Monday, March 30, 2015

Adam Davidson on Immigration

Illustration by Andrew Rae, source New York Times

Adam Davidson has a very nice New York Times Magazine article, "Debunking the Myth of the Job-Stealing Immigrant", in favor of "radically open borders."

Here's how a top professional journalist and writer puts together the central argument, so much more cleanly than I can do it:
So why don’t we open up?
The chief logical mistake we make is something called the Lump of Labor Fallacy: the erroneous notion that there is only so much work to be done and that no one can get a job without taking one from someone else. It’s an understandable assumption. After all, with other types of market transactions, when the supply goes up, the price falls. If there were suddenly a whole lot more oranges, we’d expect the price of oranges to fall or the number of oranges that went uneaten to surge.

But immigrants aren’t oranges. It might seem intuitive that when there is an increase in the supply of workers, the ones who were here already will make less money or lose their jobs. Immigrants don’t just increase the supply of labor, though; they simultaneously increase demand for it, using the wages they earn to rent apartments, eat food, get haircuts, buy cellphones. That means there are more jobs building apartments, selling food, giving haircuts and dispatching the trucks that move those phones. Immigrants increase the size of the overall population, which means they increase the size of the economy. Logically, if immigrants were “stealing” jobs, so would every young person leaving school and entering the job market; countries should become poorer as they get larger. In reality, of course, the opposite happens.

Most anti-immigration arguments I hear are variations on the Lump of Labor Fallacy. That immigrant has a job. If he didn’t have that job, somebody else, somebody born here, would have it. This argument is wrong, or at least wildly oversimplified. But it feels so correct, so logical. And it’s not just people like my grandfather making that argument. Our government policy is rooted in it.

The single greatest bit of evidence disproving the Lump of Labor idea comes from research about the Mariel boatlift, a mass migration in 1980 that brought more than 125,000 Cubans to the United States. According to David Card, an economist at the University of California, Berkeley, roughly 45,000 of them were of working age and moved to Miami; in four months, the city’s labor supply increased by 7 percent. Card found that for people already working in Miami, this sudden influx had no measurable impact on wages or employment. His paper was the most important of a series of revolutionary studies that transformed how economists think about immigration. Before, standard economic models held that immigrants cause long-term benefits, but at the cost of short-term pain in the form of lower wages and greater unemployment for natives. But most economists now believe that Card’s findings were correct: Immigrants bring long-term benefits at no measurable short-term cost.
Needless to say the "lump of labor" fallacy pervades politics, policy, and popular discussion on more than immigration. But Adam doesn't bother with the 100 other fallacies.

A beautiful stylistic choice: Adam's antagonist is ... his grandfather. That lets Adam have an anonymous, sympathetic antagonist, who is slowly changing his mind in Adam's favor. Adam doesn't have to pick on a particular individual or set of individuals with complex opinions; he doesn't resort to the horrible vague antagonist, "some think;" and he avoids the usual partisan politics and vilification of so much political blogging and editorial writing.

Students: notice concrete not abstract words. "Using the wages they earn to rent apartments, eat food, get haircuts, buy cellphones."  Not "Using earned income to demand goods and services."

21 comments:

  1. People tend to oppose immigration for identity reasons mainly.

    A comment though : if Card's experiment observe no short term costs in terms of wages, how to account for the fact 1°) that some migrants might not have any employable skills in the short term and 2°) Card's experiment reflects economic agents' behavior reaction to a temporary shock on labor supply ; what about a more permament one ?

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  2. Arguing against the “stealing jobs” argument is almost to be guilty of employing the “straw man” argument. Of course the stealing jobs argument is ridiculous: anyone with half a brain knows that. But having demolished that straw man, to then suggest that one has demolished the main argument against immigration is just no on.

    For example one good argument for curbing migration to the UK and some other European countries is that those countries are already amongst the most heavily populated in the World.

    A second argument against allowing immigrants from SOME PARTS of the world in (but not others) is the inferior nature of the culture of those countries. To take the extreme case, does any country really benefit from taking immigrants from the Islamic part of Nigeria where kidnapping schoolgirls and selling them into slavery or forced marriage seems to be not uncommon? And if you allow Muslims into your country, how many Jihadis come with them?

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    1. And these should be considered serious arguments? Unbelievable!

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    2. I was wondering if anyone would notice how silly this was. Also a red herring. Immigration policy is not about who gets in to the country, that's the tourist visa policy. Immigration policy is about who gets to work in the country!

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  3. Sadly, unlike in economics, in real life one can't just assume ceteris paribus and look at just one side of the problem at hand. Problem of immigration is a multi-layer controversial subject. I am as a first generation immigrant myself can speak from experience.

    Do the immigrants steal the jobs that otherwise would have gone to the natives? Does the increase of labor supply lower the wages? I doubt it - as does the author - at least in any amount that matters in the big picture. Immigrants from other countries are usually coming from countries with lower standards of life and are eager to take on jobs that the locals might not want to take on. Or wouldn't for a low enough wage for small and medium businesses to survive in a competitive market.

