Cafe Hayek - Latest Comments in Immigration Economics

Re: Immigration Economics

Bob White — Thu, 06 Apr 2006 04:13:58 -0000

Erin makes a good point, namely that it is important to remember that the issue of the day is primarily illegal immigration, not immigration in general. We've proven that we can assimilate larger numbers of people into our economy than we legally permit. Let's adjust the flow of legal immigrants and allow those from other countries, not just those with adjoining borders. And let's shut off the flow of illegal workers over those adjoining borders, doing so in the most cost-effective (but truly effective) way. If you have dealt in any way with US immigration services, you know that they do nothing in a cost-effective way and are grossly ineffective. But assuming they can be properly organized and funded, let us as a nation bring in more workers of our own choosing. Let us control the flow and open the gates a little wider.

Re: Immigration Economics

Bob White — Thu, 06 Apr 2006 04:01:11 -0000

Half-sigma mistakenly mangled the statistic. The article actually notes that median income has fallen for males 25-34, not 25-44, an age span of 10, not 20 years. And can we infer from the lack of notice about other age/gender groups that wages in those segments was flat or rising over the decades?

Think about highway traffic. Recall how it slows down at points where other cars are getting on the highway. Further down the road, the median speed picks up again, even though the same number of cars are on the road as at the point of entry.

This seems analogous to the way that the income of males seems to have dropped slightly, perhaps at the point of entry of a heavier flow of immigrants and native-born females into the job market. But the effect is temporary, since it seems not to persist as those workers age. This presumes that the measured decline in median wage was gradual over the years.

This implies that wages rise as workers age, perhaps because they become skilled, form bonds of loyalty with employers and fellow workers, switch to more lucrative employment as they learn how to better make money. Returning to the highway analogy, workers leave the crowded highways and opportunistically seek the those with fewer cars competing for space and fewer points of entry. Then speed, analogous to wages, picks up. I think these are effects we have witnessed and personally experienced over the years.

Re: Immigration Economics

JohnDewey — Thu, 06 Apr 2006 03:54:05 -0000

"It's important to remember that "immigrants" are those who come here legally, assimilating to the country, taking the citizenship test, and actively pursing citizenship."

Erin, just to be clear, not every Mexican worker in the U.S. wishes to assimilate and become a citizen. Some just want to work here for a few years and then return to Mexico. Would you describe those guest workers as good also, even if they do not wish to assimilate? What does assimilate mean to you?

We need more immigrants than the government currently allows. Fortunately, our nation didn't enforce the laws vigorously. Had we done so, our economy would not have grown nearly as much as it has. We've all gained from the efforts of those 12 million illegal immigrants. They fill a vital role in our economy.

So what do we now do with those people we've come to depend on? If we treat them as criminals and deport them, our economy suffers - badly.

Is it possible in your black-white, legal-illegal world to craft a solution that doesn't harm the nation's economy?

Re: Immigration Economics

Tom Kelly — Thu, 06 Apr 2006 02:50:49 -0000

Why should there be a process to become a citizen? If you live, work, and consume here you are a taxpayer. That should be qualification enough to participate in the processes of governance as a citizen.

I don't know the point of NAFTA or any other government sponsored trade agreement. Individuals should be free to trade among themselves without the government being involved.

Re: Immigration Economics

RWP — Thu, 06 Apr 2006 02:15:04 -0000

Why does everyone talk about the problems or non-problems associated with immigration? When the real question we should be answering is why are they coming here and how can we slow the flood?

As long as it is better to live and work in the US than Mexico no wall will stop the flood. It seems that the US has an excess demand for labor and Mexico an excess supply. This is perpetuated by the border. We all know how well artificial barriers work. Take for example drug prohibition. It doesn't solve the problem it just distorts it.

Keep arguing, while policy makers make the wrong choices in Washington and set up another unwinnable war against immigration. Someday both economies will find equilibrium through the price of labor; let's hope it's sooner rather than later and by a rise in Mexican wages and not a reduction of US ones.

Re: Immigration Economics

Grzegorz — Thu, 06 Apr 2006 01:55:38 -0000

Russell,

What was the point of NAFTA?

"If immigrants are good, how can a law prohibiting them be good?

Laws that turn a good action like immigrating to a region of the globe where opportuinity abounds into a crime are themselves the crime."

Because there is a process in place that allows immigrants to become citizens. If this process is broken, why don't you show the same zeal in hectoring your legislature to change the immigration laws that you do when the question of taking action to excessive illegal immigration is raised?

