Immigration and wages

by on August 30, 2013 at 6:06 am in Economics | Permalink

Matt Yglesias has a good post covering new research on immigration and wages:

… [a] new study of immigration to Denmak by Mette Foget and Giovanni Peri is one of the most detailed examinations of the issue that we’ve seen and it finds that Danish workers benefit from an inflow of complementary immigrants:

Using a database that includes the universe of individuals and establishments in Denmark over the period 1991-2008 we analyze the effect of a large inflow of non-European (EU) immigrants on Danish workers. We first identify a sharp and sustained supply-driven increase in the inflow of non-EU immigrants in Denmark, beginning in 1995 and driven by a sequence of international events such as the Bosnian, Somalian and Iraqi crises. We then look at the response of occupational complexity, job upgrading and downgrading, wage and employment of natives in the short and long run. We find that the increased supply of non-EU low skilled immigrants pushed native workers to pursue more complex occupations. This reallocation happened mainly through movement across firms. Immigration increased mobility of natives across firms and across municipalities but it did not increase their probability of unemployment. We also observe a significant shift in the native labor force towards complex service industries in locations receiving more immigrants. Those mechanisms protected individual wages from immigrants competition and enhanced their wage outcomes. While the highly educated experienced wage gains already in the short-run, the gains of the less educated built up over time as they moved towards jobs that were complementary to those held by the non-EU immigrants.

Tada! A lot of people have twisted themselves into a position where this kind of result strikes them as contrarian or counterintuitive. But if you think about population dynamics in a non-immigration context you’ll see that this is the conventional wisdom. If a deadly virus killed five percent of the population of Chicago, incomes would fall not rise. Chicago isn’t populated by subsistence farmers imperiled by land scarcity. Its residents participate in a 21st century service economy where they benefit from complex complementarities and an elaborate division of labor. That’s why big cities are engines of opportunity.

Ygelsias’s analogy to cities is a good one. Bryan Caplan has another way of explaining the point, “In a society of Einsteins, Einsteins take out the garbage, scrub floors, and wash dishes.” Thus, low-skilled immigration can increase wages by allocating talent to higher productivity jobs.

Frederic Mari August 30, 2013 at 6:13 am

Yeah, very nice but this is of course assuming that there are jobs to be had.

To take the “we’re all Einsteins, Einstein takes out the garbage” example, low skilled immigrants will free one Einstein for a higher productivity job only if such a job is actually on offer.

Otherly said, it seems to me immigration is most useful when the economy is growing. As I say on the following link, that’s not exactly ground-breaking: http://theredbanker.blogspot.com/2013/07/immigration-trade-disturbed-macro.html

Gabriel Puliatti August 30, 2013 at 9:08 am

Aha, but are economies not dynamic, complex systems rather than static?

If your problem is that there are no new jobs being created, then certainly you have worse problems than immigration…

Frederic Mari August 30, 2013 at 9:22 am

The problem will always be relative rather than absolute but, in any case, you’re right – I would agree that western economies face bigger problems than that of immigration.

OTOH, the question that interest me (and voters, presumably) is whether immigration will make things better of worse for us, right now. Not whether immigration was a net positive in the 50s and 60s when (for example) France could not get enough bodies fast enough (from Portugal, from Italy, from Northern Africa etc). Or whether immigration could not be a net positive in some future state of the world.

Rahul August 30, 2013 at 10:25 am

Maybe instead of searching the pool of “jobs to be had” some Einsteins will create their own jobs?

Z September 3, 2013 at 9:32 am

Everything in economics is static. Name one econ thinkier who doesn’t begin a thought without first saying ‘ceteris peribus.’

Gabriel Puliatti August 30, 2013 at 9:09 am

Aha, but are economies not complex, dynamic systems, rather than static organizations?

If your national economy is not creating new jobs as time goes by, you have worse problems than immigration…

Marian Kechlibar August 31, 2013 at 6:54 pm

Maybe, but the problems will compound. If you’re really in such situation, it makes absolutely no sense to import more unemployed people.

vimothy September 7, 2013 at 1:40 pm

To take the “we’re all Einsteins, Einstein takes out the garbage” example, low skilled immigrants will free one Einstein for a higher productivity job only if such a job is actually on offer.

