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What Does Immigration Actually Cost
Us?
Thomas B. Edsall SEPT. 29, 2016
Last week, as soon as the National Academy of Sciences issued “The Economic and
Fiscal Consequences of Immigration,†its 509-page report, interest groups on the
left and right immediately claimed vindication.
“National Academy of Sciences Study Confirms Immigrants Benefit America,â€
America’s Voice, a liberal advocacy group, declared from the pro-immigration side.
Frank Sharry, the group’s executive director, issued a statement assessing the
study:
On the fringes of the immigration debate, you have Donald Trump and his
small band of nativists peddling fears and falsehoods. For those of us who
inhabit a fact-driven reality, you have a growing body of credible research
demonstrating the benefits of immigrants and the burdens of following Trump’s
radical proposals.
Conservatives calling for more restrictions on immigration read the same
report but had a very different interpretation. “National Academy of Sciences Study
of Immigration: Workers and Taxpayers Lose, Businesses Benefit,†the Center for
Immigration Studies wrote. Steven Camarota, director of research at the center,
said that the report demonstrated that immigration lowers the wages of American
workers, to the benefit of immigrants themselves and of corporations:
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Immigration is primarily a redistributive policy, transferring income from
workers to owners of capital and from taxpayers to low-income immigrant
families.
These opposing views demonstrate the complexity of the core findings in the
academy’s report, which is multifaceted enough to allow for competing
interpretations. The report suggests that immigration is not a clear-cut issue in
which one side is right and the other wrong, but that there are both costs and
benefits.
The crux of the problem is that the plusses and minuses are not distributed
equally. The academy found, for example, that the willingness of less-skilled
immigrants to work at low pay reduced consumption costs — the costs to
consumers of goods and services like health care, child care, food preparation,
house cleaning, repair and construction — for millions of Americans. This resulted
in “positive net benefits to the U.S. economy during the last two decades of the
20th century.†These low-wage workers simultaneously generated “a redistribution
of wealth from low- to high-skilled native-born workers.â€
The frequent harshness of these trade-offs in real life is masked by the
academic language of the report, which points out that native-born workers who
are substitutes for immigrants “will experience negative wage effects†— in other
words, lower wages.
The report continues:
In summary, the immigration surplus stems from the increase in the return to
capital that results from the increased supply of labor and the subsequent fall in
wages. Natives who own more capital will receive more income from the
immigration surplus than natives who own less capital, who can consequently
be adversely affected.
While acknowledging these conflicts, the academy comes down decisively on
the pro-immigration side of the debate:
Immigration is integral to the nation’s economic growth. The inflow of labor
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supply has helped the United States avoid the problems facing other economies
that have stagnated as a result of unfavorable demographics, particularly the
effects of an aging work force and reduced consumption by older residents. In
addition, the infusion of human capital by high-skilled immigrants has boosted
the nation’s capacity for innovation, entrepreneurship, and technological
change.
The academy’s report provides ammunition to both sides in the contentious
debate over whether immigrants raise state and local tax burdens for education,
health care and other welfare benefits or whether those costs are more than
compensated for through taxes paid by immigrants:
For the 2011-2013 period, the net cost to state and local budgets of first
generation adults is, on average, about $1,600 each. In contrast, second and
third-plus generation adults create a net positive of about $1,700 and $1,300
each, respectively, to state and local budgets. These estimates imply that the
total annual fiscal impact of first generation adults and their dependents,
averaged across 2011-13, is a cost of $57.4 billion, while second and third-plus
generation adults create a benefit of $30.5 billion and $223.8 billion,
respectively.
In its analysis, the liberal group America’s Voice cited the academy’s statement
almost verbatim. The conservative Center for Immigration Studies, on the other
hand, interpreted the data to mean that
immigrants do not pay enough in taxes to cover their consumption of public
services at the present time.
This ideological schism has shaped the current presidential election as well as
ongoing congressional debates. Democrats have become increasingly proimmigration while Republican voters and many members of Congress generally
stand in opposition. It is this split that lies at the core of the contest between
Hillary Clinton and Donald Trump.
Clinton described the principles underlying her position on immigration in a
speech she gave in North Las Vegas last year:
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If we claim we are for family, then we have to pull together and resolve the
outstanding issues around our broken immigration system. The American
people support comprehensive immigration reform not just because it’s the
right thing to do — and it is — but because they know it strengthens families,
strengthens our economy, and strengthens our country.
The principles underlying Trump’s position are diametrically opposed to those
of Clinton. On his website, Trump declares:
When politicians talk about “immigration reform†they mean: amnesty, cheap
labor and open borders. The Schumer-Rubio immigration bill was nothing
more than a giveaway to the corporate patrons who run both parties. Real
immigration reform puts the needs of working people first – not wealthy
globetrotting donors. We are the only country in the world whose immigration
system puts the needs of other nations ahead of our own.
