"Facts about ImmigrationImmigrants come to the United States because of the freedom and opportunity it offers. They come to work and build a better life for themselves and their families. Immigrants fill niches in the labor market, typically at the higher and lower ends of the skill spectrum, where the supply of native-born workers tends to fall short of demand by US employers. Without immigrants our economy would be less productive and dynamic.
- Immigrants boost America’s economic growth and raise the general productivity of American workers by providing much-needed skills. Immigrant workers allow important sectors of the economy to expand, attracting investment and creating employment opportunities for native-born Americans. A recent study by the International Monetary Fund concluded, “Immigration significantly increases GDP per capita in advanced economies.”
- Immigrants fuel entrepreneurship. Immigrants are more likely to start a business than native-born Americans, whether it’s a corner shop or high-tech startup. Among startup companies that were valued at more than $1 billion in 2016, half were founded by immigrants. Among Fortune 500 companies, 40 percent were founded by immigrants or their children.
- Immigrants generate new products, ideas, and innovation. Immigrants make up 17 percent of the US workforce, while filing one-third of the patents and accounting for more than one-third of US workers with a PhD in one of the STEM subjects of science, technology, engineering, and math. One study found, “More than half of the high-skilled technology workers and entrepreneurs in Silicon Valley are foreign born.”
- Without immigrants and their children, the United States would soon begin to experience demographic decline. The number of US-born workers with US-born parents is already declining, and will shrink by eight million from 2015 to 2035. Immigrants extend the sustainability of federal retirement programs by slowing the rise in the ratio of retirees to workers. Without a growing workforce, the US economy would begin to lose its dynamism and leadership role in the global economy.
- Three-quarters of immigrants in the United States reside here legally. The number of unauthorized immigrants has stabilized in recent years at 11 to 12 million. Most illegal immigrants arriving today enter the country legally but then overstay their visas; thus, a wall on the US-Mexican border will not stop most illegal immigration. The most cost-effective policy for reducing illegal immigration remains the expansion of opportunities for legal entry and work.
Five Myths and Realities of Immigration1. Myth: America is being flooded with mass immigration.
Reality: The rate of US immigration today is well below its historical average and below that of many other advanced nations.
2. Myth: Immigrants depress wages and take jobs from Americans.
- According to the Census Bureau, the number of foreign-born residents of the United States was 43.7 million in 2016, or 13.5 percent of the total US population. Although growing in recent decades, the immigrant share of the US population is still below its peak of nearly 15 percent in 1910. In many other developed nations, such as Canada and Australia, the foreign-born are a much higher share of the population than in the United States.
- More importantly, the rate of net migration to the United States today is far below what it has been in previous historical periods. The United States accepts about 1.1 million permanent legal immigrants per year, which is a high number in nominal terms but is historically modest as a share of the US population. The current annual US net migration rate (both legal and illegal, minus emigration), is 3.3 per 1,000 US residents. That is less than half of the US migration rate in the peak years of the Great Atlantic Migration from 1880 to 1910 and below the historical US average since 1820 of 4.3 per 1,000.
Reality: There is no evidence that immigrants cause higher unemployment among Americans or depress average wages.
3. Myth: Immigrants increase the danger of crime and terrorism.
- Immigrants typically complement American workers rather than compete directly with them for jobs. As immigrants supply labor, they also increase demand for housing and other goods and services, creating employment opportunities for native-born workers. This is why, over time, there is no correlation between immigration and the general unemployment rate. In fact, the number of jobs and the size of the workforce tend to grow together.
- For those same reasons, empirical studies have found that immigration has only a small and generally positive impact on average wages. A study cited in the 2017 National Academy of Sciences report on the economic consequences of immigration found that the only native demographic group negatively impacted is adults without a high school diploma. The wage impact on this group is small, in the range of 1 to 2 percent, and the size of this group has declined to less than 10 percent of the working-age population. Evidence also shows that as immigrants move in, native-born Americans tend to stay in school longer and upgrade their education, raising their productivity and wages. For more than 90 percent of American workers, immigration either raises wages or has no impact.