Or, equally, if such an Einstein actually exists.

ladderff August 30, 2013 at 6:30 am

Nor does the study (not that I read it) consider what would have happened if the Danes had made their own new people rather than importing them.

Tom Strong August 30, 2013 at 7:45 am

Since (in the immortal words of Ghostbusters) Einstein did his best work as a patent clerk, I’m not sure Caplan’s analogy is all that useful.

Axa August 30, 2013 at 8:09 am

Since when a patent clerk in one of the most creative countries on earth is a blue collar job?

Tom Strong August 30, 2013 at 10:54 pm

The better question is, since when is a patent clerk a higher productivity job?

Adrian Ratnapala August 30, 2013 at 10:32 am

As far as I know, the most interesting thing he did as a patent clerk was grant the patent on Toblerone choclates.

Harold August 30, 2013 at 7:57 am

In a society of Einsteins, Einsteins take out the garbage, scrub floors, and wash dishes. For a few years until some Einstein invents some technology to do those jobs.

Rahul August 30, 2013 at 10:22 am

Other Einsteins have been predicting that since the 1950′s. We were all also supposed to have flying cars, lunar colonies, electricity too cheap to meter and ocean floor mines.

albatross August 30, 2013 at 11:56 am

For maximal irony, I sure hope you typed that on your iPad over wifi en route from LA to New York.

Marian Kechlibar August 31, 2013 at 6:50 pm

Still, the merit of his remark stands.

Highly creative people do not enjoy doing repetitive and boring work, and will use their creative abilities to get rid of them, somehow. How, that depends on their precise abilities. An engineer will create a technical solution, while an artist will either charmingly enslave some poor fan of the other sex to do the work for him/her (or, if there is a lack of fans, live in total mess of a house).

Therefore, a society of Einsteins cleaning gutters cannot last long, unless those Einsteins are coerced to do so by the government and have no other option (as all the doctors and scientists in Nazi and Communist concentration camps were).

Z August 30, 2013 at 8:17 am

I guess if you are determined to show immigration is always good, you can pick through the data until you find enough proof to satisfy yourself. Immigration has never been, is not now and never will be an economics debate. It is a cultural debate. Trotting out statistics claiming immigration is good for the labor market is like arguing that proper inflation of your tires will keep weeds out of your garden.

As to Ygelsias’s analogy, if the five percent that died from the virus was the five percent shooting the place up every night, incomes would not fall. While Chicago is not full of “subsistence farmers” it does have a sizable parasitic criminal population. Importing MS-13 to compete with the Latin Kings is why no one with an IQ above room temperature takes Ygelsias seriously.

As to the nation of Einsteins, contemplating something that can never exist should be left to science fiction writers.

Rahul August 30, 2013 at 10:19 am

“if you are determined to show immigration is always good, you can pick through the data until you find enough proof to satisfy yourself.”

……and so also for the converse, eh?

Z August 30, 2013 at 1:33 pm

Certainly. Immigration is not a data problem so i get suspicious when anyone starts throwing around data. They are either narrow minded and incapable seeing the larger issue, or, they are up to no good. In the case of Ygelsias, it is probably both.

Look, I’m generally pro-immigration, but I acknowledge that it is a matter of opinion and all choices bring trade-offs. The question, as is always the case in public policy, is who decides and who pays the bill.

Rahul August 30, 2013 at 2:16 pm

I can’t see why data is irrelevant. Sure, there are subjective opinions and moral judgements involved but to say you can decide optimally while being oblivious to data seems absurd.

That’s saying, I’ve formed my opinions and no data will change them. Yes, there are people who think like that but I don’t think it’s anything to be proud of particularly.

Marian Kechlibar August 31, 2013 at 6:53 pm

The question is: *optimally for whom*? Not just for immigration, but for any policy at all.

