The Immigration debate (Why Oh Why Can't We Have a Better Press Corps?)
Nell Henderson writes, once again, a problematic article--this time about immigration:
Effect of Immigration on Jobs, Wages Is Difficult for Economists to Nail Down: Yes, an influx of immigrants has helped depress the incomes of the lowest-skilled workers in recent decades, many economists agree. But they argue about the magnitude of the effect; some say it's big while others see it as slight.
Meanwhile, increased immigration -- legal and illegal -- helps keep inflation low, boosts rents and housing values, and benefits the average U.S. taxpayer while burdening some state and local governments, other research finds. "Immigration provides overall economic gains to a country," wrote economist Albert Saiz, summarizing the literature in a 2003 article for the Federal Reserve Bank of Philadelphia. "Indeed, the U.S. experience as an immigrants' country is one of phenomenal economic growth. However, there are winners and losers in the short run."
The primary losers in this country are workers who do not have high school diplomas, particularly blacks and native-born Hispanics, according to George J. Borjas, a Harvard University economist who has studied immigration for years. From 1980 through 2000, immigration reduced average wages for the nation's 10 million native-born men without high school educations by 7.4 percent, Borjas wrote in 2004.... Other economists contend that the effect is much smaller -- a wage reduction of close to 1 percent.... David Card, an economist at the University of California at Berkeley, in a paper presented at a Federal Reserve Bank of Philadelphia conference last year.... Looking at census data from hundreds of the nation's urban areas where immigrants cluster, Card found that in both 1980 and 2000, more than a third of adult immigrants did not have high school diplomas.... The wage gap between high school graduates and dropouts stayed relatively constant from 1979 to 2000, with the graduates earning 25 to 30 percent more, Card wrote. The "evidence that immigrants harm native opportunities is scant," he concluded, observing "a surprisingly weak relationship between immigration and less-skilled wages."...
Other economic trends have had much more impact on wages, analysts say. Perhaps the biggest is the general health of the economy.... "An extra million immigrants a year cannot possibly explain why the vast majority of workers in a labor market of 150 million workers have had stagnant wage growth," said Harry J. Holzer, an economist at Georgetown University. "All these other factors matter more."... The nation's 34 million immigrants also collectively pay more in taxes than they consume in public services and benefits, according to a National Research Council study. A high proportion of them work and pay federal, state and local taxes. Many return to their home countries before retirement and never claim Social Security payments or Medicare coverage...
The problem, of course, is that Henderson's is a "he said, he said" article. Henderson doesn't provide readers with any information to help them evaluate the reasons why Borjas and Card have different views of what the data say. I like George Borjas and Larry Katz, but I do wish that Henderson had written that the large minus eight percent estimate of the effect on the wages of high-school dropouts reported by Borjas and Katz in http://papers.nber.org/papers/w11281 is imprecisely estimated: their data are fuzzy, and give an approximately one-sixth chance that the effect on high-school dropouts is positive. I like David Card, and do wish that Henderson had quoted enough to allow us to see why Card thinks the effects are small. For example:
Is the New Immigration Really So Bad?: Looking across major cities, differential immigrant inflows are strongly correlated with the relative supply of high school dropouts. Nevertheless, data from the 2000 Census shows that relative wages of native dropouts are uncorrelated with the relative supply of less-educated workers, as they were in earlier years. At the aggregate level, the wage gap between dropouts and high school graduates has remained nearly constant since 1980, despite supply pressure from immigration and the rise of other education-related wage gaps. Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant. On the question of assimilation, the success of the U.S.-born children of immigrants is a key yardstick. By this metric, post-1965 immigrants are doing reasonably well: second generation sons and daughters have higher education and wages than the children of natives. Even children of the least- educated immigrant origin groups have closed most of the education gap with the children of natives.
