other words, Americans weren’t cheap and servile enough for her, so Open Borders were a necessity for a person of privilege, such as herself.

“I am not saying the American way is better or the only way, but I am saying it’s pretty baked in the cake now. ”

America enforced its immigration laws for 50+ years after 1920. Eisenhower deported 1-2 million illegals in just 90 days back in the 1950s (with only 1000 Federal agents).

“I want to see the study that immigration has made America poorer.”

Heritage will suffice for that. The gains from cheap labor are dwarfed by the net taxpayer costs. However, also see “The Political Economy of Immigration Restriction in the United States, 1890 to 1921″ by Claudia Goldin. The abstract is

“Anti-immigrant forces almost succeeded in passing restrictive legislation in 1897, but their plan did not ultimately materialize for another twenty years. During that time 17 million Europeans from among the poorest nations came to the United States. This paper explores the economic and political forces that propped the door open for those twenty years, as well as the factors that eventually shut it Economic downturns and their consequent unemployment almost always brought demands for restriction. The flood of immigrants eventually did result in large negative effects on the wages of native-born workers. But the political clout of immigrants was strengthened by the reinforcing nature of their flows. Cities having large numbers of the foreign born received a disproportionate share of immigrants during the 1900 to 1910 period. After 1910, however, immigrant flows were diluting. This factor and the negative impact of immigrants on native wages were important in the passage of restrictionist legislation, although the rural heartland of America was pro-restriction from the l890s.”

See also “The Impact of Immigration: Comparing Two Global Eras” by Hatton and Williamson. They show that mass immigration reduced American wages and raised wages in Europe.

“I am fully aware that it has ill effects at times for certain groups, but what I have read suggests it is a net positive over the long run.”

Immigrants who impose net negative externalities can not be a net positive. Before the welfare state, even very poor immigrants had to support themselves and their low wages could (hypothetically) constitute a net gain for non-immigrants. That era is long gone. In our world, low skill working immigrants collect more in handouts (of all kinds) than they earn. In other words, if they paid 100% of their income in taxes, they would still be a burden.

Worse, their children won’t (on average) do much (if any) better. See “Seeing Today’s Immigrants Straight” by Heather MacDonald. Quote

“If someone proposed a program to boost the number of Americans who lack a high school diploma, have children out of wedlock, sell drugs, steal, or use welfare, he’d be deemed mad. Yet liberalized immigration rules would do just that. The illegitimacy rate among Hispanics is high and rising faster than that of other ethnic groups; their dropout rate is the highest in the country; Hispanic children are joining gangs at younger and younger ages. Academic achievement is abysmal.”

Lowering the skill level of the American people can not make our nation better, not matter how much some people profit from it.

“Oh and your “gouged taxpayers” happen to also be consumers who benefit big time from the cheap labor.”

The gains from cheap labor have been repeatedly studied. The 1997 National Academy of Sciences study found potential net gains of $1-10 billion per year. Any plausible estimate of taxpayer costs dwarfs that number. Note that the 1997 NAS study found that each low-skill immigrant imposes large costs on the American people.

“The most comprehensive research on this subject was done by the National Research Council (NRC), which is part of the National Academy of Sciences. The study, conducted in 1997, found that more-educated immigrants tend to have higher earnings, lower rates of public service use, and as a result pay more in taxes than they use in services. In contrast, the NRC found that because of their lower incomes and resulting lower tax payments coupled with their heavy use of public services, less-educated immigrants use significantly more in services than they pay in taxes. The NRC estimates indicated that the average immigrant without a high school education imposes a net fiscal burden on public coffers of $89,000 during the course of his or her lifetime. The average immigrant with only a high school education creates a lifetime fiscal burden of $31,000. In contrast, the average immigrant with more than a high school education was found to have a positive fiscal impact of $105,000 in his or her lifetime. The NAS further estimated that the total combined fiscal impact of the average immigrant (all educational categories included) was a negative $3,000. Thus, when all immigrants are examined they are found to have a modest negative impact on public coffers. These figures are only for the original immigrant, they do not include public services used or taxes paid by their U.S.-born descendants.”

and

“New Jersey’s Costly Immigrant Burden” by Steven Malanga. Quote

“The Garden State is in a good position to understand the fiscal impact of immigration on its citizens. Back in the mid-1990s, Congress commissioned a project, under the auspices of the National Academy of Science, to examine immigration’s bottom line. As part of the project, nonpartisan teams of some of the country’s leading economists conducted two groundbreaking studies—one on New Jersey and another on California—that assessed immigrants’ contributions to the public good in terms of the taxes they paid, and their cost in terms of the government services they consumed.