If a policy is adopted, and the country GDP rises in total, this still does not mean that it was optimal for the society as a whole. Some groups of people may actually be worse off, and huge benefits may accrue to a few people only.

bertry August 30, 2013 at 11:04 am

Since I’ve never seen Alex devote a long post to the negative social consequences of immigration or the welll-known lack of convergence to American norms of Hispanic immigrants (e.g. out of wedlock births, gang membership, high school completion, college attendance, crime, participation in civil society, voting patterns, etc. in the second and third generation) it’s safe to say that his focus is solely on the obvious material gains from immigration rather than the unseen social losses. He might feel that those losses are worth it, but to focus on these gains without worrying about the many costs that have been routinely discussed by others (like Borjas) while promoting open immigration suggests that he prefers to cherry pick the evidence. In contrast, his colleague Bryan Caplan acknowledges these effects but then resorts to ad hominem by calling those opposed to open immigration immoral.

Emanuele August 30, 2013 at 11:36 am

Or, Alex gives an economists point of view without expressing his point of view with topics he is not an expert. Of course immigration is a complex and multidisciplinary problem. There are economic, politic, social and health effects. And many of those effects are correlated. Still, it is interesting to know that from the economic point of view, unemployment does not go up while wages do. While it is not enough to take a decision, it is an important point. At least it seems so looking at how many times the opposite argument – empirically false – is used to scare people about immigration.

Alistair September 1, 2013 at 8:52 pm

From the economic point of view, the study is contentious, and may reflect the Danish experience. An obvious lack of control as Steve Sailor points out is the underlying growth rate and employment opportunities, or even ability of native low pay workers to redeploy and retrain. These were long, good years for the Danish economy, and a boom disguises many evils.

The UK experience of low-wage native employment has been a lot less sanguine, with less labour mobility and retraining effects.

BC August 30, 2013 at 8:18 am

And, similarly, when the immigrants are robots…

Yancey Ward August 30, 2013 at 10:42 am

Good point.

Alistair September 1, 2013 at 8:54 pm

Good point.

If we were to imagine low-cost robots that could do any simple manual job, do Caplan and Yglesias think that this would leave the low-skilled/low wage better off or worse off?

The Anti-Gnostic August 30, 2013 at 8:20 am

A society of Einsteins is high trust, low time-preference and high inputs per worker. It is, in a word, wealthy. Salow got a Nobel for pointing this out, but the implications from his thesis are kind of unfashionable these days.

I don’t know why Western millionaires and billionaires and the academic economists in their thrall have decided that land and good school districts are too cheap and that the working class’s wages are too high. It seems a horribly short-sighted view. Do they really want to live like the rich have to in the Third World? Helicopters, kidnap insurance, armed caravans? I guess the upside is when labor is so desperate and cheap, you can pretty much have your way with them.

Frederic Mari August 30, 2013 at 9:25 am

Do they really want to live like the rich have to in the Third World? Helicopters, kidnap insurance, armed caravans? I guess the upside is when labor is so desperate and cheap, you can pretty much have your way with them.

+1. We don’t always see eye-to-eye on things but here I am right with you, Anti-Gnostic! http://theredbanker.blogspot.com/2013/06/why-elysium-is-not-best-rich-can-do.html

John Thacker August 30, 2013 at 10:32 am

I want people in the Third World to live like we do in the West. What this study and others suggest is that immigration brings us all up, doesn’t bring us down.

I don’t understand how people can claim to speak for “the working class” when they want the world’s poorest to live like the poorest have to in the Third World.

Emily August 30, 2013 at 11:48 am

Most people want people in the third world to live like we do in the west, or at least don’t not-want it. The disagreement is primarily about whether that’s possible through immigration. If you think that significant unskilled immigration will make everyone live like we do in the west, you’ll probably support open borders. If you think open borders will destroy the historically anomalous good institutions that make living in the west living in the west, perhaps because the west’s prosperity is related less to its location and more to people-related factors, you probably won’t. But no one goes to bed at night thinking “I really want to keep poor people extremely poor.”

albatross August 30, 2013 at 12:03 pm

The relevant question for US immigration policy is “how will this policy work out for Americans?” Helping the poor outside the US is a worthy goal, but it’s nowhere near the top priority for US policy. We can afford a little charity, but that’s not our main function.

This study seems to suggest that allowing a fair bit of immigration, even from poor countries that mostly send low-skill immigrants, is good for the citizens of the receiving country. That seems relevant to me in a way that discussions of the good or bad impact of our immigration policy on other countries never will.

mavery August 30, 2013 at 2:00 pm

“The relevant question for US immigration policy is “how will this policy work out for Americans?” Helping the poor outside the US is a worthy goal, but it’s nowhere near the top priority for US policy. We can afford a little charity, but that’s not our main function. – See more at: http://marginalrevolution.com/marginalrevolution/2013/08/immigration-and-wages.”

