The economic effects of immigration

Kremer
and Watt argue that as more immigrant women serve in household
positions, more high-skilled native women are therefore available to
join the labor market, driving down relative wages among high-skilled
workers and reducing the disparity in wages between low- and
high-skilled workers.

Here is the paper, and that is via Greg Mankiw.  I’ll say it again: it is not frequently enough recognized that the gender of immigrants is a major policy issue.  Female immigrants bring fewer problems than do male immigrants, and they encourage the male immigrants to behave better, but of course they also, in the longer run, mean a greater demographic shift in favor of the immigrants and their culture.

Comments

"Female immigrants bring fewer problems than do male immigrants, and they encourage the male immigrants to behave better"

Really? Immigrants must be smarter than the natives. The good old southern boys I grew up with did some pretty stupid things to get the attention of the women. And they did some pretty stupid things when we got away from the women to go on drunken safaris.

"more high-skilled native women are therefore available to join the labor market, driving down relative wages among high-skilled workers"

Wouldn't that be just the short term effect on high skill wages? Doesn't the introduction of more talented workers lead to economic growth, growth that generates more demand for skills? I couldn't read the entire 52 page document, but it seemed the focus was on only the short term.

Borjas, Grogger, and Hanson have just published a paper showing the highly adverse impact of Open Borders on African-American employment and imprisonment. The abstract states

“The employment rate of black men, and particularly of low-skill black men, fell precipitously from 1960 to 2000. At the same time, the incarceration rate of black men rose markedly. This paper examines the relation between immigration and these trends in black employment and incarceration. Using data drawn from the 1960-2000 U.S. Censuses, we find a strong correlation between immigration, black wages, black employment rates, and black incarceration rates. As immigrants disproportionately increased the supply of workers in a particular skill group, the wage of black workers in that group fell, the employment rate declined, and the incarceration rate rose. Our analysis suggests that a 10-percent immigrant-induced increase in the supply of a particular skill group reduced the black wage by 3.6 percent, lowered the employment rate of black men by 2.4 percentage points, and increased the incarceration rate of blacks by almost a full percentage point.†

Anyone who still, somehow, believes that low-skill immigration somehow benefits the United States (in spit of the new massive contrary evidence), needs to read this paper. Perhaps C/T will comment on it. The paper can be found at http://www.nber.org/papers/w12518.

"Anyone who still, somehow, believes that low-skill immigration somehow benefits the United States (in spit of the new massive contrary evidence), needs to read this paper."

But correlation doesn't always mean cause-and-effect, right? Suppose small businessmen perceived – perhaps incorrectly - that African-American males with low skills are just too much trouble to hire. Media reports and personal experiences may convince them that such African-American males are unreliable due to drug and alcohol abuse. Through conversations with fellow businessmen they may discover that low-performing African-American males are difficult to terminate, as they are likely to sue claiming discrimination. How would a small businessman respond? Rather than advertising a job, he just might ask his Hispanic employee about any friends or relatives who need work. The new employee just happens to be illegal, but the employer had no way of knowing.

I am dead certain that at least one small businessmen in California, in Texas, and in Tennessee has gone through exactly that thought process and action.

Did the availablility of an illegal immigrant cause an unskilled African American male to be unemployed? Or was it the perceived undesirability of a native worker that made a job available to the immigrant?

Did the U.S. benefit when the employer hired the illegal immigrant? I guess it depends on whether the employer’s perception was correct.

What is bad for low skilled black men might still be good for America as a whole.

As Tyler vaguely alludes, the 1986 illegal immigrant amnesty caused a huge baby boom among ex-illegal immigrants in California, swamping the California school system in the 1990s and early 2000s.

Laura E. Hill and Hans P. Johnson of the Public Policy Institute of California wrote:

“Between 1987 and 1991, total fertility rates for foreign-born Hispanics [in California] increased from 3.2 to 4.4 [expected babies per woman over her lifetime]. This dramatic rise was the primary force behind the overall increase in the state’s total fertility rate during this period. Were it not for the large increase in fertility among Hispanic immigrants, fertility rates in California would have increased very little between 1987 and 1991.

“Why did total fertility rates increase so dramatically for Hispanic immigrants? First, the composition of the Hispanic immigrant population in California changed as a result of the Immigration Reform and Control Act (IRCA) of 1986. In California alone, 1.6 million unauthorized immigrants applied for amnesty (legal immigrant status) under this act. The vast majority were young men, and many were agricultural workers who settled permanently in the United States. Previous research indicates that many of those granted amnesty were joined later by spouses and relatives in the United States... As a result, many young adult Hispanic women came to California during the late 1980s. We also know that unauthorized immigrants tend to have less education than other immigrants and that they are more likely to come from rural areas. Both characteristics are associated with high levels of fertility. As a result, changes in the composition of the Hispanic immigration population probably increased fertility rates.