Reality: Immigrants are less likely to commit crimes or to be incarcerated than native-born Americans. The risks from immigrant terrorism are relatively low compared to other dangers.
4. Myth: Immigrants impose a fiscal burden on US taxpayers.
- Immigrants are less prone to crime for a number of reasons. After surveying the available evidence, a major 2015 study on immigrant integration by the National Academy of Sciences concluded, “Far from immigration increasing crime rates, studies demonstrate that immigrants and immigration are associated inversely with crime. Immigrants are less likely than the native born to commit crimes, and neighborhoods with greater concentrations of immigrants have much lower rates of crime and violence than comparable nonimmigrant neighborhoods.”
- Foreign-born terrorists have committed deadly attacks on US soil, most tragically on September 11, 2001. But the terrorists responsible for the deaths that day were temporary visitors in the United States on nonimmigrant tourist and student visas. Terrorist acts by permanent immigrants are much less of a theat. According to research by Alex Nowrasteh of the Cato Institute, from 1975 to 2017, “. . . the chance of being murdered in a terrorist attack committed by a chain immigrant or a diversity visa recipient was about 1 in 723 million per year,” a risk far lower than death by domestic homicide.
Reality: Most immigrants pay more in taxes over their lifetimes than they consume in government benefits.
5. Myth: Immigrants are no longer assimilating into American culture.
- Immigrants on average are net contributors to government. Immigrants tend to produce more of a fiscal surplus, or less of a deficit, than similarly educated native-born Americans because they are eligible for fewer government benefit programs. The children of immigrants are also more beneficial for government budgets than the children of native-born Americans because they tend to achieve higher levels of education, earnings, and tax paying.
- Higher-skilled immigrants are especially beneficial to government finances. According to the 2017 National Academy of Sciences report, an immigrant arriving in the United States at age 25 with a four-year college degree will, over his or her lifetime, pay $514,000 more in taxes than government services consumed (at net present value). An immigrant with an advanced degree will pay a surplus of almost $1 million. Immigrants without a high school diploma impose a lifetime cost on government of $109,000, but the cost is much smaller than that of a native-born adult without a high school diploma.
Reality: As with immigrant waves before them, today’s immigrants and their children are learning English and assimilating into American society.
- Immigrants are acquiring proficiency in English at comparable rates to immigrants in the past. Second- and third-generation immigrants are overwhelmingly fluent in English. As the 2015 National Academy of Sciences report concluded, “Today’s immigrants are learning English at the same rate or faster than earlier immigrant waves.”
- In other important ways, immigrants are adapting to and integrating into American society. The 2015 National Academy of Sciences report also found that immigrants are more optimistic than native-born Americans about achieving the American Dream. Rates of intermarriage between native-born Americans and immigrants have been rising, including among ethnic and racial minorities."
Saturday, June 23, 2018
By Daniel Griswold of Mercatus. Excerpt:
By Bruce Yandle of Mercatus.
"With heavy rainfall having brought severe flooding to Maryland and other areas along the Atlantic and Gulf Coasts and the 2018 hurricane season just getting underway, it’s a good time to remember that the United States suffers from more than just weather patterns. In some situations, our flood insurance system encourages people to live where the risk is greatest. The worst part of it? We know better.
Of those hurricanes that eventually make landfall, according to Yale University economist Robert Mendelsohn, only some 4 percent actually hit the United States.
How could that be? What is it about us that causes disproportionate damage in our otherwise-prosperous corner of the world? And why hasn’t our government fixed an obvious problem?
Put in insurance economics jargon, the problem is called “moral hazard.” This is a situation where the solution to a hazard can make the problem worse. Fire insurance provides an easy illustration: If insurance companies wrote policies covering 100 percent of losses from fire, there would be a significant incentive for some people to buy a policy today and set fire to their home tomorrow.