So we don’t even consider it? What a callous notion.

The Anti-Gnostic August 30, 2013 at 3:38 pm

I love how economists who coldly discuss the judicious use of cruise missiles and the inefficiency of “sticky wages” (i.e., workers taking home more pay than economists think they should) get all teary-eyed and preachy once the subject turns to immigration.

albatross September 1, 2013 at 10:54 am

As I said, we can afford a little charity–letting in a few refugees, say–but charity for foreigners is not and cannot be the main job of the US government w.r.t. immigration policy, foreign policy, farm policy, etc. The president and congress are not employed to generically do good in the world, but rather to manage a huge organization on behalf of the citizens of the US. I say this in the same way I say that a judge’s job is to stick to the law, not to try to impose his vision of how to make the world a better place. He is given a lot of power, with a particular job in mind. He should try to see justice done according to the law.

The Anti-Gnostic August 30, 2013 at 12:53 pm

The study is cherry-picking. Immigrants are mostly net tax consumers and there’s downward pressure on wages and upward pressure on costs for housing, medicine and education. There’s also decreased trust and more law enforcement and national security.

If you took the population of Fairfax VA and swapped it out with the population of Mogadishu, in a few years Fairfax would resemble old Mogadishu and Mogadishu would resemble old Fairfax. We do not have much time left to grasp this lesson.

Rahul August 31, 2013 at 12:41 am

Lay off the hysterics. Who’s talking of this hypothetical swap? You are attacking a strawman.

The Anti-Gnostic August 31, 2013 at 8:29 am

Think of it this way: at the scale we are talking about, we are not importing Somalians; we are importing Somalia.

Marian Kechlibar August 31, 2013 at 6:45 pm

I don’t think that you could distinguish some of the migrant neighborhoods in Western Europe from the countries of origin, save the architecture only (which predates the population).

A colony of, say, 100 000 Iraqi refugees is de facto an exclave of Iraq, in good and bad.

errorr September 1, 2013 at 3:12 am

Fairfax has an anomalously high population of immigrants of both the skilled and unskilled variety. I believe the county is almost 30 percent foreign born and it is quite the hellhole for the richest county in the nation.

A.B Prosper August 30, 2013 at 5:04 pm

Simply, yes they do. Being rich is not about being better off. Baring a few luxury goods the upper class of the 1st world has all the goods that a normal person can enjoy.

This is about status and after a point the only way the rich can get the rush from being rich is to drag everyone else down.

A little kidnapping insurence is a small price to pay for a fix and having guards why that just makes you important.

Marian Kechlibar September 1, 2013 at 10:06 am

Not really. In my opinion, being rich means the ability to buy yourself some leisure time, while keeping the standard of living high.

By this definition, not very many high-income people are rich.

T. Shaw August 30, 2013 at 8:59 am

“That’s why big cities are engines of opportunity.” That’s why I’m relocating to Detroit.

Patricia Mathews August 30, 2013 at 9:00 am

Over 50 years ago, Poul Anderson had a story in Astounding SF about who takes out the garbage etc in a society of Einsteins. His answer, fairly typical of the period’s employment patterns, was “Young people. Students.” All the budding Einsteins started out in these entry-level jobs.

After 50 years I could also add “older hobbyists, brewing beer or growing vegetables for fun.”

Which doesn’t address immigration, but I note that today’s world’s most anti-immigrant (free world) nation is a leader in robotics, and seems to be approaching Isaac Asimov’s “I, Robot” world. Including robo-dogs and robo-cats.

The Anti-Gnostic August 30, 2013 at 10:14 am

It’s very related to immigration because it belies the claimed fact of a labor shortage. GMU economics professors also probably tell their micro 101 students that there’s no such thing as a “shortage” in a functioning market, only a misallocation of resources which require pricing signals to straighten out. When it comes to labor markets though, they throw out the textbooks and declare government must do something.

bob August 30, 2013 at 11:46 am

But the government is doing something by making it illegal for people to come into the country and work. It just happens that you are thinking the default position is to forbid immigration, instead of letting people go where they wish.