“Another possible reason for the sudden increase in fertility rates for Hispanic immigrants is also related to IRCA. Because many of those granted amnesty and their spouses had been apart for some time, their reunion in California prompted a “catch-up† effect in the timing of births...†

The Senate bill 2611 would reproduce this Baby Boom on a national basis, but nobody is discussing that in the national press because it sounds politically incorrect to notice it.

I can agree with this paper but I also think that it is over looking some of the other main points. Eventhough it could be better for women in the work force what about the men that have lived in a country and can not find work. This concept is very apparent in my home town. Where men that have lived there all their lives ca not find jobs cause people without green cards are taking the job cause they will work for alot less. I just think that this paper needs to look at the whole picture.

Apparently, no one has troubled themselves to even read the ABSTRACT of the paper in question. The alleged benefits of female low-skill (household servants) immigration are entirely a product of a true “guest worker† system where the government can and does force the “guest workers† to leave at the end of tenure of service. Singapore can do this. No kidding. Singapore canes and jails illegal immigrants†¦ Along with anyone who helps them.

Does anyone really think that a country (the USA) that allows convicted child molesters to return after deportation, to kill a police office (and father of five) is capable of enforcing any such system?

In real life low-skill female immigrants may be called (as an insider joke) “guest workers†. However, no one with a shred of integrity should fall for this. The Senate Amnesty bill went to pains to provide permanent immigrant status to all “guest workers†. The word “guest† was used only as a scam to fool the unwary and naïve.

Clearly, permanent low-skill immigrants (of both sexes) impose vast externalities on the American people. They amount to the privatization of profits and socialization of costs. Profits for the few and burdens for the rest. Proper libertarian economics, as always. Heather Mac Donald over that the Manhattan Institute has written extensively on this subject. “Seeing Today’s Immigrants Straight† was the title of her most recent article. The reality is that we are importing an ever expanding underclass so that our privileged elites can enjoy cheap labor.

A minor note is that any real system of female “guest workers† would have to include an abolition of birthright citizenship. Allowing “anchor babies† to block the removal of their mothers would shatter any hypothetical economic gains. Notably, Ireland just did this, by referendum no less.

I eagerly await a denunciation of birthright citizenship by all of the libertarians on this blog.

Greg Mankiw writes:

"Kremer and Watt argue that as more immigrant women serve in household positions, more high-skilled native women are therefore available to join the labor market, driving down relative wages among high-skilled workers and reducing the disparity in wages between low- and high-skilled workers."

The illogic in this statement is staggering. These are paid intellectuals? Adding supply of low-skill workers will increase supply of high skill workers, thus lowering their price and bringing it closer to the price of the low-skill workers. But adding low-skill workers didn't do anything to their price? say that again????

I only got an undergrad minor in economics, so apparently I didn't get to the class where it tells you how to apply the law of supply and demand so selectively.

sourcreamus:

It might, but it might also be part of the bigger trend to just throw away the leftmost part of the bell curve. "We don't want or need you, stay out of our neighborhoods and schools, and we won't toss you into jail unless you raise too much hell in the ghetto where we're keeping you."

This strikes me as a bad policy for reasons that don't get captured in national income statistics or a model of how much gets produced. I think both free trade and more-or-less open immigration are a win, in practice, in terms of GDP--the pie gets bigger. And they may very well lead to even the underclass getting materially better off, because there will be more to spend on them. But there are creepy social effects if we can indefinitely satisfy our low-skill worker needs in ways that leave increasing numbers of people at the bottom of the heap with no prospects for a job, and nothing much expected of them.

The guest-worker programs discussed in the paper (let female guest workers in for a restricted range of jobs) is one way to minimize the externalities of importing cheap labor. Another is to import cheap labor in the form of cheap goods bought from overseas. And there are others. But none of them address this issue of moving us along toward what Charles Murray calls the custodial state by making sure that if there's a need for workers with low skills, where some culture clash is acceptable, we import them from El Salvador rather than from Anacostia.

Keith writes, "I think Tyler has a point about the gender of immigrants.

If we get enough female immigrants, then those African-American guys who got incarcerated because (male?) immigrants pushed down their wages will have someone waiting for them when they get out. These things have a way of working themselves out."

First, black men are not in want of available Black women. Increased black male incarceration has created a significant increase in unattached Black women, so when that Black male you're talking about gets out of prison, he's got a lot of options as it is. If there is a causal relationship between immigration and Black male incarceration, then the costs are being incurred not just by Black men in jail, but also by Black women who now face a greater dearth of eligible Black men. I don't see how increasing immigrant women addresses that problem at all.

