Immigration has been in the news quite a bit recently, as certain political factions (we are so fair and balanced that we won’t say which ones) are looking to score some cheap points at the expense of immigrants. They will even go so far as to deploy the National Guard at our border with Mexico, since those Guard folks have more or less been sitting around with nothing to do for the last three years.
Alex Tabarrok, who blogs at Marginal Revolution, is attempting to inject some facts into the debate. He is basically libertarian/conservative himself, but there is consensus among economists from either side of the political spectrum on the basic realities of immigration, and he has written an open letter to the President and Congress urging them to take these realties into account. It’s been signed by professional social scientists of all political persuasions (including Brad DeLong on the left); if there are any experts reading, they are welcome to sign it themselves.
Dear President George W. Bush and All Members of Congress:
People from around the world are drawn to America for its promise of freedom and opportunity. That promise has been fulfilled for the tens of millions of immigrants who came here in the twentieth century.
Throughout our history as an immigrant nation, those who are already here worry about the impact of newcomers. Yet, over time, immigrants have become part of a richer America, richer both economically and culturally. The current debate over immigration is a healthy part of a democratic society, but as economists and other social scientists we are concerned that some of the fundamental economics of immigration are too often obscured by misguided commentary.
Overall, immigration has been a net gain for existing American citizens, though a modest one in proportion to the size of our 13 trillion-dollar economy.
Immigrants do not take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.
Immigration in recent decades of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to be small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent.
While a small percentage of native-born Americans may be harmed by immigration, vastly more Americans benefit from the contributions that immigrants make to our economy, including lower consumer prices. As with trade in goods and services, the gains from immigration outweigh the losses. The effect of all immigration on low-skilled workers is very likely positive as many immigrants bring skills, capital and entrepreneurship to the American economy.
Legitimate concerns about the impact of immigration on the poorest Americans should not be addressed by penalizing even poorer immigrants. Instead, we should promote policies, such as improving our education system that enables Americans to be more productive with high-wage skills.
We must not forget that the gains to immigrants from coming to the United States are immense. Immigration is the greatest anti-poverty program ever devised. The American dream is a reality for many immigrants who not only increase their own living standards but who also send billions of dollars of their money back to their families in their home countries—a form of truly effective foreign aid..
America is a generous and open country and these qualities make America a beacon to the world. We should not let exaggerated fears dim that beacon.
What do you mean “basically libertarian/conservative”? To me he appears just libertarian and not some mixtiure of libertarian and conservative.
Errr…shouldn’t there be a mention at least of the strain illegal immigrant have on social services budgets? If they’re “doing the jobs Americans don’t want” they’re not putting nearly enough into the system to offset the medical, educational, policing, etc., costs they incur. One visit to the emergency room costs far more than the benefit the economy accrues from having a low skill job done a bit cheaper. And why the elision of the word “illegal”, or at least “undocumented”? Otherwise this seems to be conflating issues. If we had a minarchy that would be one thing, but we don’t…
Urijah: I will echo your sentiment… Militarizing our southern borders is analogous to our war-on-drugs campaign: they both are futile as well as a drain on our taxbase. Because state and federal governments are not collecting taxes on the work produced by these high-valued workers who are active recipients of our public schools as well as our health care system, this undocumented wave of immigration is stressing our public schools as well as our health care system. Therefore, in order to shore-up these eroding elements of our public infrastructure, the goal of our nation should be to devise ways to collect taxes from these undocumented workers and/or from companies that primarily benefit from these highly productive workers. Case in point, when I see very wealthy construction companies literally dumping-off at the entrance to the trauma center undocumented workers who have been severely injured at the worksite, I am not only angered by these companies overall lack of human compassion but overall lack of social accountability.
Urijah,
Actually there are a couple of papers in Economics that have shown that immigrants have very little impact on fiscal policy. Basically they pay enough in taxes to offset the services they use; ex: part of any rent they pay goes to school and municipal taxes, most are young so don’t draw on medicare but still pay into it, ect.
Also, what is the incidence of an emergency room visit versus the amount of work an immigrant will put in? I am sure you have a firm idea what an emergency room visit costs (~500-1000). But, what is the value of that worker to the economy? The answer is the wage he is paid which I am sure is greater then an emergency room visit; otherwise he would not be able to pay for the visit itself.
I like the “send billions of dollars of their money back to their families in their home countries–a form of truly effective foreign aid” part.
