Wednesday, February 27, 2013

Why liberals shouldn't turn against immigration



Dean Baker easily could have gone into academia, or sold out and gone on to make big bucks consulting in the private sector. Instead he did neither, choosing to work in the less prestigious, less-highly-paid world of liberal Washington think tanks. The reason is that he cared about the American working class, and wanted to dedicate his life to fighting on their behalf. This is extremely laudable.

However, that doesn't mean I always agree with Dean's ideas for helping the working class. In the last month, he has written a number of pieces with an anti-immigration slant. For example, on Feb. 2, he wrote this:

It's true that a declining population means that labor will be in shorter supply. That means that the least productive jobs will go unfilled. That is the way economies develop and the reason that half of our workforce is no longer employed in agriculture. In the U.S. this would mean that we might have fewer restaurants and the convenience stores won't be open all night. In Japan, perhaps they won't be able to find workers to shove people into the subway cars in Tokyo. What's the problem?... 
This is not to argue against immigration or immigration reform. The way we treat people who came to this country to work...is an outrage and is bad for the economy. However readers deserve a more serious discussion of the issues involved... 
Some immigration to the country undoubtedly provides economic benefits. However in nearly all cases there will be winners and losers. For example, a large flow of immigrants at the low-end of the labor force will hurt the people who have recently immigrated to the country. Some of us may not consider that a good thing.
On January 19, he wrote a piece saying that China's declining working-age population is good for wages (implying that the same would be true for us). And on February 26, he wrote an article for the Guardian, again calling for shrinking working-age populations:

There is no reason why the prospect of a stagnant or declining workforce should concern the vast majority of people... 
The people who hire help – the very same who also dominate economic policy debates – are terrified over the prospect that they will have to pay workers more in the future. 
But the rest of us can sit back and enjoy watching them sweat as ordinary workers may finally start to see their share of the gains of the economic growth of the last three decades.
The anti-immigration implications of this argument should be extremely clear. If shrinking labor forces lead to higher wages, then large-scale immigration will depress wages. Hence, we should consider immigration restrictions as a way to boost working-class wages. Some other liberal think-tankers, such as Jared Bernstein, have been writing pieces in the same vein. I call this view "labor protectionism".

There are four big, big reasons why I think that "labor protectionism" is a very bad idea, and should be dropped from the policy platform of American liberalism.

Reason 1: Agglomeration Economies

We are not living in an Econ 101 world, in which most people are employed as farmers, working the land. Instead, we live in a world with "increasing returns to scale", where economic activity gets a productivity boost from being concentrated. We also live in a world with transport costs, where companies want to put their offices and factories where the workers and customers are, and workers and customers want to live close to where they can get goods cheaply. These facts are summarized by Paul Krugman's theory of "New Economic Geography," for which he won the Nobel Prize.

But also, we live in a world in which knowledge economies are of extreme importance; when people cluster together in cities, their productivity goes up because of the accidental (and purposeful) exchange of knowledge and ideas.

For these reasons, the vast bulk of America's GDP is produced in extremely densely populated cities. Check out this infographic:



A casual glance shows that America's output is highly concentrated in big cities like New York and L.A. Studies confirm that living in a big city increases a worker's productivity by a substantial fraction.

If we were to kick a bunch of working-class people out of NYC, would NYC wages rise for the working-class people who were left, because of an artificial shortage of low-skilled labor? Maybe. But if we did this too much, NYC would start to lose its huge productivity advantage, and the tactic would backfire, reducing the wages of the working-class people who remained (to say nothing of the people who got kicked out).

Now realize that our modern world is very globalized. Much of our economy depends on trade (in fact, much more than the percent of GDP directly taken up by trade!). In the global economy, agglomeration economies mean that capital will flow to the country where the most productive workers and the densest, highest-purchasing-power markets reside. In other words, immigration helps us remain at the center of the global economy.

Reason 2: Politics

As you may have noticed, America's more liberal major party just won a historic electoral victory. This victory has many Republicans and conservatives fretting that liberalism has won in the U.S. But it's not the margin of Obama's victory that is producing this hand-wringing; rather, it's how Obama won. Specifically, Obama garnered 71% of the Latino-American vote and 73% of the Asian-American vote. These are the country's two fastest-growing demographics. If they continue to lean so strongly Democratic, the GOP is looking at a long, long time in the wilderness.

But why did Latinos and Asians abandon the GOP? The Republicans used to get a much larger share of both groups' votes. Many believe that the strongly anti-immigration views and policies of the Tea Party GOP in the last few years sent a clear message to Latinos and Asians that the GOP was a nativist party (the beginning of this was the grassroots conservative opposition to George W. Bush's immigration reform plan).

If, at this moment of triumph, liberals themselves were to turn anti-immigration, it would reverse the enormous gains and squander the historic opportunity that the GOP's nativist blunders have offered us. Think about whether the GOP or the Democrats would be better for America's working class. It's a no-brainer.

Reason 3: Offshoring

In today's globalized world, capital is highly mobile; multinational corporations can put their factories and offices wherever they want. If we did manage to push up wages here in America by restricting immigration, companies can partially offset this by relocating overseas. The offices and factories will go where the labor is. That is probably exactly what is happening with Japan, where population is declining and immigration is heavily restricted, but real wages have been flat or falling for many years.

In other words, offshoring cancels out much of the effect of immigration restrictions. Of course, we could try to block that effect by restricting offshoring and trying to trap capital here in the U.S. Labor protectionism would thus require actual, general protectionism in order to be effective. But actual, general protectionism would be bad for our economy, including our working class. We depend a lot on trade.

Reason 4: Social Security

The most enduringly popular liberal social program in the U.S. has been social insurance, a.k.a. Social Security. But as everyone knows, Social Security is put under extreme fiscal strain if the population starts shrinking. This would give political ammo to Republicans who want to destroy this cornerstone of the New Deal. Thus, immigrants - who are relatively young, and who almost all work - are key to preserving our system of social insurance in an age of low fertility among the native-born.