Borjas and Katz have a counterargument:
The Evolution of the Mexican Workforce in the United States: [T]he estimated cross-city correlations [of immigration and wages]... cluster around zero, helping to create the conventional wisdom that immigrants have little impact on the labor market opportunities of native workers.... [T]wo questions about the validity of interpreting nearzero cross-city correlations as evidence that immigration has no labor market impact. First... if immigrants... cluster in cities with thriving economies (and high wages), there would be a built-in positive correlation between immigration and wages... [which] would certainly attenuate... negative impact immigration might have had on wages. Second, natives may respond to the wage impact of immigration by moving.... [C]ities in Southern California flooded by low-skill immigrants pay lower wages to laborers. Employers who hire laborers will want to relocate to those cities. The flow of jobs to the immigrant-hit areas cushions the adverse effect of immigration on the wage of competing workers in those localities.... [F]lows of capital and labor tend to equalize economic conditions across cities. As a result, inter-city comparisons of native wage rates will not be very revealing.... In the end, all laborers, regardless of where they live, are worse off because there are now many more of them...
I think that Borjas and Katz's counter is weak. First, surely many immigrants cluster not in cities with high wages but in cities they find comfortable and easy to get to. Second, manufacturers may relocate from Detroit to El Paso in search of lower-wage laborers, but service sector and construction employers can't. I don't think the issue is resolved, but I think that Card is well ahead of Borjas on points--which Henderson should have noticed and noted, given that Borjas and Katz characterize Card's position as the "conventional wisdom."
Eduardo Porter does, I think, a much, much better--in fact, an excellent--job with the same topic:
Cost of Illegal Immigration May Be Less Than Meets the Eye - New York Times: CALIFORNIA may seem the best place to study the impact of illegal immigration on the prospects of American workers. Hordes of immigrants rushed into the state... competing for jobs with the least educated.... The wages of high school dropouts in California fell 17 percent from 1980 to 2004. But... consider Ohio... mostly free of illegal immigrants. And what happened to the wages of Ohio's high school dropouts from 1980 to 2004? They fell 31 percent.
As Congress debates an overhaul of the nation's immigration laws, several economists and news media pundits have sounded the alarm.... Yet... scant evidence that illegal immigrants have caused any significant damage to the wages of American workers.
The number that has been getting the most attention lately was produced by George J. Borjas and Lawrence F. Katz... illegal Mexican immigrants... reduced the wages of high school dropouts in the United States by 8.2 percent. But the economists acknowledge that the number does not consider... the fact that certain businesses would not exist in the United States without cheap immigrant labor. If it had accounted for such things, immigration's impact would be likely to look less than half as big....
[A]s businesses and other economic agents have adjusted to immigration, they have made changes that have muted much of immigration's impact on American workers... the availability of foreign workers at low wages in the Nebraska poultry industry made companies realize that they had the personnel to expand. So they invested in new equipment, generating jobs that would not otherwise be there. In California's strawberry patches, illegal immigrants are not competing against native workers; they are competing against pickers in Michoacán, Mexico. If the immigrant pickers did not come north across the border, the strawberries would.
"Immigrants come in and the industries that use this type of labor grow," said David Card, an economist at the University of California, Berkeley.... In a study... that compared cities that have lots of less educated immigrants with cities that have very few, Mr. Card found no wage differences that could be attributed to the presence of immigrants.... Even economists striving hardest to find evidence of immigration's effect on domestic workers are finding that, at most, the surge of illegal immigrants probably had only a small impact on wages of the least-educated Americans.... When Mr. Borjas and Mr. Katz assumed that businesses reacted to the extra workers with a corresponding increase in investment... their estimate... was shaved to 4.8 percent. And they have since downgraded that number... [to] just 3.6 percent....
Mr. Borjas said that while the numbers were not large, the impact at the bottom end of the skill range was significant. "It is not a big deal for the whole economy, but that hides a big distributional impact," he said. Others disagree. "If you're a native high school dropout in this economy, you've got a slew of problems of which immigrant competition is but one, and a lesser one at that," said Jared Bernstein of the Economic Policy Institute.... Mr. Katz [said]... "Illegal immigration had a little bit of a role reinforcing adverse trends for the least advantaged... but there are much stronger forces operating over the last 25 years."