Rebuttal of Sen. Sessions’ Anti-Legal-Immigration Op-ed

By Alex Nowrasteh of Cato. Excerpts:

"Below, I look at Senator Sessions’ arguments against legal immigration. His writings will be in block quotes and my responses will follow.

The first “great wave” of U.S. immigration took place from roughly 1880 to 1930. During this time, according to the Census Bureau, the foreign-born population doubled from about 6.7 million to 14.2 million people. Changes were then made to immigration law to reduce admissions, decreasing the foreign-born population until it fell to about 9.6 million by 1970. Meanwhile, during this low-immigration period, real median compensation for U.S. workers surged, increasing more than 90 percent from 1948 to 1973, according to the Economic Policy Institute.

Real per-capita GDP increased by 95 percent during the 1880–1930 period of high-immigration that he cites.

The United States did not have closed borders from 1948 to 1973. The Bracero guest-worker visa program let in nearly five million lower-skilled Mexican workers to temporarily labor in American agriculture, 

There is not a fixed supply of jobs to be divided up amongst Americans: the market constantly creates and destroys new job opportunities and increasing supplies of workers and consumers help that process along.

Internal migration was also a big factor. About 29 million black and white Southerners migrated to the North during the course of the 20^th century. Those migrations took place during periods of rapid income growth around the nation. If immigrants supposedly lower the wages of Americans, wouldn’t women also lower the wages of men and Southerners depress the wages of Northerners and Westerners? The scale of those migrations and the entry of women into the workforce dwarfed the post-1968 immigration.

Worker productivity is also influenced by the type and quantity of capital in the economy, the differences between immigrant workers and native-born workers, and the availability of technology. In a well-functioning economy, increases in the supply of workers increases demand for workers, which don’t lead to more unemployment.

This ongoing wave coincides with a period of middle-class contraction. The Pew Research Center reports: ‘The share of adults who live in middle-income households has eroded over time, from 61% in 1970 to 51% in 2013.’ Harvard economist George Borjas has estimated that high immigration from 1980 to 2000 reduced the wages of lower-skilled U.S. workers by 7.4 percent—a stunning drop—with particularly painful reductions for African American workers. Weekly earnings today are lower than they were in 1973.

In order to compete with middle-income Americans, immigrants must have similar skill sets. Because not all labor is the same, a lower-skilled immigrant who works in agriculture does not compete with a middle-skilled American accountant. By the senator’s own admission, immigrants are more likely to be less skilled than middle-class Americans, so it’s hard to see how immigrants in one skill category lower the wages of Americans in another.

Concerning Borjas, his findings that immigrants decrease the wages of Americans are the most negative in the economics literature. In that paper, he holds the supply of capital as fixed–an assumption that may be fine for an academic publication but it is not useful for analyzing policy. The stock of capital is dynamic, increasing with population. Ignoring that important effect would make any increase in population decrease wages. It should further be noted that Borjas, like other economists, admits that immigration does help Americans more than it harms them, but with some distributional consequences.

Applying Borjas’ research methods to different periods of time yields less negative results. This recent paper used Borjas’ methods but includes the wage data up through 2010, finding effects so small that they are insignificant. That is a significant rebuttal to Borjas’ findings.

In contrast to Borjas’ work that holds the stock of capital fixed, economists Gianmarco Ottaviano and Giovanni Peri assume that capital adjusts in response to immigrant inflows. They find that immigrants have a very small effect on the wages of native-born Americans without a high school degree (-0.1 percent to +0.6 percent) and an average positive effect on all native workers of about +0.6 percent. The negative wage effects of new immigrants are concentrated on older immigrants. Unsurprisingly, new immigrants compete with older immigrants who both share similar skills while native-born Americans benefit from a larger supply of lower-skilled workers.

Research by Peri and Chad Sparber finds that increases in lower-skilled immigration induce lower-skilled natives to specialize in jobs that require communication in English while the immigrants specialize in jobs that are more manual-labor intensive. Communication jobs are more highly compensated than manual-labor jobs. This complementary task specialization reduces the downward wage pressure because natives react by adapting and specializing in more highly paid occupations, not by dropping out of the job market. This effect decreases wage competition between lower-skilled natives and immigrants by around 75 percent. Peter Henry found that low-skilled immigrants to an area induced natives to improve their school performance so that they wouldn’t have to compete with lower skilled immigrants. Immigrants push Americans up the skills ladder.

Yet each year, the United States adds another million mostly low-wage permanent legal immigrants who can work, draw benefits and become voting citizens. Legal immigration is the primary source of low-wage immigration into the United States. In other words, as a matter of federal policy—which can be adjusted at any time—millions of low-wage foreign workers are legally made available to substitute for higher-paid Americans.

If controlling immigration to the United States was as easy as flipping a policy switch, then there would be no debate over immigration reform. The most contentious issue, the 11 to 12 million unlawful immigrants, wouldn’t be here.

This federal policy continues at a time when robotics and computerization are slashing demand for workers. One Oxford University professor estimates that as many as half of all jobs will be automated in 20 years. We don’t have enough jobs for our lower-skilled workers now. What sense does it make to bring in millions more?

Economist, futurist, and Artificial Intelligence researcher Robin Hanson is skeptical of the claim that 47 percent of jobs are at risk of being automated. He wrote:

Yet this 47 percent figure comes mainly from the authors ‘subjectively’ (their word) labeling 30 particular kinds of jobs as automatable and 40 as not. They give almost no justification or explanation for how they chose these labels. Such a made-up figure hardly seems a sufficient basis for expecting catastrophe.

Even if 47 percent of jobs were soon to be automated, why not let the market decide how many workers should be added to our economy? Surely the free market is better able to regulate labor markets than well-meaning politicians.

Every few decades going back to the early 19^th century, concerns about machines taking away our jobs briefly push Luddite fears to the forefront of public debate. Interestingly, an editorial adjacent to Senator Sessions’ op-ed in the Washington Post is skeptical of Luddism. What sense does it make for the U.S. government to base immigration policy on yet another prediction that our jobs will soon be automated?

The percentage of the country that is foreign-born is on track to rapidly eclipse any previous historical peak and to continue rising. Imagine the pressure this will put on wages, as well as schools, hospitals and many other community resources.

The economy is dynamic and adaptive, just like immigrants. They don’t just magically appear on our shores; they are incentivized to come here for economic, family, or humanitarian reasons. If there are few job opportunities then fewer immigrants will come. Once here, immigrants increase production and demand for goods and services.

As a percentage of the U.S.-born population, yearly immigrant flows to the U.S. are half of what they were during the 19^th century and early 20^th centuries. Australia’s immigrants, as a percent of their entire population, is about double what it is in the United States. Using the same metric, Canada’s immigrant population is about 50 percent bigger than in the United States. Australia and Canada are both wealthy, growing economies with more liberalized immigration and migration policies than the United States. Senator Sessions has spoken approvingly of Canada’s immigration system in the past. Having more immigrants is correlated with a more quickly growing economy, not increasing poverty and joblessness..

As for the pressure on government services, those must be put in to perspective. It is currently illegal for new immigrants to get most means-tested welfare benefits. Those barriers to welfare use should be increased, as we’ve written about in detail at Cato. Even so, poor immigrants use much less means-tested welfare than poor-natives. We should absolutely seek to lower those expenditures through welfare reform, but imposing more government controls over immigration is a difficult and backwards way to go about it. The fiscal effects of immigration are small–mostly clustered around zero. The long-term taxes paid by immigrants and generated through the economic activity they jumpstart are about equal to the benefits that they consume. (Read here for a literature survey on the topic.)"