The Alternative: Focus on High-Skilled Immigration

There is a clear alternative to labor protectionism. Instead of focusing on decreasing the supply of working-class immigrants, let's focus on increasing the supply of high-skilled immigrants! Dean Baker, in fact, hits upon exactly this solution when he writes:
[A] large flow of very highly educated immigrants, such as doctors, can get the wages of these workers more in line with the wages of professionals in other wealthy countries and provide large savings in areas like health care.
This is absolutely right, but it receives only a small mention at the end of an otherwise distinctly anti-immigration post. Instead, support for more high-skilled immigration should be the centerpiece of liberals' approach to immigration.

Remember, even in Econ 101, what matters for wages is relative scarcity, not absolute scarcity. What that means is, for a given number of working-class population, every additional high-skilled immigrant raises working-class wages. So if we increase the absolute numbers of high-skilled immigrants, we will automatically raise working-class wages.

And if we shift our immigrant mix toward high-skilled immigrants, by allocating more visas based on skills and fewer based on family reunification, the effect on working-class wages will be even more dramatic. This is the upshot of the Atlantic article that Adam Ozimek and I wrote on high-skilled immigration in June 2012.

Brad DeLong once wrote:
I think the United States needs more immigrants--more people willing to take risks and work hard to seek a better life for themselves and their children, and illiterates from Chiapas seem to me as good as doctors from Calcutta.
I also like both varieties of immigrants. But if you care about the income distribution, the two are not equivalent. High-skilled immigrants are better for American working-class wages than low-skilled immigrants.

In conclusion: If liberals go the labor-protectionist route, the potential gains (in terms of working-class wages) are miniscule, or even negative, while the potential losses (in terms of political advantage for the Democrats) are absolutely enormous. But if people like Dean Banker drop the labor-protectionist angle and throw their political weight strongly behind a shift toward high-skilled immigration, the potential gains are very large and the potential losses miniscule.

The choice is clear.


Update: Dean Baker responds. I can't say I'm happy with what he writes ("As far as less-skilled immigration, I would want it sharply limited"), but hopefully the logic of my post will sink in over time...

64 comments:

  1. Anonymous5:40 PM

    Noah:

    Just a side-note: Most of the OECD countries that have done well post the 2008 financial crisis are those that have the most liberal immigraiton laws: Canada, Australia, Sweden, and to lesser extents Norway and Israel.

    I can't really buy the argument that immigration is all that deleterious to median voters and income earners. Texas has been a huge taker of these immigrants over the last 15-20 years, and its not as if the state has become hellish of late (although its miracle or model status is over-hyped)...

    Frank

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    1. Anonymous8:33 PM

      Canada has stricter banking regulations that protected and rebounded their economy -immigration wasn't an issue

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    2. Anonymous6:52 PM

      Not true - Canada treats illegal immigrants much more harshly than even the Tea Party suggests and it's very to impossible for low skilled immigrants to get into the country legally. Australia has aggressive outreach to skilled immigrants but their demographic trends demand it. None of these nations have birthright citizenship - I'm not sure what Israel's deal is but I can't imagine they are too generous with non-Jewish citizenship given their purpose is to be a Jewish homeland.

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  2. Forget "liberal" or "conservative".

    The idea that workers will benefit from a shrinking working-age population is a zombie idea that needs slaying. All else being equal it may be true, but all else is not equal. Japan is paying a heavy cost for having such a restrictive immigration policy.

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    1. Are they? As Noah recently noted, Japan had good, seemingly inexplicable growth in the 2000-2007 expansion, as their workforce was retiring.

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  3. 1. I don't have the impression that Dean Baker is against immigration, and I'm pretty certain he's not against high-skilled immigration. I suppose I should let him speak for himself, but it seems like you're taking a small tent view of the issue, saying that, if you're only with us 99.9999%, then you're in danger of excommunication. Personally, I'm very much pro-immigration, but I tend to agree with Dean Baker about population issues.

    2. I don't buy the agglomeration argument at all. It's not plausible that the size of the overall US population (or the number of immigrants) is what is limiting the population of major urban centers. Rather, it's local land-use policies. Rents are astronomical in places like New York and the Bay Area; no reason to think there aren't enough people being allowed to try to move there.

    3. But I will give you one more pro-immigration argument (though I find it troubling because it's also an argument for a growing world population, which I have a hard time seeing as a good thing overall). Immigration raises the marginal product of capital, which raises the natural interest rate, which reduces the chance of hitting the zero lower bound.

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    1. I'm pretty certain he's not against high-skilled immigration

      Obviously not, as anyone who read this would know.

      I don't buy the agglomeration argument at all. It's not plausible that the size of the overall US population (or the number of immigrants) is what is limiting the population of major urban centers. Rather, it's local land-use policies. Rents are astronomical in places like New York and the Bay Area; no reason to think there aren't enough people being allowed to try to move there.

      You should read Krugman and Fujita's book, in particular the section on immobile labor across national borders!

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    2. Speaking of Paul Krugman, he wrote about this question some time ago:

      http://krugman.blogs.nytimes.com/2006/03/27/notes-on-immigration/

      I think he's spot-on about it being a very conflicting question. Temperamentally, I think younger liberals are more inclined to conclude "OF COURSE immigration" is a net positive thing, and that's where I come down. But it's a tough question.

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  4. I puzzled by the emphasis on high-skilled immigrants (though who wouldn't want all of the highly-trained people) for two reasons. First, it smacks of pulling up the ladder behind you. Most people in the U.S. do not descend from well-educated immigrant forebears: there were never that many doctors, lawyers or other professionals in their home countries. They were uneducated but usually willing to work hard.

    Which brings me to puzzling point #2. The bulk of job growth in the U.S. is predicted to be in semi-skilled sectors. Wouldn't a bunch of hard-working people who aren't overeducated be the better fit for those positions?

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    1. I puzzled by the emphasis on high-skilled immigrants (though who wouldn't want all of the highly-trained people) for two reasons.

      It's really not that puzzling. High-skilled immigrants boost wages for the low-skilled and semi-skilled. And one-for-one they do more to boost the economy as a whole than other immigrants.

      Though of course I still want other immigrants too!

      First, it smacks of pulling up the ladder behind you. Most people in the U.S. do not descend from well-educated immigrant forebears: there were never that many doctors, lawyers or other professionals in their home countries. They were uneducated but usually willing to work hard.

      I don't see how getting 40% high-skilled immigrants and 60% low-skilled immigrants is any less fair than getting 20% high-skilled and 80% low-skilled.

      The bulk of job growth in the U.S. is predicted to be in semi-skilled sectors.