Through centuries of experience, fire insurance companies have learned to require policy owners to bear part of the risk. Policies now commonly cover around 80 percent, and homeowners co-insure. Unfortunately, Uncle Sam has only partially taken this lesson to heart when trying to help homeowners in flood-prone areas.
Federal law requires anyone purchasing a home in a designated flood area using financing from a federally insured and regulated lender to buy flood plain insurance through the Federal Emergency Management Agency (FEMA). Instead of charging insurance premiums that cover the expected cost of floods, FEMA offers partly subsidized insurance; the government discount can be huge. Moral hazard knocks at the door. In 2015, there were 5.1 million policies in force.
FEMA now produces maps for about 60 percent of the country showing the degree to which a particular parcel of land may lie in a flood-threatened location. Generally speaking, the higher the risk, the higher the insurance premium. But the longer a particular homeowner has had floodplain insurance, the lower the premium. Newly sold insurance reflects full cost, but polices that are grandfathered in do not.
To illustrate, consider a $250,000 home with no basement, located in a flood plain and insured before FEMA developed its new full-cost insurance for the area in question. (The latter applies to roughly 12 percent of all insured property.) The annual flood insurance premium in 2014 for this home was $2,644. For an identical property insured after FEMA developed full-cost pricing, the policy cost can be as high as $10,263.
Understandably, homeowners who hold highly subsidized insurance do all they can to keep it. That can mean avoiding selling a property or choosing to rebuild in the same place even after suffering severe damage from a storm. In short, it means some people have a strong incentive to continue to live in flood-prone areas.
To make matters worse, FEMA’s insurance program fails to bring enough revenue to cover costs. The agency must borrow from the U.S. Treasury, which currently owes $25 billion for past flood insurance deficits.
Of course, Congress knows about all this. In 2012, it passed legislation requiring FEMA to move toward full-cost pricing and phase out all subsidized insurance plans. Everything went along well until the next hurricane season. In 2014, Congress backed away from full-cost pricing and the requirement that grandfathered coverage not be renewed. Special interest pleading won out, and citizens living on higher ground paid up. Moral hazard lived to play another day.
Now’s the time for Congress to hit the line, once again, and require FEMA to fix the flood plain insurance problem — this time for good."
Friday, June 22, 2018
By Scott Sumner.
"The answer is “probably”, but by less than you might assume. The LA Times has an interesting article entitled:
New evidence shows that our anti-poverty programs, especially Social Security, work wellI’m not quite convinced by this argument. The article discusses some very interesting research by Bruce D. Meyer and Derek Wu, which shows the poverty rate looking at only official income data, and then again after accounting for taxes and various income support programs. I’m convinced by their argument that poverty, properly measured, has fallen rather sharply over time. There are clearly far fewer poor people in America than when I was young (in 1960).
Indeed research by Bruce Meyer and James Sullivan produced another similar graph that I included in this post, which shows that the consumption poverty rate has fallen to extremely low levels, below 5%. I like that graph so much I included it in the new principles textbook that I am working on.
And yet, none of this tells us about the causal impact of poverty programs. The first time I ever spoke up in a college econ class (back in 1974), was to challenge my professor on exactly this point. He showed data on the income distribution before and after transfers, and argued that this showed the impact of transfers. I raised my hand and suggested that without transfers, low-income people would probably have more market income. (He graciously conceded the point.)
For instance, if there were no Social Security program, older people would be more likely to keep working beyond age 65. Having said that, I would also like to make the following two points:
1. Even if Social Security does not raise the income of the elderly, it quite likely makes them better off. Many old people would prefer to spend their final years enjoying life, not working at Walmart, or at least working less than full time.
2. I do think it likely that Social Security did reduce poverty, as the offset of fewer hours worked and less market income is likely less than 100%.