Gee, it’d be nice if 1) they paid taxes and 2)they spent some of that money here to improved the economy, and 3) foreign aid? That won’t even be taken into account as the U.S. sends more money in aid. Our arms should remain open to all legal immigrants, but illegal? Why don’t we focus on helping the desperately poor in our own country first before we try to handle more. Let’s see, they get jobs, they get free medical care, they don’t have to pay taxes, and they send money out of the country (for which I do not blame but rather admire their loyalty), and this is a good thing for the rest of the citizenry?
Cynthia,
see my comment above. Immigrants pay for public schools through rent they pay; this is the easiest example where they _do_ actually pay taxes.
Also how many times have you seen a contractor dumping a worker at an emergency room and driving off? Ancedotes are not compelling evidence.
Uncle Al,
I am sure that if you were writing this during the mass irish immigration you would not be singing their praises but instead saying the exact same thing you are saying now.
Also you say that the school budget is being flushed down the toilet but only 10% of the class is not passing. Does this mean the other 90%’s education is worthless? Finally, the research that has been done by Economists in this area shows that once race is taken into account there exists no difference in aptituted on standardized tests. The problem you think is caused by brown skin is actually caused by the fact that they are poor.
Susan,
1) They do pay taxes, either directly (yes most workers pay some form of income tax) or indirectly. 2) They don’t have to spend money here to improve the economy, that is the job of people who own capital; also they have added to the economy by working. 3) Foreign aid is less then 0.1% of the US budget. Denmark spends more in absolute terms then the US in foreign aid.
Where is this free health care anti-immigration people are always talking about? And yes immigrants working here is a good thing, otherwise people would not be willing to pay their labour.
Sean, thank you for this very interesting post. In Europe we are now facing a very similar dilemma and I don’t think we can stop illegal immigration deploying the National Guard neither we can do what Susan is proposing only. We need to take care of both groups of poor, with the basic understanding that the reason why people come to our countries is because they are DESPERATE! They have nothing to loose since they own nothing, just hunger.
I suggest some of you to lose days or weeks of your time in polizia stations trying to get the documents to live and work legally. I’m an illegal immigrant (past 3 years), with 25 years working in the sciences and a physics PhD, I pay more taxes than most of the legal residents around me, and I certainly can’t vote to try to change the meltdown that an incompetent government caused in creating the unworkable set of immigration laws that I’ve faced for the past 4 years. If you want to look ahead to what is in store for the US in their proposed set laws, you need only to look to Italy to see the results.
Jim, you make quite a few claims that I don’t think you can substantiate. First of all, don’t lump all immigrants together. This discussion is about illegal immigrants, Mexicans in particular. Schooling alone costs about $10,000/y per pupil in the US, so one child K-12 is about $130,000. That’s a lot of property taxes (or rent). Your comparison of the cost of an emergency room visit to “the value of that worker to the economy” is specious; at best you have to compare the benefit of the employer if there wouldn’t be illegal immigration–perhaps $10,000/y or less in lower salary? I think you are lowballing the ER cost. That might be the marginal cost, but the per capita user cost is much higher, not to mention how much something like childbirth costs.
What does “otherwise he would not be able to pay for the visit itself” mean? That’s the point–he/she is uninsured and the taxpayers pick up the tab.
One point you make is incontrovertibly wrong
“the research that has been done by Economists in this area shows that once race is taken into account there exists no difference in aptituted on standardized tests. The problem you think is caused by brown skin is actually caused by the fact that they are poor.”
Completely incorrect, as any psychometrician will tell you. For example, poor whites do about as well or better (on AVERAGE) in g-loaded tests as rich blacks. Hispanics are somewhere in-between.
Amara,
what do you mean by: “If you want to look ahead to what is in store for the US in their proposed set laws, you need only to look to Italy to see the results.”? I am very interested in this. Thanks
I’d just like to point out that immigrants, both illegal and legal, are vulnerable to exploitation by their employers. This is one reason that their presence “drives down wages.” If immigration law were reformed to improve immigrants’ positions, this would make competition for jobs fairer: it would remove one incentive to hire a non-citizen over a citizen.
Jim In Iowa: I will clarify by add that the cost of a single extended stay in the ICU can easily approach the high-six-figure-digits. This cost does not include follow-up visits, multi-readmissions or rehab services. Additionally, perhaps the tax codes are very different in Iowa; however, from my American municipality, landlords -not renters- pay property taxes. Moreover, I will reiterate the following: using a military strategy to combat undocumented workers (similar to our nation’s strategy to combat illegal drugs) is not only futile but is an absolute drain on our taxbase.
Yes, immigrants have been good for America. The unfortunate thing is, that these days it is predominantly immigrants form the third world countries and fewer and fewer form the industrial countries.