      That's kind of interesting. Do you have a link?

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    2. What is the actual mechanism/story behind the high-skilled immigrants boosting wages?

      In the hightech sectors that seem most open to immigration (physical sciences for instance, have truly international markets), wages are low (the median phd scientist is a postdoc and probably makes 35-50k) and most workers after developing their high-skill level leave the field.

      I don't understand how increasing the number of highly educated workers chasing jobs outside the field in which they are high-skilled improves life for all? If anything, I'm convinced the increasingly migrant life-style required of scientists is hurting productivity in the science sector.

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    3. Noah, link is here: http://www.bls.gov/emp/ep_table_103.htm

      I would be shocked if twenty percent of my grandparents' generation would have qualified as skilled.

      I also agree with Will about productivity in the science sector. The overproduction of PhDs along with funding woes is really destabilizing research programs

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    4. Noah, link is here: http://www.bls.gov/emp/ep_table_103.htm

      Thanks, Mike!

      I also agree with Will about productivity in the science sector. The overproduction of PhDs along with funding woes is really destabilizing research programs

      It kind of annoys me when people assume "skilled workers" = "academics". In fact, the vast bulk of skilled workers don't work in academia, they work for companies, they work in professional occupations, they run their own businesses, or they work for the government.

      I agree that the PhD is a vastly over-produced degree. But I don't think that implies that we have a "glut" of high-skilled workers. Far from it.

      Just look at wages. PhD lifetime earnings premiums are a net negative, on average, indicating an oversupply of PhDs (also, MBAs). But bachelor's and master's lifetime earnings premiums are substantial, not to mention medical and law school.

      Remember that what's good for national productivity may not be what's good for you (or what would have been good for you when you were starting your career).

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  5. THis is an odd post. Allowing more immigration of professionals and other "high-skill" workers may be a small part of this particular post, but it's a very big part of Dean's work in general. Indeed, I think it's arguable that Dean argues for free trade in skilled labor more, and more consistently, than any other prominent liberal economist.

    I don't happen to agree with Dean on this, but if you want to find a liberal economist go after for not appreciating the value of professional immigrants, he's just about the last one you'd pick.

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    1. This is an odd comment, given that you're complaining that I don't provide sufficient examples of someone making an argument that you disagree with...IIRC that falls under the heading of "concern trolling"... ;-)

      Just out of curiosity, why do you not like HSI?

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    2. I like Dean Baker. I think his views should be fairly represented, even when I disagree with them.

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    3. It's not 'concern trolling'. You mischaracterized Dean Baker's take on immigration, pure and simple. He has long been a vigorous advocate of increasing the supply of immigrants in the highly-paid professions (doctors, lawyers, dare I say economists).

      Moreover his argument for this, whether one agrees or disagrees with it, is a model of clarity compared to the one you make here: The resulting competition (the elimiation, precisely, of 'labor protectionism') would drive down the wages of these highly-paid groups, making their services more affordable for the 'lower skilled' workers who have up until now born the brunt of wage competition from both increased trade and high rates of immigration.

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  6. Most discussion on immigration seems to ignore the origin countries. You want more doctors immigrating to suppress the labour cost of highly skilled professions. But what happens in the country of origin? Doctors wages increase?

    I thought this comment was a bit flippant -"But as everyone knows, Social Security is put under extreme fiscal strain if the population starts shrinking."

    I think it has been one of Dean Baker's main arguments that this is not quite true. And most analysis of the issue ignores the reduction in dependent children as the number of dependent retirees increase.

    The net impact on total human economic production is anything but clear. For me immigration is a social question that should be judged on moral grounds. Do people of the US, Australia, wherever want more people? If not, then tighten immigration laws. If so, then loosen them.

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    1. This is an important point. Some people think that it is progressive to speak out in favor of high-skilled immigration. Given that, first, a large part of education is organized and paid for by the government in many countries, and second, that it is reasonable to argue that more high-skilled people is good even for the low-skilled, the whole argument for high-skilled immigration turns out to be an argument for free-riding. Of course we can say that everybody should be "free to choose" where to live etc; however, this would not solve the externality and public good problems, but just raise another issue. So, Noah, are there "smart guy externalities" and how relevant are they? (If there are not, then the public-goods issue is still there, and it would possibly be a progressive position to argue for letting young, uneducated people from poor countries come to the US and educate them there.)

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  7. My biggest fear vis-a-vis increasing educated immigrants is it allows the US to be complacent with its own kids. Why institute competitive math and science programs for primary and secondary kids when you have a huge inflow of IIT grads willing to take their place?

    I'm not protectionist at all, if for nothing else than a closing window-of-opportunity. America derives its advantage as a "immigrant haven" not really because it's the best place for immigrants, but it's the second best. With the further integration of the EU labor market, we can also expect the European immigration to be all but over.

    That leaves Asia. India is becoming more prosperous, as is China. And both are realizing that they can't afford to loose critical science talent, forced to depend on American gadgetry and innovation. This doesn't mean we don't have time to change our attitude.

    A huge advantage America has is a relative lack of ideological racism. That's capital, and it's eroding away.

    However, I'd want to see any significant high-end immigration offer coupled with a revitalization of the American school curriculum. The past thirty years have offered a huge influx of post-Soviet math nerds, IIT wunderkinds, and Chinese tech marvels. In the face of this, we've had the best research in the world but allowed our own system to erode.

    A bit of Cold War era thinking won't hurt. Born in 1995, I sometimes yearn for those days (probably dumb, I know). The idea that we could all get together and do something unthinkable to inspire the world – send a man to the moon. The idea that it was a collective intellectual effort – invest in public education through progressive taxation.

    Where's a good threat when you need it?

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  8. I agree w/ JW Mason. As someone who has been reading Dean's work religiously over the past four years, I think this piece misrepresents Dean's views. He's not against low-skilled immigration; he's against low-skilled immigration without its high-skilled counterpart due to protectionist policies in Washington.

    The point that he tries to make, over and over, is that there are distributional consequences when only one segment of the labor force is exposed to globalization - which is, in fact, how US immigration policy has been operating over the past 30 years. Some of those consequences might not be worth it to the working class if Washington is too corrupt to open the doors for workers of all classes.