Both studies found that immigrants used government services at a greater rate than native-born residents did. The New Jersey study found, for instance, that the typical immigrant family received about $4,044 annually in government services, about 11 percent higher than the average native-born family. At the same time, immigrant households paid about 8 percent less in taxes. The net result was that “the average native household generated an annual fiscal surplus of $232” to government, while “the typical foreign household was a net burden of $1,484.” The gap was even wider in California, where immigrant households produced a net deficit of $3,463 each, because so much of that state’s recent immigration had been in the form of low-wage, low-skill workers.

Though the study did not distinguish between legal and illegal immigrants, it did break down foreign-born households by the regions of the world from which they had come. In both states, the study found the steepest deficit in Latin American households, which in New Jersey consumed 26 percent more in government expenditures than the average native-born family, but paid 38 percent less in taxes. By contrast, immigrant households in New Jersey that hailed from Europe or Canada actually consumed, on average, less in government services than the typical native-born family, and paid nearly as much in taxes.

Though the NAS study is nearly a decade old, it’s likely that, if anything, the negative fiscal impact of immigration has worsened in New Jersey. After all, Jersey’s foreign-born residents, who at the time of the study accounted for about 15 percent of the state’s overall population, now constitute nearly 20 percent of it. Moreover, the percentage of immigrants coming to the state from Latin American countries—those immigrants who, according to the NAS study, consume the most in government resources—is increasing.”

“If US farms become more productive with a mix of immigrant and native labor, then your food costs less, and your pay check goes further…and the American dream rolls on.”

Cheap labor has reduced agricultural productivity in the U.S., not raised it. Other nations are now the leaders in farm mechanization. Dumping costs on taxpayers is profitable for the exploiters, not the American people as a whole. Of course, the notion that cheap farm labor actually benefits consumers is questionable. Check farmland prices. Cheap labor is simply capitalized into higher land prices (see Ricardo). Consumers don’t get cheaper produce, but they do pay higher taxes.

Even if you don’t accept that argument, see Philip Martin on the impact of immigration labor on farming. The gains to consumers are de mimimis. See “Farm Labor Shortages: How Real? What Response”. One historic example of how restricting immigration works. In the 1960s, Congress ended the Bracero program. The growers whined that tomatoes would never be grown in California again. In real life, the tomato crop was quickly mechanized. Quote

“The mechanization of California’s processing tomatoes illustrates the discontinuous adjustment process. In 1960, over 80 percent of the 45,000 peak harvest workers employed to pick the state’s 2.2 million ton processing tomato crop into 50 to 60 pound lugs were Braceros. A decade later, almost all processing tomatoes were harvested mechanically, and fewer than 5,000 local workers rode on the machines to ensure that only ripe”

Of course, farm wages went up by 40% as well. That’s a win-win for the American people.

Here is an easy way to understand the economics of immigration. No one questions that America’s own poor people are a burden on our society. Why exactly, would anyone think that imported poor people would be any better?

Jan January 1, 2013 at 6:25 pm

Their children can often become high-skill American workers. Anyway, that funny analysis doesn’t take into account how much we receive from immigrants in all the unrewarding work they are willing to do at relatively low wages. Think of how much more we all would pay for the services immigrants provide if we didn’t have them. We could have a society without low-skill immigrants, but that would make for a boring, less innovative society. Diversity does a lot of good things, but some people have to get over their initial fears of it.

Peter Schaeffer January 1, 2013 at 7:30 pm

Jan,

“Their children can often become high-skill American workers”

Not really. Check the numbers. There is a reason that California competes with Mississippi for having the worst public schools in America. See also “Honesty from the Left on Hispanic Immigration A provocative new book doesn’t flinch from delivering the bad news.”, Quote

“John McCain and Barack Obama have largely avoided discussing immigration during the presidential campaign. But when it comes to the legal side of the issue, they both seem to support the status quo: an official policy centered around low-skilled, predominately Hispanic immigrants. A forthcoming book shows just how misguided that policy is, especially in light of the nation’s current economic woes. The Latino Education Crisis: The Consequences of Failed Social Policies, by Patricia Gandara and Frances Contreras, offers an unflinching portrait of Hispanics’ educational problems and reaches a scary conclusion about those problems’ costs. The book’s analysis is all the more surprising given that its authors are liberals committed to bilingual education, affirmative action, and the usual slate of left-wing social programs. Yet Gandara and Contreras, education professors at UCLA and the University of Washington, respectively, are more honest than many conservative open-borders advocates in acknowledging the bad news about Hispanic assimilation.