This is already becoming apparent as America is becoming a two-tear society with diminishing middle class. On top of that, America is losing its edge in science and technology, but this time won’t be able to attract scientist and engineers from EU. Hence, the impact of today’s immigration will probably not be the same as in the twentieth century.
He provides references, which is nice, but it would have been nicer, especially from an economist, to get a brief quantitative review of what the evidence for describing immigration as a net gain to the economy actually is. Otherwise, while containing laudible sentiments, the letter comes across as little more than another bit of friendly pablum, and easy to ignore. I rather doubt our President can be bothered, or even has the attention span, to follow up on the endnotes. Joe Sixpack isn’t likely to get much out of it either.
Immigration, pro and con, is being argued pointedly in the pundisphere in terms of numbers (albeit fuzzy ones), namely dollars. Most of the loudest claims are con, alleging unjustifiable strain on our public services. If John Q. Public is to support a particular program of robust and effective immigration reform, which nearly everyone purports to desire, it would be nice to get the monetary breakdown of the argument, and hash those points out. Generosity and openness are all well and good, but exhortations to act unselfishly have proven less than persuasive among the general electorate, it would seem. America wants to see the bottom line. If that doesn’t look convicing, supporting uninhibited passage across our borders will be an uphill battle.
Replies,
Urijah:
Citations for my claims “The coming generational storm” by Kotlikoff and Burns(2004) p. 112-114. THey in turn reference Auerbach and Oreopoulos AER (1997) p.176-180. THe money quote is “The impact of immigration on fiscal balance is extremely small relative to the size of the overall imbalance itself. THus, immigration should be viewed neither as a major source of the existing imbalance nor as a potential solution to it.”
According to Blue Cross and Blue Shield of North Carolina the average cost of an emergancy room visit is 1029$ which is pretty much the top end of my assumption. They put the low end as 361$, below my estimate.
Also I was talking about labour economists. In addition, read Stephen Jay Gould’s the mismeasure of man hich refutes your point about recial differences. The relevent differences are socio-economic. Also the original post mentioned this was California statistics. The interesting question becomes what is the _relative_ proportion of immigrants who fail the tests.
Cynthia:
“however, from my American municipality, landlords -not renters- pay property taxes. ”
Yes and they pass these onto the rentors. Therefore, rentors pay the municipal taxes as part of their rent.
Also what is the probability that an illegal immigrant will be placed in a six-figure ICU situation? emergency room visits are am ore reasonable estimate and as you can see this is high hundreds; which is paid by the worker.
I completely agree with you on the military part of your post.
Dumb biologist:
RTFA, at the end of the article is a list of references that demonstarte the positive net gain for the US economy.
In addition, a subtle point is that if you have free trade then immigration is much less relevent an issue. Here is the thought experiment, suppose you could close the border completly. In this case all the (assume) Mexican workers are stuck in Mexico, this in turn drives down Mexican wages making them relatively more
Jim In Iowa: On the issue of property taxes, I will not deny that renters (documented workers or undocumented workers) are indirectly paying property taxes in the form of higher rent. However, I will argue that the tax collector collects virtually the identical amount of property taxes regardless if the rental property is occupied or not occupied. Therefore, I will argue that renters do not add to the overall property taxbase. On the issue of health care, for a nonpaying patient to be denied the same quality of care as the paying patient goes against all forms of medical ethics!! Furthermore, to deny an undocumented worker – especially one with acute illness/trauma – adequate amount of ICU care and treatment is simply to be practicing medicine with complete and total inhumanity!!
i: I fear what I write will sound like a rant, but I’ll write what I know from experience of the laws, the caveat being that I am not a detached observer.
Fortress Italy is not very different from Fortress America in assuming a siege attitude to handle immigration, which I find extra strange since non-Italians constitute only a few percent of the total population. Italy’s present immigration policies, the Bossi-Fini law signed in June 2002, are the logical conclusion of an extreme nationalistic (Fini was of the former fascist party) attitude, so lessons can be learned here of what results when bureaucrats mix together xenophobia, nationalism, and technical and economic ignorance and try to forge a national policy. You will find many elements of the following now underway in the US or as part of the new proposal.
Bossi-Fini makes it far more difficult for immigrants: 1) to obtain employment — they must have a finely-detailed job offer from an employer before entering Italy and their entry visa is good for a one-time-entry three months from the job offer, 2) to obtain resident permits — which are closely tied to the permit-of-stay, 3) to gain asylum — mostly impossible, and 4) to bring their families — only children or spouse– to live in Italy, while 5) facilitating expulsion from the country — a suspected immigrant can be picked up at any time and put in one of the new detention centers and ejected. Part of the permit-of-stay procedure is a set of fingerprints on file, that is, a full-pair of fingerprints, and palmprints, and handprints (afterwards your hands will be completely black with ink).
