Giovanni Peri’s latest on immigration and productivity

Here is the abstract and it has to do with a Smithian theme, namely division of labor:

Using the large variation in the inflow of immigrants across US states we analyze the impact of immigration on state employment, average hours worked, physical capital accumulation and, most importantly, total factor productivity and its skill bias. We use the location of a state relative to the Mexican border and to the main ports of entry, as well as the existence of communities of immigrants before 1960, as instruments. We find no evidence that immigrants crowded-out employment and hours worked by natives. At the same time we find robust evidence that they increased total factor productivity, on the one hand, while they decreased capital intensity and the skill-bias of production technologies, on the other. These results are robust to controlling for several other determinants of productivity that may vary with geography such as R&D spending, computer adoption, international competition in the form of exports and sector composition. Our results suggest that immigrants promoted efficient task specialization, thus increasing TFP and, at the same time, promoted the adoption of unskilled-biased technology as the theory of directed technological change would predict. Combining these effects, an increase in employment in a US state of 1% due to immigrants produced an increase in income per worker of 0.5% in that state.

The paper is here.

Comments

Wait a minute, they increased productivity, but still each 1% increase in employment generated a 0.5% increase in income .

Heaven protect us from such progress.

What the guy is saying, in plain English, is that it's cheaper for Mexicans to mow our lawns, clean our chickens, and apply our drywall than it is for Americans (or robots) to do the work. Not only do we benefit from cheaper lawns, chickens, and houses; the remaining jobs are higher-skilled and thus pay more.

Duh. Isn't that kinda obvious?

Spencer,
So, employment increases, and per worker income increases, and this gets us to Bangladesh how, exactly? (I was under the impression that even immigration skeptics were in favor of per worker incomes going up.)

spencer,

The quote did not say "a 1% increase in employment [due to immigrants] generated a 0.5% increase in income".

It said a 1% increase in employment [due to immigrants] generated a 0.5% increase in income per worker.

In other words, global total income did not go up by 0.5%; it went up by 1.505% (based on 1.01 * 1.005), since the increased per-worker income applies to the increased employee population. And the 0.5% increase in income was for all workers (on average), including non-immigrants.

I just wonder if immigrants just go to places that are growing economically. Not that they cause the growth, but they go to growing economies and avoid slowing economies.

For example, not a lot of immigrants are moving to Ohio or Michigan, why would they.

I think immigrants are good for the economy, just wonder if this is overstated.

Can anyone tell me what impact immigrants have on median income? Because until it has been shown that immigration increases income for at least half of the population, I'm going to go with Spencer that immigrant labor just leads to more income, and to a much greater share of income going to owners of capital instead of workers. I mean, really, what else would you except when you increase the supply of labor?

First, is this about LEGAL immigrants or ILLEGAL immigrants. To me, using the term immigrant references LEGAL immigrants (hence we preface those here illegally as ILLEGAL immigrants).

I look forward to immigrant labor, I agree that there are needs here that our system cannot (or can no longer) supply. Many are doctors, engineers, educators. I don't know of anyone, personally, coming here on a Work Visa to mow anyone's lawn or trim their hedges. Though, I'm not sure some wouldn't to escape any hopelessness they feel in their country of citizenship. Why do we 'import' jobs? Because there is work to be done and generally not enough talent produced by our educational system and the lack of motivation many of us feel toward achievement (since, as I see it, we have never 'wanted' for anything like security and the chance to succeed).

Second, if this is about ILLEGAL immigrants, what is going to happen if we 'pardon' them? What will happen when we no longer have 'cheap' labor? What will happen when they get the 'going rate' for the work? Do people hiring illegal immigrants to perform the labor just decide to pay more or do they seek out other options (future illegal immigrants) to do the work at the desired rate? Minimum wage laws exist, and it's the perception that the illegals work for 'less' as they often receive payment in 'cash' or 'under the table'. Not sure that is true, as many are on payrolls of some local companies (not in my town but ICE is consistently busting them close to me).

Just my thoughts.

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