Hispanics are underachieving academically at an alarming rate, the authors report. Though second- and third-generation Hispanics make some progress over their first-generation parents, that progress starts from an extremely low base and stalls out at high school completion. High school drop-out rates—around 50 percent—remain steady across generations. Latinos’ grades and test scores are at the bottom of the bell curve. The very low share of college degrees earned by Latinos has not changed for more than two decades. Currently only one in ten Latinos has a college degree”

“Anyway, that funny analysis doesn’t take into account how much we receive from immigrants in all the unrewarding work they are willing to do at relatively low wages.”

Not true. The standard general equilibrium models certainly incorporate the gains from complementary immigration. They are small. The same models (much loved by the Open Borders crowd) show staggering effects on income distribution. Note that Borjas and Rodrik have argued that the gains from complementary immigration don’t exist because of capital adaptation.

“We could have a society without low-skill immigrants, but that would make for a boring, less innovative society.”

America enforced its immigration laws from around 1920 to roughly 1980. Our nation was neither boring nor devoid of innovation. I seem to remember several remarkable triumphs of that period. Of course, we had less ethnic food. It is astonishing the extent to which the dominant argument for Open Borders amounts to food.

“Diversity does a lot of good things,”

You may regard the “diversity” of declining wages, higher prices, soaring inequality, failing schools, press 1 for…, congestion, social atomization, shrinking resources, racial preferences, etc. as a good thing. Other people might not see it that way.

Jan January 1, 2013 at 9:56 pm

You’re wrong about second generation immigrants. They consistently earn more than their parents and are completely assimilated. Immigrants are not only Latinos. I see this among my coworkers and friends, and the data backs it up. Public schools have more to do with the city than the state, so I don’t understand what you’re implying about California. If you’re talking about universities, California’s are excellent. http://www.brookings.edu/~/media/research/files/reports/2007/7/useconomics%20haskins/07useconomics_haskins

The Heritage paper does not address the gains I am talking about, that is comparing the status quo to the counterfactual of not having low-wage immigrants to do some of the many jobs they do. The paper only addresses the gains in the context of increased total GDP that immigrants provide.

We may have had less immigration between 1920 and 1980, but remember that a large share of the U.S. population at that time was foreign-born. About 15% of the population were immigrants a century ago, higher than right now. Those people remained immigrants in the U.S. until they died, and those individuals contributed significantly to American advances in 40s, 50s, and 60s, when we saw the most impressive growth.

If you’re worried about the disastrous effects of immigration, check Canada. They have about 17% immigrants now, and stronger social welfare programs than we do. They seem to be doing alright. Anyway, I think this ship has sailed (no pun intended). America is a country of immigrants and will be going forward, probably more so.

Peter Schaeffer January 2, 2013 at 12:44 am

Jan,

Did you actually follow your link? Read the paper? A few quotes

“Today, first generation immigrants are earning less compared to non-immigrant Americans than they have at any other time since World War II; and there has been a sharp decline in the last 30 years.”

“In 2000, first generation immigrants earned 20 percent less than the typical non-immigrant worker, compared to 1970, when recent arrivals were still earning 1.4 percent more than their non-immigrant counterparts. In 1940, new immigrants were earning almost 6 percent more than non-immigrant workers.”

“For example, in the case of Mexico, relative earnings moved from 32 percent less than non-immigrant workers in the first generation (1970) to 15 percent (2000) less than non-immigrant workers in the second generation, thereby making up more than half the deficit in wages earned by the first generation.”

“Educational attainment varies significantly based on an immigrant’s region of origin: almost half of immigrants from Latin America arrive with less than a high school diploma, while about half of immigrants from Asia arrive with a bachelor’s degree or higher.”

“Economists typically measure growth in income inequality by comparing some measure of the distribution of income at two points in time. These calculations invariably reveal that the growing income inequality in the United States is aggravated by the declining wages of each succeeding wave of immigrants.”

There is a lot, lot more of course…

“You’re wrong about second generation immigrants. They consistently earn more than their parents and are completely assimilated.”

Your link shows that is not the case. However, earning more than their parents isn’t much of a test. The average illegal is a high school dropout. How about earning incomes equal to the national average? Not about to happen. Let’s try some facts. See “Hispanic Immigration to the United States” by Bodvarsson and Van den Berg.

“Research on the assimilation of Mexican Americans in the U.S. shows that new immigrants
from Mexico and other Hispanic countries earn substantially less than U.S. natives.
But, more ominously, studies such as Livingston and Kahn (2002) find that second
generation Mexican Americans only partially catch up to the U.S. average, and third
generation Mexican Americans show no further progress at all in catching up. Borjas
(1985, 1994) uses evidence of the stalled economic progress after the second generation
to argue that “the huge skill differentials observed among today’s foreign-born groups
become tomorrow’s differences among American-born ethnic groups.”3 In short, there
is evidence that a permanent gap between Hispanics and other Americans may be in
the making.