Second, you're ignoring the empirical fact of positive assortative matching by race, as well as education. Even with rising Black male incarceration, you have not seen greater inter-racial matching between Black women and non-Black men. When inter-racial matches occur, it is statistically more likely to be a Black man with a non-Black women than the other way around. So, Black female marriage market options are worsened by anything causing the Black male incarceration rate to rise, and given positive assortative matching AND the nature of the market itself (a two-sided matching market), we do not see Black women responding to the shortage by matching with non-Black men. It is possible, of course, that the shortage of Black men has increased Black female-to-female pairings - at least for those women who prefer a female match to being alone (certainly possible, assuming that they can find one another) - but I've not seen any evidence on that.

So, I disagree that this has a way of working itself out. The forgotten impact here is on how Black women fare given increased Black male incarceration. A Black male coming out of prison, while he does seem some erosion of his marital market options no doubt, still a lot of options. A Black woman, on the other hand, faces a much worse marriage situation due to this ramping up of incarceration.

Of course, it may still be that net benefits of immigration are positive, even given how immigration impacts both Black male wages, black male incarceration, and therefore, Black women, and more broadly, teh sexual network dynamics themselves. There is evidence that rising black male incarceration is linked to the AIDS epidemic among Blacks (see Johnson and Raphael 2006 on this), so that is an additional cost on Black women. So nonetheless, it may be that the benefits still swamp those costs. But, I wouldn't go so far as saying this will work out for Blacks.

albatross: "Are you saying that if we didn't allow immigrants in, that those jobs would never be done? No fruit would be picked, no offices or homes cleaned, no buildings built? Or would the costs just go up?"

I'm not sure I can give a short answer to your three questions, but I'll try.

Immigrant labor allows many jobs to be done cheaper than if businesses were forced to automate. Produce picking is one case where the absence of immigrants would lead to automation and higher prices for produce. I don't believe produce growers would hire natives for this work, as I don't believe reliable natives are available to do it.

Construction work would get done without immigrant labor, but I doubt the unskilled unemployed who would be doing it. IMO, higher construction wages would attract skilled workers from other industries. In those other industries, companies would need to raise wages for skills as well. That higher wage expense would quickly lead to automation in those industries as well. The bottom line, as I see it, is that we'd all pay more for construction and more for other work as well. The total number of skilled jobs would decline.

Housecleaners would still be hired, but not at nearly as many homes. Many homeowners who work away from home would be forced to work more at home as well.

Some may argue that the long term unemployed could pick up the slack and replace the immigrant workforce. To that argument, I ask this question: Did you see the long term unemployed who took up residence at the Superdome and at the New Orleans Convention Center last September? or the looters who were pushing shopping carts of electronics goods down flooded streets? Does anyone believe these folks can replace the Mexican immigrant workers who are building homes right now in the hot Texas sun? Would those New Orleans unemployed be trusted to enter and clean our homes in our absence?

What I'm arguing, albatross, is that employable workers in the U.S. are already employed. So absent immigrants, the number of paying jobs will decline by almost exactly the number of immigrants who leave. Wages would rise almost exactly the amount that prices would rise. And 8 million former immigrant workers, now unemployed, would increase instability on our southern border.

The Seattle Times just published an article, as part of a series on immigration, examining what would happen to prices without illegal immigrants:
Low-paid illegal work force has little impact on prices

You might assume that the plentiful supply of low-wage illegal workers would translate into significantly lower prices for the goods and services they produce. In fact, their impact on consumer prices — call it the "illegal-worker discount" — is surprisingly small.

The bag of Washington state apples you bought last weekend? Probably a few cents cheaper than it otherwise would have been, economists estimate. That steak dinner at a downtown restaurant? Maybe a buck off. Your new house in Subdivision Estates? Hard to say, but perhaps a few thousand dollars less expensive.

The underlying reason, economists say, is that for most goods the labor — whether legal or illegal, native- or foreign-born — represents only a sliver of the retail price.

If a low-skill immigrant costs an employer $7/hour and imposes costs to society of $10/hour, and a machine would cost $15/hour, then the machine is better deal for society as a whole. The underlying concept is called “negative externalities†. Of course, the employer prefers the low-skill immigrant because society gets stuck with the costs while the employer keeps the profits. Classic privatization of profits, and socialization of costs. Libertarian economics at their finest.

Please read what is posted before responding. I argued (correctly) that “more than 100% of our population growth is driven by immigration†. Yes, of course, population growth is driving housing prices. Take a look at California. Before Open Borders California had some of the nicest, most affordable housing in America. It also had high wages, great schools, great mobility, low crime, etc. What about now?

Americans are net leaving California. California’s population growth is more then 100% driven by immigration. With 10-20 million people, California was heaven. With Open Borders it is sinking into hell.

