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Steven Malanga
Immigration Confusions
A response to the New York Sun.
27 September 2006

The issue of immigration has prompted great soul-searching and re-evaluation among economists across the political spectrum. For years, mainstream thought in the field, based on numerous studies, held that immigration’s benefits largely outweighed its drawbacks and that in general newcomers were strong contributors to the growth and development of the American economy.

But over the last 30 years, as the nature of immigration has shifted to include more low-wage, low-skilled workers, opinion within the field has slowly changed, too, based on mounting evidence that the benefits of such immigration are small, while the costs are growing. On the right, Nobel laureate Milton Friedman has perhaps best expressed that change: “It’s just obvious that you can’t have free immigration and a welfare state.” On the left, New York Times columnist and economist Paul Krugman recently wrote that although he is “instinctively, emotionally pro-immigration,” “a review of serious, non-partisan research reveals some uncomfortable facts about the economics of modern immigration,” and that, eventually, “we’ll need to reduce the inflow of low-skill immigrants.”

It was the weight of this evidence and the shift in thinking that I chronicled in a piece that appeared in the summer issue of City Journal (“How Unskilled Immigrants Hurt Our Economy”). Needless to say, I was surprised to read at the end of the New York Sun’s critique of that piece (“The Case for Immigration,” September 22) that the author, Diana Furchtgott-Roth, placed me within the line of a group of “small but influential thinkers” whose ideas on immigration have, over the decades, spawned such disreputable movements in American society as the Know-Nothing party. In nearly 20 years of engaging in public policy debates, I’ve always felt great satisfaction when my opponents resort to implying that my arguments help underpin racism or nativism or some other despicable “ism.” It’s generally a sign that they find their own arguments weak.

The irony here is that it’s Furchtgott-Roth who stands with a small (and shrinking, though still influential) circle of thinkers—that is, open-borders advocates, who have clung tenaciously to the notion that all immigration is ultimately good for our economy, despite growing evidence to the contrary, and despite a significant shift of opinion within academic circles. Presented with a series of studies on modern immigration by the most authoritative economists in the field, a bipartisan congressional commission on immigration reform wrote in the mid-1990s, “It is not in the national interest to admit unskilled workers.”

In my piece, I recounted studies that explained that the first great immigration, from 1880 to the mid-1920s, brought economic benefits to the country largely because the newcomers of that era brought much-needed skills with them; indeed, a 1998 study by the National Academy of Sciences reported that those earlier immigrants were on average more skilled than native workers, more than a third of whom still toiled on farms. Those skills are a key reason why many of those immigrants and their children succeeded so well. One research report cited by the academy noted that the American-born children of those immigrants were just as likely to be accountants, engineers, and lawyers as were other native-born Americans.

Today’s immigration, the so-called second great wave, began roughly 50 years ago and has come increasingly to feature low-skilled, uneducated workers and their families at a time when succeeding in our economy demands ever-more education and skills. Throughout the 1980s and the 1990s, illegal immigrants alone—consisting almost entirely of unskilled workers—have crossed our borders at the rate of between 225,000 and 300,000 a year. Legal immigration has also turned sharply toward the low-skilled, thanks to 1965 legislation that changed our national quota system so that the vast majority of legal immigration now hails from poorer countries.

Not surprisingly, as low-skilled workers have arrived in ever-greater numbers, their fortunes have fallen. Today, for instance, Mexican immigrants, who overwhelmingly dominate the ranks of our low-skilled migrants, typically begin work in America with a 40 percent wage gap compared with native-born workers. Rather than disappearing over time, moreover, that wage gap persists and may even be growing larger, according to work by the Harvard economist George Borjas. Equally unsurprisingly, the advantage of such low-wage immigration to America’s broader economy is limited. An authoritative study by the National Academy of Sciences in 1997 found that immigration contributed a mere $10 billion to our (at the time) $8 trillion economy, an inconsequential amount, all the more so in that the cost of immigration was increasing.

Furchtgott-Roth begins her response to my piece with a singularly inappropriate example of the supposed benefits of low-wage immigration: immigrant entrepreneurs plying the streets of Washington, D.C., during a rainstorm to sell umbrellas to stranded pedestrians. She fails to note that such “entrepreneurs” rarely pay taxes and business fees, and that legitimate retailers often complain that these street-corner merchants undercut their prices precisely because they don’t play by the rules. If this is the best example we can find of how immigrants complement native workers and invigorate our economy, we’re in trouble.

From this anecdote Furchtgott-Roth proceeds to the old saw that immigrants are here to work (though the percentage of nonworking women, children, and the elderly among immigrants is much higher than in the past), and they do jobs that Americans won’t. To buttress this claim, she cites unemployment rates among high-school dropouts, noting approvingly that among immigrants, the rate is only 5.7 percent, while among the native born, it is 9.1 percent (or double the nation’s overall unemployment rate). But rather than providing cause to celebrate the immigrant work ethic, the gap in the unemployment rate among high-school dropouts is more likely evidence that native-born workers are finding themselves crowded out of labor markets by immigrants taking jobs for lower pay and fewer benefits.