Trejo (1997, 2003) looks at the causes of the lack of income growth for Mexican immigrants,
and he concludes that the differences in income between Mexican Americans
and other U.S. residents are largely explained by differences in human capital. In
his studies, Trejo provides evidence showing that Mexican Americans do not continue
catching up between the second and third generations because they do not continue to
increase their relative levels of human capital after the second generation.

Duncan and Trejo (2006) survey the various studies of assimilation by Mexican
Americans, and they report that between the first and second generations, average
schooling rises by almost four years, and incomes rise by 30%. But then advancement
stops, and third generation Mexican Americans still have 1.3 fewer years of education
than the average American, and incomes are still about 25% lower. Suro and Passel
(2003) examine income and education attainment and find the same pattern of rapid
advancement from the first to the second generations of Hispanic immigrants, followed
by little change from the second to the third generations. Table 4 summarizes the data
from a special survey by the U.S. Census Bureau.”

Note that “fewer than half of all second generation Hispanic immigrants live in households where English is the dominant language”. Fully assimilated?

“Public schools have more to do with the city than the state, so I don’t understand what you’re implying about California.”

California has the most immigrants and the worst (or very close) schools. The connection is obvious to all but the Open Borders fanatics. See “End State: Is California Finished?” by John Judis (of the TNR).

“At the gathering, held in a plush conference room, one of the experts projected tables and graphs comparing various states. It was there that I had my own “AHA!” moment. The states with thriving educational systems were generally northern, predominately white, and with relatively few immigrants: the New England states, North Dakota, and Minnesota. That bore out the late Senator Patrick Moynihan’s quip that the strongest factor in predicting SAT scores was proximity to the Canadian border. The states grouped with California on the lower end of the bar graph were Deep South states like Mississippi and Alabama with a legacy of racism and with a relative absence of new-economy jobs; states like West Virginia that have relatively few jobs for college grads; and states like Nevada, New Mexico, and Hawaii that have huge numbers of non-English-speaking, downscale immigrants whose children are entering the schools. California clearly falls into the last group, suggesting that California’s poor performance since the 1960s may not have been due to an influx of bad teachers, or the rise of teachers’ unions, but to the growth of the state’s immigrant population after the 1965 federal legislation on immigration opened the gates.”

If Judis can figure it out, perhaps you can too.

As for Canada, I know it well. Canada keeps out low skill immigrants and encourages high skill immigration. Immigrant children do quite well in Canada. Canada is a bleak reminder of how Open Borders, mass immigration is weakening American society.

Jan January 2, 2013 at 9:35 pm

You seem to be mistaking an “open borders” philosophy for what I support, which is expanded legal immigration for both low and high skill workers, tilted towards high skillers. I also do not support massive round-ups of illegal immigrants who are here, working, paying taxes and generally staying out of trouble.

Here are rebuttal quotes, from the same paper.

“Another remarkable part of the immigrant experience depicted in Figure 4 is that second generation immigrants exceed the educational attainment of the first generation by a considerable margin.”

“second generation immigrants not only exceed the wages of first generation immigrants, but also exceed the wages of non-immigrant workers. This pattern demonstrates clearly that there is impressive upward economic
mobility from the first to the second immigrant generation.”

“A recent report by Rob Paral of the Immigration Policy Center shows that immigrants are a major presence in about one-third of U.S. job categories and that most of these job categories would have contracted during the 1990s if it had not been for immigrants.”

Dave Barnes January 1, 2013 at 6:50 pm

Frank,

I wrote “Mexicans” as a joke.
I live in Denver and these young men mow my lawn.
I’ll bet more than 50% are US citizens.
I should have La Migra greet them the next time they come to mow my lawn.

“How much extra are you paying for housing to get away from poor people” is absurd. I live close to very poor neighborhoods. My own neighborhood (Berkeley) has many poor people (some with Hispanic surnames) in it.
When I lived in a very expensive high-end neighborhood, we sent our daughter to private school. We had a lot of money then. Did not come close to going bankrupt.

casey January 1, 2013 at 1:58 pm

I loved the roomba when i bought it, but the cleaning of the device took longer than it did to actually vacuum. :(

RM January 1, 2013 at 2:36 pm

I think it is because of the power of the landscape workers’ union.