Trump supporters, who are 87 percent white, are substantially more hostile to
immigrants than the general public. A Pew study in August found that two thirds of
Trump loyalists describe immigration as a “very big problem.†Half of Trump
voters believe immigrants “are more likely than American citizens to commit
serious crimes,†a figure that rises to 59 percent among his strongest supporters. In
terms of work, 35 percent of Trump voters say immigrants take jobs from
Americans, compared with 24 percent of all voters.
A March 2016 Pew poll found that a majority of all voters, 57 percent, said
immigrants strengthen the country through hard work, compared with 20 percent
of Trump voters. Thirty-five percent of all voters said immigrants burden the
country “by taking jobs, housing and health care,†compared with 69 percent of
Trump supporters.
The accompanying chart from the book “Polarized America†by the political
scientists Nolan McCarty, Keith T. Poole and Howard Rosenthal illustrates the
linkage between immigration and political polarization. The chart shows that over
the period from 1879 to 2013, divisions between House Democrats and
Republicans rose when the level of immigration was high and dropped when the
level fell.
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The intensity of the conflict over immigration is on view in the contrasting
arguments of pro- and anti- immigration forces on a relatively obscure issue,
remittances sent by immigrants to their families in their native countries.
Conservative organizations seeking to reduce immigration levels argue that
remittances are a drain on the American economy. Limits To Growth, for example,
describes remittances as money “strip-mined from the United States by foreign
workers†that could have been used for productive investment in this country.
The academy’s report disputes that claim, citing studies showing that very
small adverse economic consequences result from remittances, and numerous
benefits, including
having a substantial and important role in moving funds from rich to poor
countries, which is needed to speed up global growth and reduce cross-country
inequality and possibly also international migration.
The views of Pia Orrenius, vice president and senior economist at the Dallas
Federal Reserve, reveal the complications of the politics of immigration. Orrenius
served on the National Academy of Sciences panel that produced the report and
she makes the case that the “Benefits of Immigration Outweigh the Costs:â€
Immigration fuels the economy. When immigrants enter the labor force, they
increase the productive capacity of the economy and raise GDP.†In addition,
she continued, “immigrants grease the wheels of the labor market by flowing
into industries and areas where there is a relative need for workers — where
bottlenecks or shortages might otherwise damp growth. When immigrants
enter the labor force, they increase the productive capacity of the economy and
raise GDP.
But, Orrenius acknowledges there are downsides. Immigration
lowers the wages of competing workers, while raising the return to capital and
the wages of complementary workers. In other words, the immigration surplus
does not accrue equally to everyone. It goes primarily to the owners of capital,
which includes business and landowners and investors.
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Orrenius points out where the disadvantages of immigration primarily accrue:
Competing workers’ wages fall, at least in the initial transition period as the
economy adjusts to the new labor inflow. Research suggests that previous
immigrants suffer more of the adverse wage effects than do natives. Research
also suggests any negative wage effects are concentrated among low-skilled —
not high-skilled — workers.
This conclusion, which is supported by many of the empirical studies included
in the report, goes to the heart of a Democratic dilemma, which the party rarely
addresses publicly.
On one hand, support for liberalized immigration policies, including a path to
legal status and citizenship for the undocumented, is crucial to winning support
from Hispanic voters. A majority of Latino voters have relatives, friends and coworkers who are in this country illegally and who live in fear of deportation.
Among Democrats of all ethnicities and races, support for immigration and
immigrants has risen steadily.
Pew Research found in August that 78 percent of Democrats agreed with the
statement that immigrants “strengthen the country through hard work,†a view
shared by 35 percent of Republicans. 88 percent of Democrats said undocumented
immigrants should be granted legal status to stay in the United States.
At the same time, however, the costs of liberal immigration policies are borne
most heavily by two key Democratic constituencies. Both are current targets of
voter registration and get-out-the-vote drives: recent immigrants to this county
and all workers without high school degrees, a group that is majority minority, 29.5
percent African-American and 35.2 percent Hispanic.
The economic winners from rising immigration levels are closely associated
with the establishment wing of the Republican Party: “businesses and landowners
and investors,†as Orrenius noted. It is just this wing that Trump ran against
during the primaries.
The National Academy notes the tension between winners and losers
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throughout the report:
The arrival of immigrants raises the overall income of the native population
that absorbs them: the immigration surplus. This surplus is directly related to
the degree to which immigration changes wages and returns to capital. In the
simplest models, the more wages decline, the larger the surplus.