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  9. Noah,

    I appreciate the compliments. But just to be clear, I am strongly in favor more high skilled immigration and argue this case frequently. For less-skilled workers, I am strongly in favor of granting the immigrants here full rights and citizenship and allowing for family re-unification. But I do think that large amounts of low-skilled immigrants lower the wages of low-skilled workers (who are now primarily earlier immigrants). I will try to post more on this later.

    regards,

    Dean

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    1. I'm curious – even as an advocate of the 'poor and powerless' – how you can justify closed borders.

      The poor in America are far more empowered than they would be in Mexico (or North Africa vis-a-vis Europe). I think smooth immigration has substantial long-run benefits for everyone involved (unskilled Americans included), but I can sympathize with the short-run shock in particularly affected regions (which also happen to be poorer in general, exacerbating the reaction).

      However, you can't seriously say turning away people from Latin America, who have run for months to come to a better life, for their kids, is somehow empowering in general? Indeed, I think it's rather cruel. Border agents in the US make the trip treacherous, but people still come. To treat them the way we do just seems inane.

      I am more sympathetic to European fears about immigration than I am about ours. The only natives in this country are poor beyond imagination. We were all immigrants once, and you have no divine rights to this land because you came here a hundred years ago.

      I believe we needs systems and processes for immigration – that is, don't just let people walk in. But don't keep them from coming, at least not in the way that we have (also find a way to ensure that people in New England face the same threat as do people in Alabama, nativism is disgusting, but I can appreciate the irritation a southerner feels when someone up north calls for more immigration).

      I also find something deeply non-egalitarian about the idea of giving special preference to rich and educated immigrants over the poor.

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    2. Thanks, Dean!

      Hopefully you found my post persuasive... :-)

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  10. Anonymous8:55 AM

    Noah, you are both about half right.

    Baker is right to be against immigration of low skill workers.

    Both of you are wrong about the immigration of high skill workers.

    You both forget that in this Country individuals and families have to go into hock to get high skills, a market which is becoming very price senstive (look at law schools).

    Allowing immigration of high skilled workers will be a positive disincentive to our citizens acquiring skills.

    There is a fundamental flaw in your thinking.

    You both seem to think that we have a shortage of capable people now, but we don't.

    Look back at history, to the American Revolution. We had a population of 2.5 million, much of which was slave that couldn't produce, yet that society, which was much more meritorious and healthy, produced incredible leadership. Philadelphia, with 40K, produced both Franklin and Morris.

    In sum, we should tackle our lack of skills problem by attacking everthing in our society that stifles people making use of their skills.

    Our immigration policy should do two things. First, contrary to Baker, a healthy society must grow. We should take a trend in population growth (3.5%) and hit such.

    Second, we should target our local demographic problems. Detroit, Chicago, St. Louis, etc., would benefit by targeted immigration. You may move here if you live there.

    You mention that we need people for our cities. This is very true. Just opening up our boarders, however, will not get people into these cities.

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  11. Noah, why are you so kind to Dean Baker on this one? Just about every point he made is incorrect economically and historically. Here are his first three sentences: "It's true that a declining population means that labor will be in shorter supply. That means that the least productive jobs will go unfilled. That is the way economies develop and the reason that half of our workforce is no longer employed in agriculture." Agricultural employment has constantly fallen even as population, labor supply and agricultural production have grown in the US. Agricultural labor and capital have become much more productive which was a necessity of the industrial revolution as you kinda have to eat first before you do anything else. So if you are going to start with that fundamental misunderstanding, why would you be interested in any part of his view. The rest is just crackpot stuff about restricting labor supply being good for the least skilled workers - this is clearly not true except in a closed economy. The result of populaton stagnation is economic stagnation, re Japan.

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  12. I understand defending high skilled immigration and not open borders for political reasons.

    But your "if you care about income distribution" is just perverse.

    If you care about income distribution you will put the interest of potential low-skill immigrants far above the interest of working class Americans.

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    1. I totally agree. "Perverse" is the perfect word for it. Statistics over human well-being, apparently. This is why Gini is a terrible measure. Keep out poor immigrants seeking a better life and a country is rewarded with a "better" Gini coefficient.

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  13. "I also like both varieties of immigrants. But if you care about the income distribution, the two are not equivalent. High-skilled immigrants are better for American working-class wages than low-skilled immigrants."

    What about the effect on wages for unskilled workers who would otherwise be working in less developed countries? This is where the left-wing obsession with income inequality (rather than poverty) loses me. You're trying to get a statistic (Gini) to look nice, rather than trying to actually improve the lives of poor people. The reason low-skilled immigrants come to the United States is that it's a real improvement in their impoverished lives.

    Yes, on a national scale, letting unskilled workers immigrate to the U.S. increases economic inequality. But, on a global scale it REDUCES inequality—and poverty.

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    1. James -

      The impoverished population of the world is billions. We can accommodate a few thousands.

      Doesn't really do much to address world poverty - and nothing at all for those left behind.

      JzB

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    2. We can accommodate millions. We can't solve world poverty, but we can improve the lives of many truly poor people. They are living, breathing human beings, not mere statistics. It's too bad the "progressive" left wing doesn't realize that.

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    3. Let me add that I agree with the bulk of this blog post. It's just the phrasing of one paragraph that concerns me. Immigrants are good for America, they built America, and they will continue to build it as long as we let them come. Educated immigrants do produce greater positive externalities for the rest of the country than unskilled immigrants, because education in general has positive externalities. I commend Noah for arguing the point.

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  14. Noah -

    In all due respect, I disagree with this post on almost every level.

    First off, you present general platitudes about the benefits of immigration as if they are universally applicable, always and everywhere. This ignores the current high unemployment situation, affecting almost all skill levels and occupations [in varying degrees], assumes a shortage of available skilled workers, and is simply absolutist thinking.

    Second, with particular regard to highly skilled immigration, if the benefit to us is X, then I'll suggest the detriment to the home country is 3X, 5X, or even 10X, given your reason 1. A few decades ago this was called "the brain drain" and was recognized as a global problem.

    On to your specifics.

    1) You are making a critical mass argument. I'll make a diminishing returns argument. The marginal benefit of the next skilled immigrant to NY City is close to 0, and the one after that, even less. You also imply a link between productivity and low wages. How progressive is that?