When you look at poverty programs for the non-elderly, things get a bit murkier. It is certainly plausible that they have also reduced poverty, but it’s hard to prove. While poverty has declined sharply since the 1950s, it’s important to keep in mind several factors:
1. Much of the fall in the official poverty rate occurred prior to 1966, before the Great Society programs were fully implemented.
2. Even without poverty programs, you would have expected a sharp fall in poverty because of economic growth. Per capita GDP is much higher than in the 1950s.
Consider a family of illegal immigrants from Latin America, where both the husband and wife work full time. What is the poverty rate among that sort of family? I suspect it’s pretty low. And yet that family does not qualify for government income transfers.
So here’s the $64,000 question. To what extent have poverty programs caused different labor market behavior among America’s native-born poor, as compared to that hypothetical immigrant family? I don’t know. How many single moms who are on welfare would instead be married and working as hotel maids if welfare was not currently available? I don’t know. What if welfare had never been available over the past 50 years? I don’t know, and I don’t even know of any way to find out. We should be very modest about our ability to answer these sorts of questions."
By David Henderson.
Some highlights on their stiff 7% annual tax on wealth:
I go on to say why it is weak."
"In Radical Markets, University of Chicago law professor Eric Posner and Microsoft senior researcher Glen Weyl propose a radical restructuring of property rights, immigration policy, and voting, as well as a substantial change in corporate law. Their most radical proposal is to completely overturn property rights so that people would need to continuously “bid” for property they already own. They want to alter immigration policy to allow about 100 million more immigrants into the United States, but change who decides whether or not to allow particular prospective immigrants to enter. They want to switch to “quadratic” voting as opposed to the current one citizen–one vote method. They also want a major change in how investors can hold shares in corporations.These are the opening two paragraphs of “A Radical Restructuring and Redistribution of Wealth,” my review of Radical Markets by Posner and Weyl. It appears in the Summer issue of Regulation. (Scroll way down to see my review.)
For all of these positions, they make clever and sometimes compelling arguments. The most compelling one is on voting. The least compelling, and also absolutely horrific, one is on property.
Some highlights on their stiff 7% annual tax on wealth:
What would prevent people from underestimating the value of their assets? This is where Posner and Weyl’s proposal is horrific. Once a homeowner, say, has stated the estimated value publicly, he would have to sell his house to anyone who offers more than that value. So, for example, suppose my aforementioned house is worth about $900,000 on the open market. If I estimated the value at $900,000, my annual tax under their proposal would be a whopping $63,000. If I estimate the value below that, I would risk losing the house to anyone who bids more than my estimate. To be safe, I would probably estimate the value at $1 million because I like living there. But then I would pay $70,000 in taxes on my home annually. (Notice that a 7% annual tax on an asset would amount to an implicit tax of over 100% on the income from many assets.)
In short, Posner and Weyl would fundamentally undercut property rights, making them conditional. If you’ve lived in your home for 32 years, as my wife and I have, and put a lot of sentimental value on the place where you raised your children, then you would have to put a number on that value. And in case you think you can handle that, you must remember that they want to do the same with virtually all of your net worth.
Toward the end of the book, they even toy with having people pay taxes on their human capital. They give an example of a surgeon who announces that she would perform gallbladder surgery for $2,000 and pay a tax accordingly. She would be obligated to provide that surgery to anyone willing to pay $2,000. So if the surgeon was thinking of retiring, forget it. The only satisfactory solution for her would be to estimate the value of her services at a number that really would make her indifferent between working and retiring.
The authors are aware that they’re treading on sensitive ground here, writing, “A COST on human capital might be perceived as a kind of slavery.” Might be? They claim that such a perception is incorrect, but the reasoning behind their claim is weak.
Thursday, June 21, 2018
Noah Williams. He is with Center for Research on the Wisconsin Economy, University of Wisconsin-Madison.