Or maybe you think that colonial US was a crazy socialist utopia full of government intervention.

The Anti-Gnostic August 30, 2013 at 1:43 pm

There is no default position of “letting people go where they wish.” In a society of completely private property, all movement off your own property requires the permission of adjacent and intervening landowners. If immigration were a matter of contract there would be no immigration. There would only be owners, licensees and trespassers.

I’m not sure about the reference to colonial America. The North American colonists weren’t immigrants. Immigrants don’t arrive until a functioning State is in place which can grant them that status. The colonists were, depending on your viewpoint, settlers of terra nova, or hostile invaders.

Adrian Ratnapala August 30, 2013 at 6:45 pm

Your vision of society has no immigration only because it hasn’t figured out how to have transportation.

John Mansfield August 30, 2013 at 9:05 am

What does a “society of Einsteins” have to do with the U.S. labor force?

albatross August 30, 2013 at 12:04 pm

It’s a picturesque way of explaining comparative advantage.

FE August 30, 2013 at 9:26 am

I will definitely tell the next unemployed person I see to allocate his or her talent to a higher productivity job.

David Fornborg August 30, 2013 at 10:17 am

Z: Low skilled immigration loses the economic argument as well. A case study of Malmö(very close to Denmark and similar immigration pool): http://super-economy.blogspot.se/2013/05/malmo-case-study-in-multiculturalism.html

Bill August 30, 2013 at 10:32 am

Yglaisius comments are not comparable to the US. He compares the influx of immigrants competing in all spheres of labor activity to the influx of illegal immigrants who compete in an underground economy where there are few document requests: construction, farming, etc. To make it comparable you would have to make illegal immigrants legal and then see what jobs they could compete for. I suspect you might find spanish speaking truck drivers and other occupations which require more identity searches opening up for legalized formerly illegal immigrants.

Andrew' August 30, 2013 at 11:35 am

I suspect the causation flows from type of work to the demand for documentation.

Ryan August 30, 2013 at 10:42 am

Yet again this notion that wages scale with productivity. Where do the robots or technology fit into this model. Do more with less and paid the same is what you’ll see if you look out the window.

Handle August 30, 2013 at 11:25 am

Is everybody an Einstein? Do we have a surfeit of Einsteins? Employees scream, “no”, so who are we supposed to believe?

And wait, why should their Einsteins wash our Einsteins floors? Wouldn’t the new Einsteins be just as eligible and productive as Einstein-level jobs as our Einsteins? Are we assuming the new guys aren’t as Einsteiny as the old guys?

Why would our Einsteins wash the floor without immigration unless the wages were attractive relative to Einstein jobs? Is the assumption that there isn’t room for another Einstein job without the non-internationally-tradable demand from a lot of new non-Einsteins? Like what? And if they move to those Einstein jobs, it’s because the relative wage difference has expanded … which means the wages at non-Einstein jobs moved downwards.

Huh… I’m so confused!

bmcburney August 30, 2013 at 1:54 pm

“In a society of Einsteins, Einsteins take out the garbage, scrub floors, and wash dishes.” Thus, low-skilled immigration can increase wages by allocating talent to higher productivity jobs.

This seems very wrong to me. Obviously, the immigration of low-skilled workers makes my life better if for those that employ them. Thus, if I am already a professor of economics I am benefited by the immigration of low-skilled workers to scrub my floors more efficiently and cheaply than before. At the same time, however, these low-skilled workers do not compete with professors of enconomics and, therefore, do not lower wages or harm job prospects in the profession. If low-wage workers do compete with me, however, the arrival of an immigrant to take my job washing dishes does not automatically result in my becoming a professor of economics even if I have the “talent” to do the job.

Increased competition must help consumers but must hurt the field of existing competitors. Thus, our policy should be to increase the immigration of high-skilled workers, such as professors of economics. This would presumably reduce the cost of higher education and therefore increase the educational opportunities for our existing low-skilled workers. If it is true that wages are increased generally “by allocating talent to higher productivity jobs,” wouldn’t the effect be more efficient and more pronounced if we “re-allocate” the “talent” and education from other countries directly rather than “re-allocating” low-skilled workers from other countries in the hope that our displaced low-skilled workers will become more “talented”?