There is, however, no agreement on the scope or size of the lost wages
resulting from immigration.
Jennifer Hunt, a professor of economics at Rutgers and a member of the
academy panel, wrote in an email that “what we did not come to a consensus about
was a number for the wage decrease experienced by native high school dropouts.â€
Not only was there no consensus on the academy panel on the size of the wage
loss among native-born high school graduates, among immigration scholars there
is a sharp debate over whether there is any loss at all.
George Borjas, an economist at Harvard and also a member of the academy
panel, is a leading proponent of the argument that immigration produces
substantial wage losses for native-born American workers, especially high school
dropouts.
In a 2007 paper, “The Evolution of the Mexican-born Workforce in the United
States,†Borjas, writing with Lawrence Katz, also a professor of economics at
Harvard, argued that:
Economic theory implies that immigration should lower the wage of competing
workers and increase the wage of complementary workers. For example, an
influx of foreign-born laborers reduces the economic opportunities for laborers
— all laborers now face stiffer competition in the labor market. At the same
time, high-skill natives may gain substantially. They pay less for the services
that laborers provide, such as painting the house and mowing the lawn, and
natives who hire these laborers can now specialize in producing the goods and
services that better suit their skills.
Borjas separately concluded that all high-school dropouts experience a
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substantial wage loss from immigration of 6.3 percent in the short run and 3.1
percent over the long haul as labor markets adjust to the increased number of
workers.
Katz said in an email exchange that his more recent work with Claudia Goldin,
also a Harvard economist, has convinced him “that immigration is at most a small
contributor to the awful real and relative wage performance of U.S. high school
dropouts,†whose relative wages “fell by 40 percent compared to college graduatesâ€
from 1980 to the early 2000s.
Katz’s bottom line:
The effects of immigration range from 0 to a few percentage points and are
swamped by the impacts of slowdown in U.S. education supplies, technological
change, and eroding labor market institutions (unions, minimum wages, rising
outsourcing/fissuring of the workplace).
David Card, an economist at the University of California-Berkeley, disputes
Borjas’s argument and contends that immigration inflicts little or no wage penalty
on American workers and may in fact boost wages.
In an email exchange, Card wrote that his own research suggests that the effect
of immigration on native-born workers without high school degrees “is zero.â€
While the most common assumption is that a larger work force drives down
wages, in practice, “when you look at the evidence, larger population normally
increases productivity,†Card wrote.
For the immediate future, this and other issues involving immigration will not
be resolved within academia, but litigated in the political arena. Governments
everywhere will be challenged to better steer the transnational flow of populations.
Still, I believe the future direction of immigration is clear.
If the anti-immigration forces gain ground in this election, such victories will
prove short-lived. For one thing, the rise in global trade and financial transactions
has been steady over the past 35 years.
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Robert Shiller, the Nobel Prize-winning economist at Yale, maps out the
probable future in his Sept. 19 essay, “The Coming Anti-National Revolutionâ€:
For the past several centuries, the world has experienced a sequence of
intellectual revolutions against oppression of one sort or another. These
revolutions operate in the minds of humans and are spread – eventually to
most of the world – not by war (which tends to involve multiple causes), but by
language and communications technology. Ultimately, the ideas they advance –
unlike the causes of war – become noncontroversial.
“As technology reduces the cost of transportation and communications to near
the vanishing point, achieving this equalization is increasingly feasible. But getting
there requires removing old barriers and preventing the erection of new ones,â€
Shiller writes, concluding that
Ultimately, the next revolution will likely stem from daily interactions on
computer monitors with foreigners whom we can see are intelligent, decent
people – people who happen, through no choice of their own, to be living in
poverty.
Before we get there, though, this year’s candidates have made irreconcilable
proposals on immigration.
Trump, in “Crippled America: How to Make America Great Againâ€:
I want good people to come here from all over the world, but I want them to do
so legally. We can expedite the process, we can reward achievement and excellence,
but we have to respect the legal process. And those people who take advantage of
the system and come here illegally should never enjoy the benefits of being a
resident — or citizen — of this nation. So I am against any path to citizenship for
undocumented workers or anyone else who is in this country illegally. They should
— and need to — go home and get in line.
Clinton was more succinct:
If you work hard, if you love this country, if you contribute to it, and want
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nothing more than to build a good future for yourselves and your children, we
should give you a way to come forward and become a citizen. And you know
what? The majority of Americans agree. They know it’s the right thing to do.
The outcome on Nov. 8 will not settle this dispute, but it will give us some
indication of where those who support what they see as enlightened immigration
policies stand as they face those who seek to restore a lost past.
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© 2018 The New York Times Company
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