Zachary January 1, 2013 at 4:00 pm

LOL +1

Keith January 1, 2013 at 3:12 pm

Major nurseries are now buying robots that displace hundreds of workers at a time. I learned this talking to a robotics engineer in Boston. This is happening in the US where legal and illegal labor is plentiful. It is amazing how quiet and fast this is happening.

Keith January 1, 2013 at 3:25 pm

I meant garden nurseries in case anyone is confused.

Bill January 1, 2013 at 4:37 pm

Robot lawnmowers have been around since 2001, with Roomba type devices.

Here is an NPR piece describing why we differ from Europe, both in land size and grass features, as well as manliness: http://www.npr.org/templates/story/story.php?storyId=106301575 One of the reviewers is from Consumer Reports:

“One of them is Bob Markovich, home and yard editor for Consumer Reports. “Sometimes I’m cursing and saying, ‘Boy, I wish I could do something else, I have to mow the lawn,’ ” says Markovich. “And yet I have to tell you, there’s a certain peaceful solace in mowing the lawn.”

Every year, Markovich and his team test dozens of lawn mowers, including, recently, a Robomow model and a LawnBott machine. “They really are more labor-intensive than you’d think,” says Markovich. He says they can sometimes get stuck in places, for example.

And the grass isn’t left with a pattern of straight lines. “They produce kind of an odd, random pattern,” he says, “that some may not like.”

Plus, these machines typically cost more than $1,000, way more than a regular push mower. “I think the short and simple answer is, it’s still an expensive toy,” says Markovich.”

Golf courses are a different matter and market, however: http://www.rec.ri.cmu.edu/projects/toro/

As for me, I prefer the bioengineered green grass that requires no water, no mowing, and produces electricity from photosynthesis.

Bill January 1, 2013 at 4:55 pm

PS. As a marketing aside, I always like articles which say, as this one did, that the market is growing by double digits. If you take the article apart a bit, market share is based on product sales (not surprising) by euro, and the equipment costs between $1000 to $6,000, with the low end costing 2 to 3 times as much as a reqular mower. Total market share is 6% based on euro sales, and grew at “double digits”–in this case 30%–which mean that last year its share was…here’s where the math gets complicated…4.6%.

What is the market if the price is 3 to 20 times more than a regular mower.

Bill January 1, 2013 at 5:04 pm

PPS. I also like the comments that compare my lawnmowing time to the costs of hiring an illegal immigrant.

That means, of course, that I and all the other men are cutting our own lawn, have a very low price for leisure–lower than the price of hiring an illegal immigrant.

But, of course, we knew that, because in our wive’s eyes, that is what we and our leisure time are worth.

I am expecting, however, Mankiw to step in here and say that the marginal increase in taxes somehow enters into this, and that the tax increases will mean that I no longer have to cut the lawn.

John January 1, 2013 at 7:10 pm

If we’re going to accept the explanation we also have to accept that Germany, Australia and New Zealand are similar in respect to labor markets.

Ronald Brak January 2, 2013 at 12:07 am

Germany and Australia are pretty similar. New Zealand lags a bit in richosity.

axa January 1, 2013 at 8:28 pm

Just spent the autumn looking at one of those robots mowing the neighbor’s backyard. It’s like 2,000 sq meters lawn, not exactly small. Laborers for menial jobs are scarce in Switzerland.

Maybe robots can handle the job cause grass grows really slow in cold climate.

Rahul January 1, 2013 at 11:42 pm

No, robots can handle the job because they cut little and slow but everyday for long hours. Power versus endurance.

Someone from the other side January 2, 2013 at 4:30 am

If you can afford 2000 sqm lawn in any remotely desirable location in Switzerland (IOW, you are putting lawn on land that is at least 1000 CHF/sqm), you can more than likely afford the gardener to go with it…

Ronald Brak January 2, 2013 at 7:13 pm

Median house price in Sydney is about $680,000 US dollars. One hour’s yard work at $50 an hour per week (cheap for Sydney) comes to about $2,500 a year. As it’s not cheap, a lot of people do their own yardwork. So if a robot mower saves half that cost it would pay for itself in less than two years at a price of 1,700 Euros. This suggests robot lawnmowers might sell well in Australia once ones that can handle the conditions here are available. But I do wonder if Jim the lawn mowing person will buy a large and fast robot and use it on the lawns of many customers.

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Scoop January 3, 2013 at 10:18 am

Can anyone with robot knowledge talk about why the Roomba and other robot vacuums have progressed so slowly?

It would seem, if we’re to the point where a few laptops are driving cars, that a truly perfect robot vacuum could be made for very little premium over a traditional vacuum.

Why are there still any non-robot vacuums? Why the hell am I still vacuuming my house?

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