    There are obvious benefits on a large scale as well. The influx of newly arrived immigrants is like extra water from a melted snow in the spring helping the watermill of the governing body to spin faster and produce more energy. More taxes collected from the extra workers means more funds can be spent on education, roads and other improvements thus increasing the efficiency and productivity of the community as a whole - so that every member can reap the benefits.

    Adam Smith in his Wealth of Nations stated that specialization and division of labor are imperative to economic growth. With todays global economy, immigration further helps specialization and division of labor on a global scale by providing extra labor where it is needed, paid better and used more efficiently. This allows for more goods produced that are available for global consumption.

    And as far as the ethical questions of immigration go - this country IS a country of immigrants. People very much like today’s immigrants who were looking for a better life for their families are the ones that built this country.

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  5. "The chief logical mistake we make is something called the Lump of Labor Fallacy: the erroneous notion that there is only so much work to be done and that no one can get a job without taking one from someone else."
    -As Sandwichman pointed out, isn't this proof that modern neoclassical economists never stopped believing in Say's Law after all? Also, as Steve Sailer pointed out, Card ignored the crucial role of cocaine in Miami at the time. I have confidence that a permanent increase in the rate of immigration would, ceteris paribus, lower the wage share of national income and increase the natural rate of unemployment.

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    1. But your confidence is based on what, exactly?

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  6. The debate should be about legal immigration vs illegal aliens. What concerns people is not an orderly flow of immigration each with various skills, but an uncontrolled inflow of mostly low or unskilled illegal aliens. With open borders there will be no check on criminal backgrounds, immunization status or health issues. Also, there is the fairness to legal immigrants, who have been waiting in line legally, to have an illegal alien step to the front of the line. And that greater numbers of illegal aliens may cause a public backlash to reduce the number of legal immigrants.

    Radically open border suggests something more than a marginal increase in the labor supply as done in the study cited. As an example, it is one thing to say that studies have shown that there is little impact on employment with an increase in the minimum wage and then to propose to increase the minimum wage to $10 per hours. It is another to cite these same studies to conclude increasing the minimum wage to $30 per hour would have little impact.

    Increasing the supply of oranges still reduces the price of oranges, despite the fact that orange growers have more income. If you increase the labor supply, wages will fall even though you have more income earners and this will especially be true with most of the illegal aliens crossing the board in large numbers that will be concentrated in unskilled or low skilled occupations.

    The people in the picture represent people who are not going to be in anyway representative of the typical immigrant crossing our border. The picture shows a doctor, surgeon, astronaut, engineer, airline pilot, several scientists, which are very high paying occupations. This will not be a representative sample of immigration with open borders. And look, they are bringing lots of capital equipment with them in this picture. This will not be the case.

    Which brings me to the capital/labor ratio: an open borders policy will radically lower the capital to labor ratio in the U.S. This item is almost never discussed, but will be the main cause of a plunge in the wages of Americans. Will immigrants from third world nations benefit? Yes. Will total output increase? Yes. Will U.S. wages fall by half? Most likely. With open borders, wages in the U.S. will tend to equalize with world wages as the capital to labor ratio falls to the world average. Native American’s (I don’t mean Indians) wages will fall dramatically, but they can feel good in the knowledge that the world is better off (at their expense).

    Political considerations should also be considered, such as government policies and annexation of U.S. states, but the economic issues are enough for now.

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  7. Interesting post. But the resistance to immigration may be cultural, not economic.
    For example, polygamy is legal in the United States, provided you married your wives in a Muslim nation.
    How many American women would like de facto legalization of polygamy---and what if community norms evolved so that wearing shorts was no longer acceptable in public?
    Mr. Cochrane, explain to your wife how de facto legalization of polygamy is okay. I'll wait outside on the sidewallk.

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  8. Add on: If enough people migrate to the US who believe polygamy should be legal...then eventually that would become the norm and the law. Or perhaps homosexuality would be outlawed...we did say open borders...

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  9. And if enough migrants enter who believe alcohol should be illegal---no more liquor?! Why not?

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  10. Japan had almost zero immigration, the USA something like 40 million immigrants. If we take 1989 as a starting point, the very year when the Japanese economy got into trouble, GDP per working age adult is virtually the same in the two countries.GDP per working age mesures productivity right ? http://snbchf.com/global-macro/gdp-growth-per-capita/
    On the other hand wealth inequality is an order of magnitude larger in America. So adding one and two it seems tha average Japanese is doing better, something that is actually not too difficult to see travelling a bit in America and in Japan..
    The problem with today global immigration is that it destroys the sense of solidarity among the working class by creating a Babel of ethnicities which fosters distrust among them so that they cannot fight back and this way the top 2% can rule and enrich themeselves at their expenses. You know, things like the 103% of incremental GDP since 2008 that in the USA went to the top 5% of the income distribution...
    This is why workers all over the world are against immigration and elites in favour. They also think at things like Brooklyn which 30 years ago was full of Italians, Irish and Jews and they are mostly gone now because of immigration and its problems..