However, to be more specific, the impact of runaway population growth on housing unaffordability is twofold. First, the United States ran out of easily developable land with reasonable commutes around 1970. If our population was stable, this wouldn’t be a problem. With third-world population growth rates, land scarcity is a critical problem.

Of course, land can always be used more intensively. However, via zoning the American people have tried to preserve the American dream and have rejected (or at least tried to reject) runaway congested development. In a democracy the will of the people is supposed to count for something.

Of course, we could allow Open Borders to make homes unthinkably expensive and pack all but the very rich into tiny apartments. With the right zoning laws (better yet, none) the American dream could be wiped out in a generation. Once again, libertarian economics at their finest.

Stated different, even aside from inherent land scarcity (commuting distances, etc.), zoning does intensify the conflict between Open Borders and affordable housing. Since the American people have spoken on this subject, every libertarian should in good conscience favor banning immigration until the American people can be persuaded otherwise. I won’t hold my breath.

For some actual housing unaffordability data, check out http://www.nahb.org/fileUpload_details.aspx?contentID=535. Note all 10 of the least affordable cities were in California. Many are not exactly bastions of restrictive zoning either.

I have to admit to being amused by claims that “wages aren’t the big problem†. I suppose that at $50 or $150 an hour, absolutely no one would show to do the work. I guess the free market is a myth after all. If you actually read the links you provided, you would have found that farmers are free to bring in an unlimited number of H-2A workers. But they prefer illegals because they are cheaper†¦ Libertarian economics at their finest.

However, let’s say I am wrong and no labor shows for our latter day plantation plutocracy. Who says these corporate welfare parasites are entitled to government handouts? Remember the corporate coyotes don’t trouble themselves to reimburse us for the ruin they leave in their wake (negative externalities).

Let them mechanize, switch to crops that can be mechanized, or just go out of business. Let us note that we have lost 3 million manufacturing jobs since 2000 and I haven’t heard anyone suggest we should do anything for those people. Yet, when some agricultural welfare recipient might have to adjust to the market, the libertarians have a hissy fit.

Peter Schaefer,

I really don't think we're going to get anywhere debating this. You've made up your mind. You make assertions with such confidence that I'm sure you'd never believe anything else. But I'm going to make one last post about immigration, let you have a chance to respond, and then I'm going to drop it.

I absolutely do not believe population - and particularly illegal immigration population - drives housing prices. You claim that land with reasonable commutes is unavailable. That's simply untrue for most of the nation and for most jobs. California, with its stupid zoning, is not the nation. In most cities, and probably in California cities as well, corporations are rapidly exiting center cities and moving to suburbs. It is true that some workers CHOOSE long commutes. Many were doing so before 1970 and many are doing so today.

Your argument that illegal immigrants impose costs of $10.00 per hour on society is a joke. It's probably the result of some extremely biased economist who allocates all government costs to the marginal worker. And who uses some rediciulously inflated California social costs to estimate national costs. And who allocates all cost of education to the individual parent, despite the fact that most school districts spread education costs to all the population and all the business owners.

Your argument that allowing guest workers to do agriculture work subsidizes agriculture business owners is not valid. The effect of guest workers is not to increase profits of agriculture business. Low wage guest workers hold down the prices of the food we all eat.

Your railing against population growth is something I might expect to hear in the 18th century, or from the Club of Rome idiots of 35 years ago. Despite the large U.S. population growth of the past 35 years:

- our standard of living has sharply increased;
- our air is far cleaner;
- average commute times in the U.S. have barely changed;
- real food costs have dropped as production has soared;
- crime rates have not soared, as many were predicting.

The U.S. can absorb 300 million or more additional residents over the next century. Certainly the nature of the workplace will change over that period. Certainly our infrastructure will need to grow. But I know the nation is easily up to the task. I don't know what drives doomsayers to be so pessimisstic. Just small thinking, I guess.

Albatross,

I think I understand your argument. But I disagree with it. To me, restrictions on importation of agriculture workers is the policy change. For most of California's history, growers were free to use immigrant labor.

Allowing growers to hire whomever they choose lowers prices to consumers. Slapping tariffs on imported autos raises prices to consumers. To me these are not equivalent policy measures.

Even worse, if foreign growers can take advantage of cheap labor while domestic growers are prevented from doing so, this policy change just doesn't make sense at all. There are not domestic workers available to pick produce. Why should the nation not take advantage of cheap labor eager to do the job?

The real problem with immigration is the same problem that afflicts the urban poor: the welfare state. Eliminate welfare for immigrants and they'll still come here to work. Eliminate welfare for the urban poor, and ... what? they'll start working? riot? abuse their kids? The problem is not immigrants, but the free ride we've granted to the urban poor.

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