Re: Immigration Economics

Tom Kelly — Thu, 06 Apr 2006 00:33:45 -0000

Erin:

If immigrants are good, how can a law prohibiting them be good?

Laws that turn a good action like immigrating to a region of the globe where opportuinity abounds into a crime are themselves the crime.

The criminals in such cases are the law makers, not the law breakers.

From the perspective of WWII era German law, every executioner at Auschwitz was obeying the law, while each of the executed was a criminal.

The people of Israel experimented with strictly following a law that they believed was given by God himself- and this lead to a history of calamities.

Beyond law, there are the higher principles of grace and mercy. Since laws have unintended consequences, it is prudent to temper judgment with grace and mercy as our understanding of the law develops over time.

The supporters of abominable laws that prevent our brothers and sisters who were born into oppressive regions of the globe from improving our lives and their lives by bringing their wonderful energy and talents here must be accorded the same grace and mercy as we work diligently to illuminate the better way of freedom.

Since we are all law breakers, let us strive to have less law and more grace among us.

Re: Immigration Economics

Erin — Wed, 05 Apr 2006 23:04:10 -0000

It's not about immigration- it's about ILLEGAL immigration. There is a difference.

It seems that a lot of people toss the word "immigrant" around in reference to these recent debates. It's important to remember that "immigrants" are those who come here legally, assimilating to the country, taking the citizenship test, and actively pursing citizenship. "Illegal immigrants" however are those that are best describe by the first word of the phrase that defines them: illegal.

Immigrants = Good

Illegal Immigrants = Breaking the law

Re: Immigration Economics

Russell Nelson — Wed, 05 Apr 2006 22:28:06 -0000

Half Sigma: if immigration makes us worse-off, so does reproduction. So does allowing women to work. So does trade with people who don't immigrate. Since it's obvious that none of those three things make us worse-off, neither can immigration. Use logic, not intuition.

Re: Immigration Economics

John Pertz — Wed, 05 Apr 2006 20:48:52 -0000

Tom Kelly, I like your line of reasoning.

I would simply argue that when it comes to the relationship of capital to labor the capitalist must ulimately chose. Whatever combination of labor and capital will lead to the most profits will ultimately be what is chosen. If labor is really really cheap it does not mean that capitalists will look away from capital. If that were the case then nobody in China would have any desire to use capital. Capitalists must ultimately take into account the productivity of labor to capital and their relative costs and then make the best possible decision. Their is no exact formula for it.

Re: Immigration Economics

John Pertz — Wed, 05 Apr 2006 20:42:15 -0000

"According to the CPI-U-RS, their standard of living is going down. So your argument is basically that the CPI-U-RS is wrong and is overestimating inflation.

Furthermore the cost of housing is increasing even faster than inflation as measured by the CPI-U-RS. Thus your argument is that even though a young man today has to live with his parents when a generation ago he could have afforded his own place, he is better off because he has high speed internet, a computer, DVD player, Xbox, iPod, and cell phone.

It's my opinion that all those gadgets are BS, it's much better to be able to afford your own place to live, and for that reason the CPI-U-RS is understimating inflation."

This sort of analysis is so wrong it is criminal. Again, median income data for 25-47 year olds in the 70's and then compared to median income data for 25-47 year old's now is not going to be able to say much of anything definitively. Until you control for something the analysis is of little worth. The people who comprise the two groups of the two different snapshots are different so what value is the comparison? The kind of relevant statistical analysis that will be able to defintively prove anything is very difficult to do for standard of living comparisons. You would be better off trying to follow the path of a 25 year old man in the seventies and then see how his life turned out when you look at his current situation. The point that I am trying to articulate here is that the composition of the 25-47 year old groups in the two snapshots are so different that trying prove anything through the comparison is going to be very tricky; even with controling for something, which you have no desire to do.

Re: Immigration Economics

Henri Hein — Wed, 05 Apr 2006 18:46:19 -0000

"Just how many immigrants are we supposed to absorb?"

As many as wish to come.

Re: Immigration Economics

Henri Hein — Wed, 05 Apr 2006 18:41:58 -0000

Another quote, this one from Cato's immigration page:

"Immigration

America was founded and shaped by immigrants seeking freedom and opportunity. Since records were first kept in 1820, our nation has absorbed more than 60 million immigrants. Those new Americans have almost universally embraced American culture and values, serving bravely in our armed forces, founding some of our most successful companies, and pioneering advances in science, technology and industry. Immigrants have been crucial to America's dominance and dynamism in the global economy.