Borjas and his colleague Lawrence Katz have authored the most important study of immigration’s effect on native-born workers. In their 2005 National Bureau of Economic Research paper, they found that immigrants depress the wages of low-skilled native workers by 5 percent, even when one adjusts for the additional investment that businesses make when they have access to a large pool of cheap labor. Moreover, two new papers, one published by the National Bureau of Economic Research this month by Borjas and two colleagues and another by researchers from Northeastern University published by the Center for Immigration Studies, show that the impact of low-wage immigration falls especially heavily on native-born blacks and Hispanics, not merely depressing wages but increasing unemployment levels.

In contrast, Furchtgott-Roth cites the work of economist Giovanni Peri, who argues that low-wage immigrants bring a net benefit to higher income Americans and depress the wages of all low-skilled Americans by just 1 percent. But an important component of Peri’s work (and that of others who follow him) is the claim that immigration has a muted impact on native-born Americans because immigrants largely compete with one another and hold down one another’s wages. In Furchtgott-Roth’s world, this wage impact on immigrants is unimportant because she notes that we don’t see immigrants calling for less immigration. If they don’t care about the competition from other immigrants, why should the rest of us?

The first answer to this question is that immigrants don’t protest our current policy because many of them have relatives on the list of those awaiting visas; indeed, the principal source of legal immigration in America today is family reunification, and nearly two-thirds of everyone who comes here legally does so because a family member is already here.

But in this case, what immigrants think isn’t the point. What’s troubling about the wage effect of immigrants on unskilled workers—whomever it falls on—is that it is in danger of slowing economic mobility at the bottom rungs of our society. In my City Journal piece, I devote much attention to the growing research showing how continued low-wage immigration is making it increasingly tougher on migrants themselves. This is not inconsequential; in fact, it is decisive. Americans have welcomed immigrants when we believed they could pull their own weight. Now we see signs that the economic success of immigrants is slowing. Even more disturbingly, their children are also finding it harder to make it in America, research shows, in part because of what economists describe as the “transmission of ethnic capital,” by which they mean cultural influences on children. As the children of today’s immigrants grow up in ethnic enclaves where most adults don’t speak English or value education and haven’t graduated from high school, many kids adopt those unfortunate characteristics, one reason why high-school dropout rates among native-born Hispanic children are far higher than among American-born children in general.

The danger, as Washington Post economics columnist Robert Samuelson argues, is that of “importing poverty” in the form of a new underclass—a permanent group of working poor. As Borjas recently observed, “If these historical trends continue . . . the next few decades can lead to a somewhat pessimistic forecast for the economic performance of the children of the current (i.e., circa 2000) wave of immigrants.”

This poor economic performance has significant consequences in a society that now offers substantial transfers of income through government social programs. The National Academy of Sciences in 1998 studied the trade-off between taxes paid and government services received for both the native born and immigrants in California. It found that the average native-born household paid nearly $1,200 more in taxes to support services to immigrants. Furchtgott-Roth minimizes this substantial burden by quoting only the section of the report that discusses the additional local government cost for the education of immigrant children in public schools. She ignores, however, the section about the dollars that the state and federal governments spend on immigrants for social programs. According to the study, immigrants in California received in total an average of $5,067 in benefits per household, compared with $1,983 for native-born households. Behind those costs, the study notes, was substantially greater immigrant participation in many programs.

Occasionally, Furchtgott-Roth resorts to hyperbole. In my piece, I refer to a study by two noted agricultural economists, Wallace Huffman and Alan McCunn, who find that without low-wage immigrant workers, the price of produce in America would rise only modestly. The authors offer three reasons: labor is a small part of the cost of produce, many farms would make greater user of mechanization to become more productive, and America would import more produce. To this, Furchtgott-Roth retorts, “It makes little sense to send a whole economic sector to other countries.” Of course, this isn’t remotely what Huffman and McCunn suggest would happen, nor how I characterize their study. In fact, as I point out, agricultural economists have been urging American farmers to forsake cheap labor and invest more heavily in mechanization to save their farms from competition from countries where workers earn just a few cents an hour—a rate that we’ll never compete with, no matter how many migrant workers we import. Following the path of guest-worker programs and cheap labor advocated by Furchtgott-Roth is far more likely to result in our agricultural output moving offshore.

This and other discomfiting evidence about today’s immigration has prompted considerable soul searching, as I’ve said, and not just by economists. City Journal editor Myron Magnet noted in a piece accompanying mine that most of us at the magazine are the children and grandchildren of immigrants ourselves. Over the years, the magazine has published any number of stories about the contribution of immigrants to America and especially New York. But as Magnet is fond of quoting, everyone is entitled to his own opinion, but not his own facts, and increasingly the discomfiting evidence was becoming undeniable.

Such soul-searching seems to be going on everywhere except among open-borders advocates on the left and the right. On the left, advocacy for open borders is not about what’s good for our economy but about immigration as an extension of the civil rights battles of the 1960s. But on the right it’s hard to understand what’s behind the increasingly strident advocacy other than ideology—to be defended at all costs and by any rhetorical technique available, including branding its opponents as enablers of Know Nothingness or other disreputable movements.

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More by Steven Malanga:
Borrowing Trouble
Why the State and Local Pension Problem Will Get Worse
Grassroots Soccer Mania
More . . .
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