If you are not Italian, or are EU, then quotas exist for what number of work permits are allowed for the country, so get your application form, get in line and prepare to follow the procedure:
http://www.meltingpot.org/articolo6806.html
and that includes those people from the 15 new EU countries. If you are highly skilled (professor, researcher) your procedure is no different. Every immigrant is considered by the police and government workers as a potential criminal, and treated as such at the local police station, which alse serve as local center for processing permit-of-stay documents. Each of the local police stations send their documents to _one_ office in Rome (which handles all of Italy). And while you are having your permit-of-stay processed –which by italian law is supposed to take 6 weeks, you are not legally permitted to travel out of the country. My permit-of-stay has been ‘in process’ since November 2003. After trying to follow the rules for 6 months, I had to finally ignore it because travel is a necessary part of my job. Therefore, I carry with me a large stack of legal documents (work contract, etc) with which I can demonstrate that I have a legal reason to be living in Italy. But my expired permit-of-stay with the tiny ‘renewal-in-progress’ sticker does little to convince other EU border countries. For them, either I’m lucky or not, and I take my chances each time I travel. My scientific workplace has no experience handling immigration issues (because it is rare for a scientist to immigrate into Italy), so there is no help from there.
The new Bossi-Fini laws did not increase the number of personnel or offer new efficiencies to manage the new laws, thus creating a years-long backlong that grows exponentially with time, hence the ‘melt-down’ I referred to earlier.
The Italian economy is a disaster; it carries the highest debt after the U.S. with basic services that did not succeed to modernize from the 1980s and it is rapidly losing its economy to China. In addition, it is probably the only western country where the Brain Drain is an ongoing reality, witness the Italian expats (being much more educated than the national average) who helped vote Berlusconi out of office. Therefore, one would expect that Italy would welcome educated immigrants from poorer countries to help move the economy, but not so. Italian science is usually subsidized by the families of the researchers, so educated/skilled immigrants face a double hurdle of unliveable salaries without a family for support and a political nonstatus, so they don’t last long either. The immigration procedures polarize everyone immediately, those thinking of entering Italy are deterred, those inside of Italy illegally either try and give up the attempt to be legal, or else never try in the first place and live as a nonperson.
In summary: Italy’s immigration laws are the worst models to follow.
http://www.msnbc.msn.com/id/12801084/
What you are describing is what occurs when “some individuals move from one country to another.” A phenomenon that may be “controlled politically, restricted, encouraged, planned, or accepted. What the US is experiencing, on the other hand, is not immigration but Migration. Migration is a “natural phenomenon: it happens, and no one can control it.” Migration is an extreme catastrophe, where instead of assimilating into the culture into which a people moves, (as what happens with immigration) an entire population moves into an area and changes the political, cultural, and economic make up of a country or area. This phenomenon has happened many times throughout history and, and it is at work all over he Western hemisphere today.
Independently of what we may call it; a country in which 25 to 30% of the population identifies with another country, votes and participate in another countries election and remits most of their savings to another economy cannot be called the United States of America.
The immediate economic result of such massive migration is an erosion of the quality of life, an escalation in crime, a diminished life expectancy, literacy rate and infant mortality of our population just to mention quantifiable changes.
Notwithstanding that some poor as a whole may benefit from being poor in an environment where poverty is richness as compared as the areas where they originate. In the long run openness to migration results in a disincentive to the needed ethical and political changes in the countries were the migrants originate.
The reason why our politicians are showing no leadership and constantly babble incoherent slogans is due to the fact that very soon; sometime within the next nine years the cost of Medicare-Medicaid and Social Security combined will exceed the revenue from employment taxes that have been used until now to cover for excessive government spending of the last quarter of century. When that event arrives the cost of these services would have to be paid in part with funds from other sources, meaning that Social Security and Medicaid-Medicare will be in competition for money with all other government programs including the military
The meaning of this is that future governments would have no choice but to raise taxes or cut services to an elderly population. Unless they can convince a population of minority third world workers to pay increased taxes while receiving less services. The problem with that equation is that low skilled workers pay a smaller percentage of the tax burden while consuming more services. One $80,000 engineer produces more government revenue and uses less government services than four $20,000 agricultural workers.
Cynthia :
This has nothing to do with “renters do not add to the overall property taxbase.” The original point is that immigrant children who go to school are not taking putting a strain on the system. Instead their families are paying the school tax by paying the rent.