It is the immigation of high-skilled workers to take Caplan’s job (or Alex’s or Tyler’s or even Matt’s) which would increase wages by “by allocating talent to higher productivity jobs.” I certainly agree that there must be plenty of floor scrubbers in this country with the innate sense of entitlement and arrogance to be journalists or professors of economics if only they had the education (or educational credentials if you prefer) to go with the “talent.” However, there are also plenty of potential immigrants with the same “talent” who already have the education. Let’s try importing them first, maybe Alex and Matt can get jobs scrubbing their floors or taking out their garbage.

BC August 30, 2013 at 6:14 pm

Umm, you do realize that our faculty do come from all over the world, don’t you?

bmcburney August 31, 2013 at 4:27 pm

Umm, yes, I realize that. Obviously, however, we do not have enough of them to satisfy our requirements. Otherwise, the general increase in wages fortold by our professoriate would have already occurred. More and better, say I. Let’s give Matt, Alex, Brian, and Tyler the medicine they proscribe for the lower orders.

Bryce August 30, 2013 at 2:06 pm

If a deadly virus killed five percent of the population of Chicago, incomes would fall not rise. Chicago isn’t populated by subsistence farmers imperiled by land scarcity. Its residents participate in a 21st century service economy where they benefit from complex complementarities and an elaborate division of labor. That’s why big cities are engines of opportunity.

Wouldn’t real incomes rise? Isn’t rent the major cost of living in major cities, and wouldn’t rents fall in this scenario?

I’m surprised Yglesias would write this considering he frequently talks about the land tax, wrote a book called “The Rent is Too Damn High”, has mentioned Georgism I believe a few times, etc.

“Land scarcity” is obviously relevant here. Yglesias himself has talked about how the rent is too high in cities and wants more density i.e. more apartment buildings and taller apartment buildings to create more “land” in the land scarce city.

Bryce August 30, 2013 at 2:12 pm

Bryan Caplan has another way of explaining the point, “In a society of Einsteins, Einsteins take out the garbage, scrub floors, and wash dishes.”

So in a society of Einsteins, there’d be no robovacs, automatic dishwashers, etc? Would there be no cars either? No horse drawn carriages? Would we have Einstein drawn carriages? Would we not even have the carriage? Just Einsteins carrying other Einsteins on their backs?

Piper August 30, 2013 at 2:57 pm

Denmark has virtually no black citizens.

European immigrants to Denmark are not Like Mexicans.

Denmark does not use the Euro so its economy is much stronger than those of its neighbors. This means the short-run effects of immigration are confounded by other factors. We can’t yet measure long-run effects.

Peri is a tendentious pseudo-economist. You can’t believe a thing he publishes.

Adrian Ratnapala August 30, 2013 at 6:50 pm

“European immigrants to Denmark are not Like Mexicans.”

Correct, in my last workplace we had a Mexican who left a few months before a Bulgarian joined. The Mexican was a medium-sized shaven-headed man who sat about three metres from the window. The Bulgarian was a large shaven-headed man who sat about five metres from the window. COMPLETELY DIFFERENT.

Rahul August 31, 2013 at 6:21 am

“European immigrants to Denmark are not Like Mexicans.”

@Piper

Did you notice the very minor detail that the work in question is studying the “effect of a large inflow of non-European immigrants on Danish workers”.

Scoop August 30, 2013 at 3:22 pm

“If a deadly virus killed 5 percent of Chicago, incomes would fall, not rise.”

That Yglesias can state that as some sort of given — and Tyler can quote it in a non-ironic way — indicates just how poor the thinking is on this question.

Anyone who seriously believes that at least a third of the population of Chicago, and quite possibly half, doesn’t fall into the category of “other people would be better off if I magically disappeared” is delusional.

GiT August 30, 2013 at 3:30 pm

Right, the “1/3 to 1/2 or more of Chicago dying would improve things for everyone else” crowd is the one with a clear-eyed view of reality.

mike August 30, 2013 at 5:08 pm

It is indisputably true that some communities contribute nothing positive other than the occasional freak athlete. And a whole lot of negatives.

albatross September 1, 2013 at 10:57 am

I must have been asleep in math class the day they explained how 5% = 1/2 to 1/3.