"Summary:Beginning in 2014, the state of Minnesota began a series of minimum wage increases. By contrast, Wisconsin increased its state minimum wage in 2010 to keep pace with the federal minimum wage, but has not increased it since. While the effects of minimum wages changes remains a controversial topic, comparing relative outcomes in Wisconsin and Minnesota suggests that the minimum wage increases led to employment losses in Minnesota, particularly in the restaurant industry and youth demographic most affected by the changes.
Over 60% of employees in the restaurant industry in Minnesota work for the minimum wage or less, and workers under the age of 24 account for 54% of minimum wage earners. Following the minimum wage increases limited service restaurant employment fell by 4% in Minnesota relative to Wisconsin. Further, youth employment fell by 9% in Minnesota following the minimum wage increases, while it increased by 10.6% in Wisconsin over the same time period.
In addition, part of the increased wage costs employers faced have been passed on to consumers through higher prices. The relative price of restaurant food in the Minneapolis metro area had fallen by 2% in the four years preceding the minimum wage hikes, but it has risen by 6% in the four years since. On the benefit side, earnings for affected workers grew more rapidly in Minnesota than Wisconsin following the minimum wage hikes, with average annual pay at limited service restaurants increasing by 5.5% more in Minnesota from 2014-2017.
Overall, this evidence is consistent with a competitive market for low wage workers in Minnesota, with the minimum wage increases leading to labor market distortions.
View Full Report:Evidence on the Effects of Minnesota’s Minimum Wage Increases"
By Adam Millsap of Mercatus.
"First, contrary to what South Dakota and others say, requiring web retailers to collect taxes from jurisdictions where they aren’t located would not put them on equal footing with physical stores. In fact, it does the opposite.
When I visit my parents in Ohio and go to a local store, nobody asks where I live in order to collect taxes. They charge me the local sales tax rate, not the rate I would pay at home in Tallahassee. I pay it, and the tax dollars stay in Ohio. If equal treatment is the goal, and we make web retailers collect and remit sales taxes based on customers’ locations, we should require physical retailers to do the same.
Which brings us to the second reason. We don’t require this of physical retailers because it’s costly and cumbersome. It would be a pain for physical stores to record the home locations of every customer they serve, collect the appropriate tax, and then remit it back to the customer’s home state and town. This process isn’t any less of a burden just because a purchase is made online.
Because of their extensive physical footprints, large retailers with online sales such as Amazon, Wal-Mart, Best-Buy, and many others already collect sales taxes in most or every state due to the nexus rules established by the 1992 court case. What overturning the current rule would really do is make small, mom-and-pop type online retailers located in one state bear the high costs of implementing a system that could appropriately collect and remit sales taxes to the thousands of jurisdictions around the country. Meanwhile, the physical mom-and-pop stores only need to collect sales taxes for the jurisdictions they’re located in, even if customers from all over the country walk in and buy from them.
How is that equal treatment?
A less costly, cumbersome, and fair plan is to require both online and physical retailers to collect sales taxes based on the taxing jurisdictions they are located in. This “origin-based” tax system would treat the shopping activity of tourists and online shoppers the same, and it would impose the same tax-collecting costs on physical and web-retailers.
Finally, there is a subtler reason as to why it doesn’t make sense for web retailers to collect and remit sales taxes based on customers’ home locations. Absent from all the chatter about how to levy sales taxes is a discussion about why we have taxes in the first place. Taxes exist to pay for collective goods and services that, for one reason or another, may not be provided or would be underprovided if we didn’t compel people to contribute via taxation.
Thus, in any discussion of how to levy taxes, we should also keep in mind what goods or services the tax dollars provide. Sales taxes are levied by state and local governments to provide things such as infrastructure, police protection, fire protection, and parks. Whether sales tax dollars should be remitted to the customer’s jurisdiction or the seller’s jurisdiction depends in part on which goods and services the tax dollars should be funding.