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  11. Japan had almost zero immigration, the USA something like 40 million immigrants. If we take 1989 as a starting point, the very year when the Japanese economy got into trouble, GDP per working age adult is virtually the same in the two countries.GDP per working age mesures productivity right ? http://snbchf.com/global-macro/gdp-growth-per-capita/
    On the other hand wealth inequality is an order of magnitude larger in America. So adding one and two it seems tha average Japanese is doing better, something that is actually not too difficult to see travelling a bit in America and in Japan..
    The problem with today global immigration is that it destroys the sense of solidarity among the working class by creating a Babel of ethnicities which fosters distrust among them so that they cannot fight back and this way the top 2% can rule and enrich themeselves at their expenses. You know, things like the 103% of incremental GDP since 2008 that in the USA went to the top 5% of the income distribution...
    This is why workers all over the world are against immigration and elites in favour. They also think at things like Brooklyn which 30 years ago was full of Italians, Irish and Jews and they are mostly gone now because of immigration and its problems..

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    1. The more accurate way to measure productivity is GDP per hour worked.

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    2. I think all productivity numbers can have issues. Even GDP per hour worked obviously only includes people who are actually employed. Think of certain European countries where unemployment tends to be high even in normal times. Assuming the unemployed are disproportionally lesser skilled or educated workers, this could make per hour worked stats look higher simply because the less productive workers are not working at all so they are not part of the calculation.

      Low wage immigrants in the United States may pull down per capita or per worker averages somewhat, but that doesn't necessarily mean a typical person or household is actually worse off as a result.

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  12. Why, if Adam is correct, is there unemployment?

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  13. Immigration has definitely handled better in the US than Europe, especially Britain, which has had particularly rapid immigration from Eastern Europe in recent years and very high population growth in a what many people already regard as an overly congested country (although sure not comparable yet to much of China, Hong Kong and India). Large amounts of green land which previous generations have fought hard to keep out of the reach of developers now has to make way for housing and freeways. 30-40 story apartment blocs are now becoming very widespread in London, creating new problems. The big problem though is much of this intake has not been desperate refugees from Syria or such like, but economic immigration from Eastern Europe which compete with domestic, especially relatively unskilled workers - not nice in an environment when many already face zero hours contracts and it seems for a large tail of the population, lower than ever real wages.

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  14. I think that labor economics arguments for immigration do not account for externalities related to the population mobility. Consider a mental experiment: what if there was no borders, none whatsoever, including personal property borders. A world where you can't lock the doors of your house. Anyone can walk into your house just as easily as anyone can travel and stay in your country. Intuitively, you know that this is not going to work.

    It's not all about labor economics. There are other features of population that make it for a huge difference in quality of life in different countries. Sometimes it takes one hour drive to cross the border to see a stark difference in the wealth and health of populations. The borders are to preserve the features that make good places good. We can't reduce people into units of labor, because people carry with them much more than work skills. They carry a lot of baggage some of it may not be welcome in every place.

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  15. I strongly disagree with you Professor because illegal immigration creates a influx of unskilled poorly educated people in the United States. This will increase supply of the unskilled labor ( such as farming, service jobs like walmart, and etc) which will make minimum wage jobs more competitive for the poor. Thus, you would be destroying America by making the poor compete with the unskilled illegal immigrants and the poor in America have very few opporunity to transition into other jobs.
    What i suggest is that we allow an influx of skilled immigrants that provide GREAT VALUE to the American economy. After the skilled immigrant finish working here for several years they can return to their "mother country" and bring back their highly valued expertise and create even more value for their country.
    By allowing illegal immigration in the country you are not understanding the big picture here. The big picture is to increase the welfare of everyone in the world. By allowing illegal immigrations in the United States you are making the poor and uneducated within the United States have fewer resources to work with and illegal immigrants cost even more money to help bring up into economic classes. The thing is illegal immigration doesn't work but, legal immigration can help increase the world GDP and welfare.

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  16. I understand the line of thinking from people arguing that illegal immigration ultimately is bad for the economy but I disagree. The driving force of economic growth from illegal immigrants comes from jobs manufactured by them for other foreigners. Another point to be made is that a major driving force of America's economic growth comes from impulsive or uninformed buying. When you visit another country, you tense to make purchases at prices that you wouldn't normally pay for. It's hard to remember the currency conversions and you can't help but overpay sometimes. This uninformed spending is incredibly important especially when the economy is trying to recover and Locals can't help but focus on saving. The biggest problem I see involves those that send money home to their families but that still isn't enough to negate the positive economic effects.

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