    2) A big part of the Republicans' failure is that they have revealed themselves as sexist, racist, elitist and generally loathsome. It's not so much that they're against immigration as that they revile the immigrants as people. That makes it personal. Further, polling reveals that Hispanic voters, in particular, are more socially progressive than the U.S. as a whole. It's not valid to reduce politics to a single issue, even if it's immigration.

    3) We already have off-shoring, and at least to a small extent, it's starting to reverse. I wonder why? Real wages have been flat or falling here for 40 years. Capital flight is only part of the reason why. You jump to general protectionism, which in context, is a straw man. Is there any reason to suspect that specific, well-designed capital regulations would not be helpful? And let's have a hard look at some of the more stupid aspects of the tax code.

    4) Total red herring. Our population is not shrinking. Can you cite even one reputable study on S.S. funding that makes future success dependent on immigration?

    I'm a bit nonplussed by this quote from Baker, that you agree with:

    A large flow of very highly educated immigrants, such as doctors, can get the wages of these workers more in line with the wages of professionals in other wealthy countries and provide large savings in areas like health care.

    Do you seriously believe that doctors' salaries are a significant driver of health care costs? Seriously?

    So if we increase the absolute numbers of high-skilled immigrants, we will automatically raise working-class wages.

    So there is infinite demand for these workers, and no tipping point where applicant competition reduces wages. Let's just say this is not intuitively obvious to the casual observer. In a vigorously expanding economy, I wouldn't we quibbling with this assertion. In a slow growth economy, it takes some real evidence. I'll read your Atlantic article and see it it's more convincing.

    Finally, and back to your absolutism, you seem to be treating the immigration issue as an either/or, as if there were an on/off switch. A cogent argument needs to be much more nuanced.

    I'm completely neutral on the subject of immigration, in general. But I think there is a time and place for all good things, and you've done very little to suggest that that time and place for increased immigration is here and now.

    Cheers!
    JzB

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    1. Harro, JzB!

      the current high unemployment situation, affecting almost all skill levels and occupations [in varying degrees], assumes a shortage of available skilled workers, and is simply absolutist thinking.

      A) What is a "shortage" and how would we even know if we had one?

      B) You want to use immigration restrictions as a rough-and-ready substitute for demand-side macroeconomic stabilization policy? OK, but I think that is a terrible idea.

      The marginal benefit of the next skilled immigrant to NY City is close to 0, and the one after that, even less.

      ...Evidence? Theory? Reason beyond argumentum ad verecundiam sui?

      You also imply a link between productivity and low wages. How progressive is that?

      No I don't...productivity should translate to higher wages, all else equal (and yes it's a puzzle why this hasn't been happening enough in recent decades).

      You jump to general protectionism, which in context, is a straw man.

      Nope. The point is that general protectionism is the only way to stop labor protectionism from causing massive offshoring. Think about it...

      Total red herring. Our population is not shrinking.

      Our fertility rate is less than the replacement rate. And if not for high-fertility immigrants it would be considerably less than it is!

      Do you seriously believe that doctors' salaries are a significant driver of health care costs? Seriously?

      I'm not sure (and neither should you be), but the point is, we should let in high-skilled immigrants across the board, not just targeted areas like doctors.

      So there is infinite demand for these workers, and no tipping point where applicant competition reduces wages.

      Think, man! Suppose you had an economy with 10 software engineers and 10 cooks. OK, now suppose you had an economy with 15 software engineers and 10 cooks. In which of these economies will the cooks' wages be higher?

      The point is, more high-skilled people = more relative scarcity of low-skilled people. In other words, the working class becomes more economically valuable.

      I want that.

      Delete
    2. Regarding the Atlantic article:

      1) You argue for high skill immigration with cherry-picked examples of geniuses.

      2) Regarding the Moretti study, as you presented it, this is an argument for education. What does it have to do with immigration?

      3) Regarding "this opportunity may not last": well then we better get cracking with making higher education available to our own citizens.

      Plus, this reinforces what I said above about brain drain. Is it concern trolling to wonder about depleting the human resources of the rest of the world? Is there any way this game is not negative sum?

      Give me one good reason why we couldn't achieve all the wonderfulness you project via immigration by instead providing better access to high quality domestic education. Maybe our quasi-immigrants could come from the back woods of Alabama.

      Cheers!
      JzB

      Delete
    3. A) Jobs going unfilled. Projects left on the drawing board for lack of manpower. Open position postings. There has to be a way of betting a handle on it. But on the flip side, continuing high unemployment argues against a need for more workers.

      B) You want to use immigration restrictions as a rough-and-ready substitute for demand-side macroeconomic stabilization policy?

      Nowhere did I ever say I want immigration restrictions. I'm saying prove to me that immigration is an immediate need, and a genuine solution to real problems.

      Please - nuance. I haven't drawn anything in black and white.

      And I'm not arguing for labor protectionism. I'm suggesting there might be some constructive ways to go at capital flight from the capital side.

      We don't have an economy with 10 engineers and 10 cooks. We have an economy where cooks' real wages haven't gone up in longer than your life time, irrespective of the number of engineers. And to the extent that your point is valid, again, it's an argument for education, not immigration.

      As a nation, we've made exactly zero progress in the the percentage of people getting 4-yr degrees over the past 30 years.

      http://jaredbernsteinblog.com/what-are-we-doing/

      The point is, more high-skilled people = more relative scarcity of low-skilled people. In other words, the working class becomes more economically valuable.

      The idea that this is an attainable tipping point is really a huge stretch. Especially in an environment where the lowest quintile has lost ground over the last 4 decades.

      And again, if you're right, then education!

      Cheers!
      JzB

      Delete
    4. Give me one good reason why we couldn't achieve all the wonderfulness you project via immigration by instead providing better access to high quality domestic education. Maybe our quasi-immigrants could come from the back woods of Alabama.

      I just don't get your thinking. Why is this an "either/or" situation? Why not better education AND more high-skilled immigration? Why does it have to be one or the other?

      Jobs going unfilled. Projects left on the drawing board for lack of manpower. Open position postings.

      Wait wait wait...isn't that also called "unemployment"???

      i.e., the same thing that labor-protectionists always say means we should have less immigration?

      Nowhere did I ever say I want immigration restrictions. I'm saying prove to me that immigration is an immediate need, and a genuine solution to real problems.