GiT September 6, 2013 at 11:04 am

Let met guess, you were never able to manage word problems in math? Let me annotate for you, dunce:

“Anyone who seriously believes that at least a third (1/3) of the population of Chicago, and quite possibly half (1/2)…”

Get it?

Alistair August 30, 2013 at 8:54 pm

This is just incredibly simpistic, and I thought Bryan and Matt would be smarter. Oh sure, you get some more labour and jobs nominally expand. Here’s how immigrants in the UK make natives worse off.

1) Not normalised for lifetime benefit. Low wage immigrants (the majority) contribute more in taxes than benefits in the short term due to youth effects. But they consume more benefits than taxes in the long term as they age.

2) Negative externalities in housing. Housing supply side restrictions are fierce and house prices/rents cripple disposable incomes here. Immigration accounts for most of the growth in new household numbers, and is driving prices here to stupid levels, especially in london.

3) Negative externalities in schools. Folks don’t like it when their children end up in a class mostly full of English as a second language immigrants. It has real effects on learning.

4) Lump of Labour problem. For every poor immigrant, about 0.5 native workers are displaced into unemployment rather than another job. The benefits bill, and hysterisis effects, is much greater social costs than the tax contribution of the additional 0.5 jobs created.

5) Immigrant heterogeneity. The statement of immigrant benefits conceals wide variations in their contribution. Some immigrant communities are just pure trouble. Somali immigrants are mostly unemployed and have a huge crime rate.

6) Social cohesion. People just don’t like their country filling up with people who look/talk/act very differently. You might decry this, but thats the way it is.

7) Incidentally, and with referent Econ 101, increasing the supply of labour does not improve the position of native labourers; it makes them worse off. The main winners are the companies and immigrants. Sure, on average the country is “better off”, but its not pareto efficient. Low salary natives kinda get it in the neck.

I would like to see more economists honestly address some of these points rather than falling back on econ 101 argument from the labour supply.

Rahul August 31, 2013 at 12:25 am

Your #2 needs to blame artificial supply side restrictions then.

#5 is a good point and is reason why policy needs to be nuanced. You really cannot treat a potential immigrant doctor the same as a potential immigrant who’s illiterate. Often that’s sadly the case.

Alistair August 31, 2013 at 3:10 am

I’m a huge critic of the supply side restrictions on UK housing build and the sadly rational Nimbyism that drives it. But until it is reformed with nice Coase buyouts, #2 is a really big problem for UK immigration.

Rahul August 31, 2013 at 6:13 am

The other point though is people don’t enjoy some deep natural right to keep living in a city they used to. The crazy housing prices are more a London phenomenon, right?

Your #6 is also debatable. In the “People just don’t like immigrants” argument. “Some” people is more like it. If indeed a majority of people didn’t, we’d see laws pass and immigration totally stopped. Some expected and rational backlash does happen from time to time (especially when immigration is overdone or of the wrong kind) but if the majority of people just didn’t want any immigrants (like you claim) why won’t voters just legislate it away?

Quite simply, you are extrapolating your opinions to the broader population. That’s unwarranted.

Alistair August 31, 2013 at 3:19 pm

Crazy house prices are London and nearly all the south now, by income/price ratio. But I’m not following your counter-argument. I say “Immigration is raising house prices, for the native poor” and you say, “well, the native poor don’t have a right to cheap housing in the city they grew up…” Which is perfectly true. But irrelevant to my initial claim about immigration, right?

Anyway fair enough, my other claim was too broad. Let me be more specific. Only some people just don’t like any immigrants. Most people don’t like immigrants beyond a given threshold. Thresholds will vary by person. Some people say they are fine with all immigrants. Most of them are hypocrites as revealed by their actual behaviour rather than words. Anything really factually contentious there? I make no judgement about the morality of anyone’s preferences.

There’s plenty of causes with majority support in the population and almost zero support in government, and I won’t insult your intelligence on an econ blog by refering you the basic public choice literature. C’mon, be reasonable…

Rahul September 1, 2013 at 7:00 am

@Alister:

“Most people don’t like immigrants beyond a given threshold.”