The point I am trying to make is that schools are finaced primarily through property taxes. To go to a particular school you must live in the area (forgetting for the moment some form of busing or school voucher programs). So the immigrants living in the area (both illegal or legal) must be paying either property taxes directly or indirectly through rent.
Also if you look at the incidence of the property taxes then it is the renter who are absorbing the full amount and paying the full amount. Think of it as follows. Draw a supply curve of quantity of apartments versus rent. In the short run you can increase or decrease the amount of apartments available in an area so this suupply curve is a verticle line. No draw a downward sloping demand curve for apartments, this can be at any angle but suppose it is 45 degrees. The intersection of the two is the market outcome (the horizontal axis is quantity and the verticle is rental price). Now suppose the town increases property taxes by some amount. Draw an new horizontal line at this new higher rental price. Where it intersects the demand curve is the quantity of apartments demanded and the intersection of the supply curve is the quantity supplied. This is the case you mentioned where even empty apartments are paying this tax. Now the landlords who own the apartments which are empty are making losses (since they are not getting the rent but are losing the taxes. Therefore, over the long run they leave the apartment market and the supply curve for apartments shifts to the left. This process keeps happening until supply equals demand again. Now this new equilibrium is at the new higher price. The landlord gets rent net of taxes while the rentor pays the new rental price, looking you can see the landlord is still gettting the same rent as before and the rentor is the one who is paying the higher amount.
On the health front:
I have never said “deny them the use of a hospital” I am arguing that since they are a small part of the flow into hospitals every day, they are not a major strain on the health care system. I agree with you that kicking them out if they can’t pay is barbaric.
The point here is this The cost of an emergency room visit is not that large. The cost of ICU care and all that is very large. On the other hand the probability that an illigal immigrant will end up in ICU care is very very small while the probability that they will end up in an emergency room is small but not that small. Looking at the _expected_ average cost of health care then the cost is not that big. This is balanced with the tax revenue that they generate and any hospital fees that they pay. On the net these two things balance out, and in situations where they do not the effect it has on american citizen’s taxes is very small.
Havaneropepper:
1) accounting for social security and such already does compete with the rest of the budget. All this of budget accounting system arithmatic that gets bandied around is fiction.
2) Auerbach and Oreopoulos (1997) show that immigrent’s impact on the budget is modest.
3) You are assuming that immigrants = low-skill and immigrants = low-pay. This is verifibaly wrong.
4) “Independently of what we may call it; a country in which 25 to 30% of the population identifies with another country, votes and participate in another countries election and remits most of their savings to another economy cannot be called the United States of America.” You are now implying that 25-30% of _everybody_ in the USA is an immigrant and that they are dual citizens. The actual percentage according to the last census (which does try to correct for undocumented workers) is abotu 11%. This may be found by googling “Historical Census Statistics on the Foreign-born Population of the United States”
5) “The immediate economic result of such massive migration is an erosion of the quality of life, an escalation in crime, a diminished life expectancy, literacy rate and infant mortality of our population just to mention quantifiable changes.”
Ancedote and hyperbole do not equal fact. Show me numbers.
6) “he problem with that equation is that low skilled workers pay a smaller percentage of the tax burden while consuming more services. One $80,000 engineer produces more government revenue and uses less government services than four $20,000 agricultural workers.”
see point (5)
There was a piece on Morning Edition (National Public Radio, May 17) about a guest worker program that some Idaho potato farmers use. Some 55,000 guest workers come each year. The main problem is that it takes months to get all the paperwork done. The guest workers cost $2 per hour more than the illegal rate. Nevertheless, the farmers interviewed preferred these, because these workers are correspondingly more productive.
When has there ever been a “consensus among economists”?
As a European I’ve been listening to the growing immigration controversy in the US with a slight sense of bewilderment. When will you guys learn that free movement of people and normalisation of their status as workers is a *good* thing for an economy, not a bad one. Take, for example, the recent accession of ten states to the EU bloc. Granted, Germany and some other countries have chosen to temporarily limit the rights of citizens of accession states to work in their countries, but other EU members are embracing the influx of workers as manna from heaven. Here in the UK, for example, 350,000 Polish workers have arrived with no discernable problems and yet a great benefit to the economy. Ireland, as another example, wants to obtain 500,000 new citizens through immigration over the next ten years in order to fill empty jobs – this in a country with an indigenous population of 4 million! Once Bulgaria and Romania join, the EU will become more open to Turkish and North African immigrant workers too.
I’m still not entirely convinced that the immigration brouhaha in the US isn’t fuelled at some level by a latent racism. It’s truly saddening to watch. What’s even more saddening is that this is one of the (very few) times I’ve agreed with the US president and his plans for guest worker status.