      I just don't get this. If we suddenly all got jet packs, would that fulfill our "immediate need"? Would it solve a "problem"? Or would it just make everything more awesome?

      My argument is that immigration would make our country richer, and that high-skilled immigration would make the distribution of income more equal.

      Why do we need a "problem"?

      I'm suggesting there might be some constructive ways to go at capital flight from the capital side.

      This was exactly my argument that labor protectionism eventually requires general protectionism to be viable...

      See? I'm right!

      We don't have an economy with 10 engineers and 10 cooks. We have an economy where cooks' real wages haven't gone up in longer than your life time, irrespective of the number of engineers

      No. Our number of engineers has gone down, relative to cooks. Remember, relative, not absolute, is what's important.

      And to the extent that your point is valid, again, it's an argument for education, not immigration.

      Makes no sense...just do both...they don't conflict...this is a false "either/or"...

      Are you sure you're not just starting from the conclusion that immigration is bad, and trying to work backwards to some justification?

      Delete
    5. Well, we're just talking past each other.

      I'm quite certain I'm not coming from a position that immigration is bad.

      I'm coming from a position that it is in no way obvious that specifically in 2013 increasing immigration would make everything more awesome, would make out country richer, and that HSI would make income distribution more equal.

      And I'm not saying either/or. I'm saying all the awesomeness we both crave came result from better educating the native population, which has stagnated for decades.

      We're speaking the same language, and using the same words, but failing to communicate.

      Cheers!
      JzB


      Delete
    6. We're speaking the same language, and using the same words, but failing to communicate.

      I don't think this is the case. For example, suppose we succeeded in improving our education system (difficult as that is). I'd still be calling for more high-skilled immigration.

      Delete
  15. Noah,

    you are too quick to dismiss ECO 101. I think there is no doubt that in the short run an inflow of unskilled immigrants will push wages down and raise profit rates. The reason is diminishing marginal returns to labor. Once you have two people collecting shopping carts from the parking lot, adding a third one is not as important. So given the number of Wall-Marts, to staff these Wall-Marts with more workers, wages will have to come down. BUT, in the long run the wage will rebound. The reason is that the immigrant workers are also savers and investors. Some may start their own mom and pop shop with immigrant products. Others may put their savings in a bank that can now lend at lower interest rate, thus motivating Wall-Mart or Target, in conjuction with the higher profit rates, to build another branch. Either way, the increase in investment will stimulate the demand for labor and drive wages back up. This is all ECO 101, there is no need to even go to agglomeration.

    As far as politics are concerned, are you sure that favoring skilled immigrants, who earn higher incomes, will not tilt the political scale in favor of less redistribution, particularly if the GOP listens to Bobby Jindal and stop being the party of stupids? Here is an interesting and relevant paper:
    http://mpra.ub.uni-muenchen.de/42048/1/MPRA_paper_42048.pdf

    ReplyDelete
    Replies
    1. As far as politics are concerned, are you sure that favoring skilled immigrants, who earn higher incomes, will not tilt the political scale in favor of less redistribution, particularly if the GOP listens to Bobby Jindal and stop being the party of stupids?

      A) In the long-term maybe, but not anytime soon:
      http://noahpinionblog.blogspot.com/2012/11/asian-americans-destroy-makertaker.html

      B) There's no way the GOP is going to stop being the Party of Stupids as long as it is ruled by the old Confederacy. This is the Fundamental Theorem of American Politics. Understand the
      South, and you'll understand American politics better than 99.9% of non-Americans... ;-)

      Delete
    2. You could call my parents "successful" asian immigrants. They were able to get their PhD/masters because of fantastic government funding of higher-ed programs.

      I don't think Asians will forget that anytime soon.

      Delete
    3. CA,

      You are correct in the sense that the fact that a large wave of immigration occurred in the early 20th century has no bearing on what working class wages are to today. However, insofar as we are discussing the possibility of changing immigration policy, it is entirely beside the point to ask what the long term effect of a one-time increase in the number of immigrants is; we are talking about a sustained increase in the immigration rate. On top of that, you can't dismiss the short term at a time like this; your logic leads to the conclusion that now is a less good time to consider making immigration easier than usual; of course "less good" does not necessarily mean "bad".

      Delete
    4. Eric,
      OK, but then the correct thing to talk about is the population growth rate. Economists have already argued that faster population growth results in a lower income per worker because it dilutes the existing capital over more workers. But it is irrelevant whether this is due to immigration rates or fertility rates. In fact, immigration is less harmful because you can target immigrants who already possess assets (education, financial assets, etc.).

      Delete
  16. urban legend3:01 PM

    On a subject like this, I like to see what the AFL-CIO has to say. It seems to me their stance, arrived at with some serious back-and-forth over the years, is being favorable to reasonable immigration by assuring immigrants have a recognized status that makes wage exploitation impossible. Pretty much dead-on where the Democrats are, I suppose.

    As to future immigration, yes, we should enforce the laws on the books. The problem really is that Reagan and his progeny deliberately fostered illegal immigration for their buddies (and their buddies' money). That would allow them to use the cheapest possible labor while holding the threat of deportation over their heads to prevent complaints about violations of the law and participating in unionization.

    Now we have millions here that were effectively induced to come by knowledge that nobody really cared about the rules. They've lived here for years, have kids born here who are citizens, are integral to significant parts of the economy in many states, and trying to send them back would be a total mess.

    Give them legal status, and a lot of the worst abuses are solved, with probably only positive effects on wage levels. After we've worked our way through that, we can deal better with these bigger philosophical issues. In any case, it's always a matter of where you locate a sweet spot between extremes. Does anyone seriously think we should simply shut down immigration completely to raise wages? I don't hear anyone saying that. And in a time of high unemployment and low wages, who thinks we should just open the spigots and end all limitations? As Mr. Miyagi said, "Balance is key, Daniel-san."

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  17. WhatNext6:10 PM

    I would urge progressives to show caution when it comes to immigration and start wondering if continued high immigration levels make sense.

    Due to past immigration and the eventual legalization of illegal immigrants already here, the Census Bureau's estimate that we will go from about 310 million people to about 400 million in 2050 seems reasonable to me. Just about all that population will come from recent immigrants and their descendants.

    We are going to have lots more people, that seems to be a given.

    Are we going to have lots more jobs? Will the private sector ever generate anywhere near the number of jobs that it used to?