I agree with that. OTOH most people don’t like almost anything beyond a certain threshold.

Steve Sailer August 31, 2013 at 1:22 am

You guys do know that Denmark restricted immigration from 2001 onward, following the fine showing of the immigration-restrictionist Danish People’s Party in the 2001 election?

http://en.wikipedia.org/wiki/Danish_People's_Party

“Eventually, [the Danish People's Party] gave its parliamentary support for a Conservative-Liberal coalition government, headed by Prime Minister Rasmussen, in exchange for the implementation of some of their key demands, first and foremost stricter policies on immigration.[21] The party had a key role in writing the rules and conditions for immigration in the immigration law that was established by the government in May 2002,[30] which it called “Europe’s strictest”.[31]“

Steve Sailer August 31, 2013 at 1:23 am

Professor Peri writes:

“Using a database that includes the universe of individuals and establishments in Denmark over the period 1991-2008″

I seem to recall that something happened in 2008 — it was in all the papers at the time.

Rahul August 31, 2013 at 6:15 am

And so? Whatever happened in 2008 somehow retroactively destroys the validity of all conclusions based on two decades of pre-2008 data?

Steve Sailer August 31, 2013 at 8:27 pm

Bernie Madoff should have hired Dr. Peri and Rahul as his expert witnesses: “And so? Whatever happened in 2008 somehow retroactively destroys the validity of all conclusions based on two decades of pre-2008 data?”

Erik September 6, 2013 at 7:49 am

Do you mean the Danish victory in the 2008 European Men’s Handball Championship?

Steve Sailer August 31, 2013 at 3:10 pm

It’s called a Bubble. In fact, much of Dr. Peri’s celebrated work on immigration is based on the assumption that if we look just at data from Bubble periods, such as employment in California, we can assume that the trends he observes will go on forever, even though they didn’t.

Marian Kechlibar September 1, 2013 at 10:11 am

“non-European immigrants”? This is such a heterogenous group that it does not make sense to study it at all. It is similar to studying wages of “non-economists” or scholar outcomes of people whose name isn’t Smith.

The group is extremely diverse and has very clear differences, with Sikhs, Vietnamese and Iranians being remarkably successful anywhere where they move to, and Somalis and Sudanese being rather unsuccessful anywhere where they move to.

To mix them all together seems to be too stupid to be just incompetence; I suspect that this has been done in bad faith, in order to paper over some inconvenient observations. After all, if you calculate an “average” of, say, wealth of Bill Gates and a random village in Zimbabwe, the outcome indicates that they all are millionaires.

Rahul September 1, 2013 at 1:34 pm

Agreed but it still must be a step up from conventional rhetoric like “pro immigration policy” or “anti immigration” etc.

Imagine how stupid it is to say one is “anti immigration” given this heterogeneity you describe.

Marian Kechlibar September 2, 2013 at 8:23 am

You’re right, talking about immigration effects in general is quite a bit like talking about food in general.

On the other hand, the current situation may be worsened by the fact that very concept of “discrimination” is the new devil in the European Union. And managing immigration by country of origin means to discriminate against some people. As such, it is perceived as shameful.

The Bachelor September 1, 2013 at 3:18 pm

In other words: More people creates a richer society

Actually the Deadly-virus or the Einstein arguments has nothing to do with “immigration”. All they are saying is, that if we have more people, then we would also have more people working with science and creating innovation that benefits all.
Hence everybody would on average be better of.

But remember not to talk about;
Scarcity of ressources and land
The Welfare State
The distribution of the income
Trade across borders
The importance of institutions (and the culture that created them)

Or to start wonder why so many small countries can be so rich (CH, NL, DK, NO, SE, BE, AU……).

Denmark has five million people.
Neighbour country is Germany. Think of Germany as having 5 million people + 80 million immigrants

Germany should be so rich, and Denmark so poor, because as we have all learned, in Germany the 80 million extra people makes it possible to allocate talent to higher productivity jobs.

Please Alex. Explain to me, why Denmark, Netherland, Germany, France, USA, Austria, Sweden, Canada, UK, Australia are all basically the same when it comes to wealth, even though they are so different in population size.

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