Regarding sales at brick-and-mortar stores, some of the sales tax should support the police officers and firefighters that protect the physical stores from theft and fire, as well as the local roads, water pipes, and sewage infrastructure that make shopping there possible. Alternatively, one might argue that some of the money should be remitted back to a customer’s home jurisdiction, since without tax dollars there may be no money to fund the roads that allowed the out-of-town shopper to reach the store.
But even if you accept that argument, it’s clear that the public goods at the store’s location play a larger role in facilitating in-store purchases than those at the customer’s home. Thus, most of the sales tax dollars should remain in the store’s jurisdiction. The same reasoning applies to online shopping, and the same conclusion holds.
Since there is currently no agreed-upon method to decide exactly what portion of sales tax dollars should go to the store’s jurisdiction versus the customers’, and because the largest portion should clearly go to the store’s jurisdiction, the status quo isn’t all that bad: Require both physical and online retailers to collect sales taxes based on their location.
Not only is this simple, low cost, and consistent with what we already do, but it’s also the appropriate thing to do from a public goods standpoint."
Wednesday, June 20, 2018
I submitted the following two weeks ago to my local paper, The San Antonio Express-News. But it looks like it will not get printed.
It seems like hardly a day goes by without an editorial or op-ed appearing in The Express-News that advocates a new government program, regulation, higher taxes or increased spending to solve some social problem.
Many of the advocates are well meaning and often experts on the particular issue they address. So, what is the problem?
“Solutions” to some social problems can have unwanted and unintended consequences. All the programs combined might be too costly for the government to sustain.
This may seem like a typical complaint that comes from free market ideologues. But instead, these points are found in the book Economics for the Common Good by French economist Jean Tirole.
Winner of the 2014 Nobel Prize, he is no laissez-faire zealot. But I think anyone advocating more government should seriously consider reading his book in order to understand the problems involved.
According to Tirole, we might be indignant over a problem. But our “feelings are a poor guide for economic action.”
Also, “the problem of limited information is everywhere.” We may not know enough to solve a problem or foresee the unwanted effects of a “solution” to a social problem.
Here are examples of French policies, similar to some here in the U.S., Tirole cites that have not worked out as intended.
All the various benefits given to the poor “combine to create threshold effects, setting a poverty trap.” That is, a person may have no incentive to increase their income since the gains may be completely (or even more than completely) offset by a reduction in these benefits once they reach a given income.
Workers are actually hurt in France by requiring employers to go to court to fire someone. Modifying such rules would lead to more workers hired and reduce total spending on unemployment insurance.
Policies that protect renters who are in arrears backfire. Landlords “select renters more carefully,” harming young people and those on fixed-term labor contracts.
Rent controls lead to housing shortages and poor quality. Maybe subsidies are the answer.
But housing subsidies contribute to rent inflation. They increase demand, and, along with building height limits, do nothing to increase supply. You get higher prices when demand increases with no supply increase.
The minimum wage in France is above that of most countries. Tirole says “this has contributed to unemployment.”
How much? In 1968, French youth unemployment was 5%. Now it is 25%.
These examples come in a section of Tirole’s book on inequality. I think his point is that finding solutions that work, that don’t do more harm than good, is not easy.
They need to be very well thought out. But very often they are not.
Tirole suggests that when formulating policies, we often only look at the direct effects (“a higher wage helps poor workers”) but don’t also examine the indirect effects (“employers might not hire as many workers”).
Also, we often only see the faces of the direct beneficiaries (workers whose jobs are protected because employer must go to court to fire them) and never see the faces of those indirectly affected (young, less skilled workers who have difficulty finding a job since employers become more selective in whom they hire).
Tirole suggests what underlies these poorly thought out policies is hubris or “government’s excessive confidence.” He says “the state hardly ever has the information it needs to make allocation decisions by itself.”
He certainly does not advocate just leaving markets alone. The market is an instrument, not an end in itself. But ignoring market realities can lead to counterproductive policies.