The overriding impact of immigrants is to strengthen and enrich American culture, increase the total output of the economy, and raise the standard of living of American citizens. Immigrants are advantageous to the United States for several reasons: (1) Since they are willing to take a chance in a new land, they are self-selected on the basis on motivation, risk taking, work ethic, and other attributes beneficial to a nation. (2) They tend to come to the United States during their prime working years (the average age is 28), and they contribute to the workforce and make huge net contributions to old-age entitlement programs, primarily Social Security. (3) Immigrants tend to fill niches in the labor market where demand is highest relative to supply, complementing rather than directly competing with American workers. (4) Many immigrants arrive with extremely high skill levels, and virtually all, regardless of skill level, bring a strong desire to work. (5) Their children tend to reach high levels of achievement in American schools and in society at large."

http://www.freetrade.org/is...

Re: Immigration Economics

Henri Hein — Wed, 05 Apr 2006 18:37:38 -0000

Tom made some important observations in the last thread that's worth repeating here:

"The only asset that appreciates in absolute value over time is the human mind- therefore it is the most important asset that must be free to move to it's highest and best use."

"Freedom works, have faith in it."

"I don't understand commenters here, at what in my mind is the best free market blog in the world, who don't seem to understand that the free in free markets has to apply to all markets, without special exception for labor markets based on accident of birth location."

Re: Immigration Economics

olivier blanchard — Wed, 05 Apr 2006 17:52:29 -0000

I'm an immigrant, but I made two American babies who'll join the workforce someday. Does that complicate the equation?

Re: Immigration Economics

Tom Kelly — Wed, 05 Apr 2006 17:45:42 -0000

donny:

So the logical extension and fallacy of your argument is that in an ideal world all processes are done totally by machines so people can then be productive doing what?

Capital and labor are substitutes, to maximize productivity you must use them based on their respective costs.

To have more expensive machines cranking out products and services while less expensive labor is idle is inefficient and we all suffer from that inefficient use of resources.

Labor is a resource that can't be "saved". The productivity of those unemployed today has been lost forever.

Re: Immigration Economics

donny — Wed, 05 Apr 2006 17:17:47 -0000

re: To me the logical conclusion of having more "cheap" labor is that the production process becomes more labor intensive. But that is exactly the opposite result of what we want because the only way to raise our standards to is move to more capital intensive processes.

Capital intensive processes increase our wealth because they save us a valuable resource which can be then put to other productive purposes. The resource saved is labour itself.

Re: Immigration Economics

kebko — Wed, 05 Apr 2006 17:08:37 -0000

Glen, I think you make a great statistical point. I agree with you completely.

I think, though, it seems to be generally accepted that illegal immigrants account for about 4% of the population. So, in your example, there would need to be 25 other workers with $1 of new income for each new worker at $5. I suspect that 4% of the population added at low wage levels, even if properly accounted for, probably wouldn't explain the entire recent trend of income stagnation among the lowest quintile.

I would also add that even without immigration, low income workers would still be seeing competition from foreign workers simply working on exports in their own countries, so there would still be downward wage pressure on unskilled American workers.

I think the problem comes from labor not being a very flexible market. If I am an investor in the widget market, and foreign competition starts pressuring me, I can lower my profit expectations, reinvest in other markets where I might attain my target profits, or look for other ways to be more productive. But, unskilled laborers don't necessarily have that many options for redeploying their capital (labor) in new ways, and they aren't generally willing to accept reduced profits (lower wages). For a business, this would just be an adjustment that would have to be made, your stock price would go down, and it would suck, but you'd adjust to the market. Whether it's fair or not, laborers don't like to adjust to the market. Once they get used to making $10/hr., if you tell them that now they can only get $8/hr., the response will be that they have a moral right to $10/hr. They don't, but I don't see how anyone would be able to convince them of that (witness France right now re: reducing labor expectations even in obviously realistic situations).

Re: Immigration Economics

Glen Raphael — Wed, 05 Apr 2006 16:36:11 -0000

Kebko:

In my example, EVERYONE got richer but if you do the equivalent of quintile analysis it appears that "the rich got richer and the poor got poorer". Just introducing some new low salaries into the mix drags the average values down and drags the low averages down the most even if the impact of the new immigrants is BENEFICIAL to every poor person in the group.

So you can't say from the fact that some demographic that includes new immigrants has a lower average income, that the people in that demographic are made worse off from immigration. They could have experienced POSITIVE dislocations - gotten better jobs - and the numbers would still be lower. You must /exclude/ the new immigrants from the average caluclation in order for it to be less than entirely bogus as a well-being measurement.