    When we give people citizenship, we make an eternal commitment to them and their families. Note that we make the commitment, but the cost of keeping that commitment, for the most part, won't be borne by us, it will be borne by the people who come after us.

    If we train employers to look at immigrants as superior workers (either in terms of skills or willingness to harder for less, or both), aren't we dooming future American workers to a constant battle to find a decent job in their own country?

    I think we should all keep in mind that just because people don't like Republicans doesn't mean they have to like Democrats and keep voting for them. Political realignment and the rises of new parties are possible. They don't happen frequently, but they do happen.

    ReplyDelete
    Replies
    1. You seem to think that immigrants only work. Do they not also consume? Don't they need food to eat, or a home to stay in? Do they not need a car to drive, or teachers to educate their kids? This notion that there is a fixed number of jobs to fill is wrong! People's only incentive to offer their services is to get something in return. I know these days it is unpopular to say so, but in the long run supply creates its own demand.

      Delete
    2. WhatNext4:18 PM

      Well, let me ask you:

      Let's say a family spends $25,000 annually of net earnings on themselves.

      Let us say the taxpayers spends $50,000 annually on that family, through education, medical costs and Food Stamps.

      Do you think that family was a net burden or a net plus for the economy?

      That is the scenario we are talking about with many immigrant families -- both the ones we will legalize and future legal immigrants, assuming we continue to take in the same high number of poor relatives through family reunification.

      You are right: there are no fixed amount of jobs. Since the recession there have been far fewer, and many of the middle class jobs that we used to have are gone and not coming back.

      This has nothing to do with whether immigrants are nice people or hard working. It has everything to do with the costs of immigration and our own changing economic fortunes.

      With far fewer middle income jobs and far more low income jobs, I think great caution on future legal immigration is warranted.

      Delete
    3. I call bullshit...plenty of research shows that immigrants pay a lot more taxes than they receive in benefits...

      Delete
    4. WhatNext3:57 PM

      Research on immigration costs that includes all immigrants, both legal and illegal, won't really be valid anymore once we legalize the illegal, will it?

      In addition, the future costs of immigrants for US workers and taxpayers will be considerably different for a number of reasons:

      1. It is a post-Great Recession world. Job creation is low, which may change. But middle-income job creation has been decimated. Given the number of middle-income jobs that have been eliminated by technology, who can have faith that even in a time of 5% unemployment, we will have many new middle-income jobs? While we all might want to return to a pre-2008 world, that world may be gone.

      2. The 12 million or so illegal immigrants we have will be entitled to an expensive array of benefits only available to legal immigrants. Also remember that the newly legalized will sponsor tens of millions of family members still overseas.

      3. The addition of "Obamacare" to the list of benefits available to legal immigrants will mean that the cost of low-income immigrants to the taxpayer will increase, and not by a small amount.

      In the rich-poor America that seems to be in our future, I do assume that low-income immigrants will be a net cost to the government. I also assume that the much larger numbers of low-income American citizens will be a net cost to the government.

      Frankly we are neglecting many of our own people's needs right now. How can we justify continued high levels of immigration to poor Americans who can't find a job and can't get sufficient financial support from the government, either?

      Delete
    5. My response was in reference to your argument regarding jobs. Now you changed the issue to taxes. I take that as admission that you were wrong.

      As far as current economic conditions, I fail to see how they, being temporary, should say anything about immigration policy. If an earthquake in California destroys its major highways thus leading to bottlenecks, the right policy response is to rebuild the highways, not to start revoking car registrations.

      As far as taxes are concerned, I am an immigrant (though my wife is American). As the main income-earner I pay income tax, property tax, sales tax, social security, Medicare, and Medicaid tax. By the end of my life I will have paid more for public schools than my two kids will have made use of. With my spent income I create jobs including much needed ones in construction, by gradually updating my 1950-built home whose previous American owners had allowed it to decay. I create these jobs not only by spending domestically-earned income, but also income I earn from assets I own in my home-country, which I transfer here. The many immigrant families that live in my neighborhood are not much different. Most are either college-educated and employed or small business owners that provide jobs. Demand for homes by them is the reason home prices and property tax revenues have not collapsed here, as they have in other parts of the country. Students from China, who intend to stay in the U.S. after they graduate, make up for more than half of MBA students at the university where I work, and provide valuable revenue at a time when we are struggling to maintain enrollment rates.

      As far as Obamacare, can you specifically name which provision you have in mind? Obamacare mandates that people buy private insurance. I am not sure how that affects legal immigrants. Immigrants like me who already have insurance through their employer are unaffected, while those who do not have insurance will be forced to either buy one and pay for it, or pay the fine. Therefore, they will become less of a burden, since they can no longer receive emergency care (based on the 1986 Act) and never pay the hospital which then passes the cost to the rest of us. As fasr as low-income immigrants are concerned, they had access to Medicaid even before Obamacare.

      Delete
    6. WhatNext6:51 PM

      Huh?

      Why would you believe I am backing down from anything that I have said? All I have done is expand on my initial post. I believe Americans of all political beliefs should be thinking twice about all our immigration policies.

      But what I said in my last two posts concerned low-income immigrants, both those who are currently here illegally (and will, I'm assuming, be made legal) and legally.

      Your last post described middle and upper income legal immigrants. I belief you felt you were replying to what I said, but honestly, I don't see how.

      Since my points concerned low-income immigrants, the fact that you and other immigrants in your neighborhood are not a net cost to American taxpayers really has nothing to do those who are.

      Illegal immigrants did not have access to Medicaid before; even legal immigrants usually must wait 5 years until they qualified for Medicaid, SSI and some other federal benefits.

      Also the formerly illegal immigrants sponsor tens of millions of family members and will, eventually, go on to have tens of millions of descendants.



      Delete
    7. But in your original post you mentioned immigration in general. You made no distinction between high and low income immigrants. Otherwise, I think Noah also argued that we should be targetting high-skilled immigration. But, it is not always easy to measure skill. One of my neighbors, from Colombia, is not formally educated. However, he is very entrepreneural. He started a restaurtant, made it successful, then sold it and started a cleaning company that is also successful and gives jobs to people. How do you figure out someone's ability to do that beforehand?