Re: Immigration Economics

kebko — Wed, 05 Apr 2006 15:15:46 -0000

"Or are you saying that there is no such thing as a bad or unjust law?"

I agree that the immigration laws are frequently baffling & should be reviewed. I also think the level of legal immigration they currently allow might actually have a little something to do with the amount of immigration our country thinks it can handle without creating too many dislocations.

I'm 100% with you on free flow of capital, labor, etc. & free markets & I think they all should be relied on more than they are in most situations. However, on the ground, the problem with capitalism & markets is that human beings tend to bristle at dislocations, even when those dislocations are for everyone's long term good. If we can stipulate that lower income Americans are being negatively impacted by a huge inflow of illegal immigration, then I think our reaction has to be something more than, "Hey, that's the way the chips fall."

At this very site, the topic of leftists & the media using the "rich getting richer & the poor getting poorer" cliche has been frequently visited. I'd say that's partially a result of the downward pressures from illegal immigrant laborers. And what's it doing? It's leading a lot of voters in this country to support statist policies to benefit poor people at the expense of capitalism within our very borders.

I'm just suggesting that it's hard enough to get the voting population to trust capitalist markets, even under stable civil expectations. It only gets harder if we're asking the most vulnerable members of our economy to adjust to an influx of 3rd world economic expectations.

Kebko

Re: Immigration Economics

Glen Raphael — Wed, 05 Apr 2006 14:46:53 -0000

To elaborate on that last point: suppose in 1974 there were only three workers in the economy and they had these salaries {$10, $15, $20}. Average 1974 salary (both mean and median) is $15. Now let's add a low-skill immigrant to the mix. Assume the new immigrant makes only $5, but his low-skill labor make everyone /else/ $1 more productive because they can focus on their core competency and spend less time mowing the lawn or whatever. Assume everything else stays the same. So now in 2006 the salaries in the economy are: {$5, $11, $16, $21}. Wow! Everybody in our sample is better off than before! Everybody except the immigrant is $1 richer than before, and the immigrant is richer too, because in the country he came from he was only earning $1 - that's why he came here, to quintuple his income.

But wait! what's the average income now? $13.25. What's the median? $13.5. So adding the new immigrant brought down the mean and the median income by over $1, despite the fact that EVERYBODY in the economy is at least $1 richer than before.

Looks like just comparing the median salary between two undifferentiated groups over time isn't all it's cracked up to be.

Re: Immigration Economics

Glen Raphael — Wed, 05 Apr 2006 14:32:16 -0000

Half Sigma wrote: "the typical man aged 25-44 is worse off today than in the 1970s...It's telling us something important."

Maybe it's telling us more men are going to college now than before so they get established in their careers later.

Or perhaps it's telling us that in today's fabulous economic times young men feel like they can afford the luxury of slacking off for a bit early on, supported by their rich parents.

Or perhaps it's telling us that more young men are responsibly funding their IRAs and thereby reducing their taxable income.

Or perhaps it's telling us a big group of low-skill poor people immigrated here and their salaries are driving down the average despite the fact that every individual person in the sample is better off for their presence.

In other words: how do you know it's telling us something important?

Re: Immigration Economics

Timothy — Wed, 05 Apr 2006 14:02:02 -0000

So your argument is basically that the CPI-U-RS is wrong and is overestimating inflation.

This is a known problem with the CPI. It is also impossible to account for changes in quality using the CPI.

Re: Immigration Economics

Scott — Wed, 05 Apr 2006 13:58:07 -0000

Kebko,

Sure, immigration, wether illegal or not negatively affects some people in the short run, but then again many things do.

If we stopped educating children today yours, mine and probably every other commenter on this board's wages would increase over time as supply becomes restricted, does that mean we should do it? Of course not because in the long run it's detrimental to society's well being.

Something that negatively affects one segment of population while benefitting society as a whole shouldn't be illegal. Technological advances replace some jobs negatively affecting a segment of population, but it also creates new jobs and improves society overall. Should we ban technological changes?

Simply stating that because something is illegal means it's not acceptable does nothing to further the discussion on immigration. We need to discuss WHY it's illegal and wether or not the law should be changed. Or are you saying that there is no such thing as a bad or unjust law?

Re: Immigration Economics

JohnJ — Wed, 05 Apr 2006 13:48:39 -0000

The Linda Chavez article was actually very enlightening. Being able to use some real figures instead of the hypothetical figures most people want to discuss helps. Working to greater legal immigration rates sounds very reasonable, as well as doing more to discourage illegal immigration. As a side note, Mexico rigorously defends its southern border against illegal immigrants.