      As far as Obamacare giving Medicaid access to illegal immigrants that they didn't previously have, can you please point to the specific provision? It is an honest question, as I am unaware of this. My understanind is that this happened with the SCHIP bill passed in 2007, that is, before Obama even took office.

      Delete
    8. WhatNext5:51 PM

      Last response from me on this thread, I think.

      You must be just skimming my responses because you seem unaware of things I discussed at length and/or in multiple posts after my initial comment.

      Anyway, about Medicaid:

      You are correct: illegal immigrants will not qualify for Medicaid under the new healthcare law.

      However, as I have stated repeatedly in my prior posts, I am assuming that we will end up legalizing the illegal immigrants we have now. I am also assuming those formerly illegal immigrants will bring in tens of millions of additional family members who are still overseas.

      After all this talk about immigration and immigrants, I think it's worth mentioning that we are quite wrong to be focusing so much of our time and attention on immigrants, who are only a small part of our workforce, when we are paying almost no attention to our own workers -- and our own jobless.

      I have nothing against immigrants. But I want us to pay attention to our own and their problems a lot more than we are doing.

      Delete
    9. Yes, you are correct, I did not read your posts outside this thread, so if I missed something below or above I appologise. Anyway, it seems your opposition is based on an assumption. Whether it is plausible or not it is not for me to say. I do agree however with the following:

      "But I want us to pay attention to our own and their problems a lot more than we are doing."

      After all my wife and sons, most of my neighbors, my students, and a lot of other people I care about are "your own". I just don't see these as mutually exclusive. Yes, we (am I allowed to use "we" if I have been in the US for 16 years which make up 41% of my life and deeply care about this country?) should control who gets in, and we should make decisions with economic AND humanitarian considerations in mind. But in the end one has to have a more nuanced position. A simple "good" or "bad" about immigration in general will not do.

      Delete
  18. WhatNext6:26 PM

    Do Democrats think people will keep voting for them if immigrant workers continue to do better in the job market than native born Americans?

    "From 2009 through 2012, the number of immigrants employed in the United States rose 6.5% to 23 million, compared with a 1% gain to 119.5 million for those born in the U.S., Labor Department data show.

    Underlying those figures, immigrants’ gains during the past three years were concentrated in low- and high-paying categories that range from health care to management. Only in manufacturing did those born in the U.S. see bigger gains than their foreign counterparts."

    - See more at: http://ebn.benefitnews.com/news/immigrants-outpacing-us-born-workers-in-employment-gains-2731090-1.html#sthash.IW9uonE1.dpuf

    The "immigrant advantage" so many cherish only last for a generation, then we are stuck with future generations who will be inferior Americans just like the rest of us. Is the plan to keep on importing vast numbers of new people forever?

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  19. Like all such articles, the US-Mexico issue totally skewers any attempt at discussing "immigration".

    Why? Because Mexicans are ALREADY HERE, sharing the New World with "gringos". It is the latter who imposed a de facto wall of apartheid 150 years ago, and continue it.

    There shouldn't BE a US-Mexico border because Mexico should be ANNEXED as 10 new U.S. states. After that's done all 400+ million 'Americans can finally decide on what to do about immigration from OVERSEAS.

    It can be done in a phased-manner in just years if the U.S. starts the ball rolling properly.

    Read all about the Megamerge Dissolution Solution on my blog.

    ReplyDelete
  20. Hi Noah,

    I finally got around to blogging my thoughts about your conversation w/ Dean after reading his recent blog post. would love to hear your thoughts.

    http://ashokarao.com/2013/03/01/dean-baker-and-immigration/

    ReplyDelete
  21. Noah,

    I'd argue that this approach lends too much credibility to arguments against low-skilled workers.

    First, as you pointed out, "Remember, even in Econ 101, what matters for wages is relative scarcity, not absolute scarcity." This is also true of language skills and other cultural skills that natives possess but immigrants do not pick up easily. Empirically, an increase in low-skilled immigrants does lead low-skilled natives to specialize more in language (and other non-physical) skills, which may even increase low-skilled native wages. Giovanni Peri at NBER has done at least a few studies along these lines.

    Even without taking that into account, academic critics of immigration find only a small long-term effect on wages of less-educated Americans; Borjas estimated less than 5% over two decades.

    And apparently, high-skilled immigration serves even intellectuals of the Left as a conscience salve, since they can convince themselves that favoring only specific kinds of high-skilled immigrants – doctors, dentists, lawyers – is enough to keep them from being labeled "anti-immigration." Baker links to an EPI study showing a modest increase in wages even for native high school dropouts... just after noting that he favors strong restrictions on low-skill immigration.

    That said, a focus on high-skilled immigration, while I fear it could lead to less net immigration, more support for border enforcement, etc., is also the most likely to attract Republican support. But I don't see how that protects "liberals" from the wider political consequences you mentioned, especially with those Hispanics and Asians who don't identify with high-skilled professionals.

    ReplyDelete
  22. Wonks Anonymous11:34 AM

    Razib Khan already explained asian voting trends:
    http://blogs.discovermagazine.com/gnxp/2012/11/religion-determines-politics-for-asian-americans/
    A higher percentage of asian-americans used to be Christian, immigration has reduced that percentage. I don't think the GOP has ever done well with hispanics (other than Cubans still angry about Castro).

    ReplyDelete
    Replies
    1. Hahahahahahahahaha "Razib Khan".

      Delete
  23. Dean Baker represents a very dangerous influence on policy discussions in Washington. Some of his claims reveal crass ignorance of important economic ideas, not unlike that displayed by the conservative nativists you mention in your post.

    ReplyDelete
  24. I liked the post very much. Awesome article to read. I have been seeking this type of knowledge for a long time and by posting this article you have made my work so much easier. Thanks.
    Immigration Lawyers

    ReplyDelete
  25. Anonymous4:56 PM

    Anyone who supports a high volume of immigration, low skilled or high skilled, supports lower wages for American workers, and therefore greater societal inequality. It's that simple. And the work Krugman cites absolutely supports that.

    And lower wages means lower Social Security revenues and earlier retirements and disabilities.

    Democrats should support immigration reforms, but only to increase enforcement of the laws, grants rights to existing undocumenteds, and to control the flow to a reasonable but much more narrow flow.

    And of course, to enforce our environmental, health and labor laws via taxation of imported goods and services that are produced outside of compliance with developed world standards.

    ReplyDelete