The economist Tyler Cowen has published “A Strategy for Rich Countries: Absorb More Immigrants” in the New York Times. The assumption behind the article is that a larger GDP is essential even if most of the growth is due to population growth. Let’s assume that Americans do want to share the country with 640 million people instead of 320 million, with associated intensified traffic jams, higher real estate prices, and longer waits in line for everything. Given our second-rate school system, does the idea of prosperity through immigration still make sense? It seems safe to assume that an adult immigrant, on average, cannot earn as much as a native-born American, if only due to the fact that the immigrant is not a native speaker of English, an important skill for most jobs (data from Pew confirms this). Thus the only way to get a long-term boost in per-capita GDP from immigration is if our school systems are really good at educating immigrants. But based on the book The Smartest Kids in the World
So maybe Finland could realize some long-term economic benefit from immigration but how could the U.S.? It only seems possible if native-born Americans are, on average, remarkably lazy. Data from Pew Research seems to indicate that we native-born folks are actually pathetic. The children of immigrants earn just as much as we do. They graduate from college at a higher rate. They are less likely to have an income below the poverty line.
Note that the grumpy folks at the Heritage Foundation have a different point of view in their 2006 report “Importing Poverty: Immigration and Poverty in the United States: A Book of Charts”: “In recent years, these factors have produced an inflow of some ten and a half million immigrants who lack a high school education. In terms of increased poverty and expanded government expenditure, this importation of poorly educated immigrants has had roughly the same effect as the addition of ten and a half million native-born high school drop-outs.”
Regardless of whether Pew or Heritage is correct, I think that it makes sense for a country to look at the quality of its school system, especially the schools’ success at educating immigrants, before looking to immigration for a boost in per-capita GDP.
[Note that I am not making an anti- or pro-immigration argument. There might be other reasons to want to boost immigration, or to discourage immigration. I’m just saying that I didn’t think Cowen’s main assumption, that immigration can make us, on average, wealthier, was obvious.]
I think it depends a lot on who the immigrants are. Average home country IQ is a big clue. We like to blame schools but, for example, NYC schools do very well at educating Korean immigrant children (top NYC public schools like Stuyvesant are 70+% Asian, most 1st generation, not so great at educating Guatemalans (Stuy= 2% Hispanic) . Is this the fault of the school system or a reflection on the raw material they have to work with? The US hasn’t really made an effort at recruiting those immigrants most likely to be net contributors. 2/3 of legal immigration is for “family reunification” and then there are 10 million plus illegals for whom the qualification is the ability to smuggle themselves across the border.
If an employer didn’t make any effort to screen its employees but instead took anyone who could get past the security fence or who was a relative of an existing employee, we would think of that employer as negligent and would not be in the least surprised if their average profit per employee went down. If we were shareholders we would demand reforms and a change in management. But the US is doing the same thing and somehow we are supposed to expect good results.
A big part of the problem is that (due to ample historic reasons) American society is wrapped up in racial anxieties – going back to employers themselves, they are not allowed to hire based on IQ tests because that would have “disparate impact” on certain minorities. Needless to say, we don’t try to screen immigrants by IQ (or other objective measures) either. In order to atone for the racism of the past, we must sabotage our own future.
The notion that “immigration can make us, on average, wealthier” is quite valid but it’s only “obvious” to economists. One thing that makes it less than intuitive for many people is the fact that GDP/capita is the wrong metric – it doesn’t measure the thing you want to know.
What you probably want to know is whether the people who are ALREADY HERE get wealthier when more poor people arrive as a result of the new influx. And the answer is that they do, even if the result of those people arriving is that total GDP/capita DECREASES.
Suppose somebody comes to the US to work cheaply. Hiring that person is a voluntary transaction. Voluntary transactions involve both consumer surplus and producer surplus. As an American who was already here, the benefit to YOU is your share of their producer surplus – the net value (after salary) that they add to their new employer. If somebody comes here and works for a tiny salary the new average GDP might be smaller when they join it because adding in more small numbers pulls down the average. But the average GDP of everybody BUT the new immigrant is (a little) larger than before. And their salary is larger than before too, if you compare with what they made in their prior country. So even though GDP/capita decreased, that change reflects a world in which essentially everybody’s individual standard of living increased.
It’s BECAUSE we’re lazy that we can benefit from hiring more gardeners, maids, people to pick crops, people to flip burgers. They want the work and letting them do that work lets the rest of us be a little more productive at whatever it is that WE do. We get nicer lawns and cleaner houses and more varied food options with less personal effort.
I think Izzie is exactly right that the effect of immigration on the US depends in large part on who the immigrants are. This is actually a pretty difficult question to answer and there’s been active debate in the economics research literature for quite a while. Borjas (American Economic Review, 1987) thinks we tend to get the least skilled / lowest quality folks from the origin countries. Chiquiar and Hanson (Journal of Political Economy, 2005) find the opposite.
My own take (based on real research and personal experience) is that because it’s pretty difficult to migrate we get the smartest and most hard-working people migrating. They look at the US as a place where they can get rewarded for these skills and not as a place for hand-outs at all.
The US *does* select immigrants based on observable skills through the H1-B program and the rest of the immigrants we get are (on average) a big boon for the economy.
Doug
http://teachbetter.co
…due to the fact that the immigrant is not a native speaker of English, an important skill for most jobs
English is not a necessity for many lower-paid jobs in some cities, for example, Miami. In fact, the inability to speak Spanish in a city such as Miami is an automatic dis-qualifier from many jobs at all levels.
Uncontrolled legal and illegal immigration of poor people exacerbates income inequality and, according to the NYT, this is a bad thing.
Uncontrolled legal and illegal immigration of poor people increases the labor supply at the lower end, decreases wages, and increases unemployment among American blacks. The NYT is silent on these facts.
I’m originally from England (population density = 411 people/km²), so a potential move in the US (where I live now) from 32 to 64 people/km² really doesn’t sound so bad to me. It’s a huge country. We might want to try to encourage people to move to particular states if we’re worried that everyone is going to try to live in Manhattan at once.
Chris: A densely populated country requires a lot of infrastructure and it is much more expensive, difficult, and time-consuming to build infrastructure, e.g., new subway lines or roads, in the U.S. compared to other countries. It also costs a lot more to run public services in the U.S. compared to other countries (see this article, for example). Traffic in Boston has gotten truly horrific in the last year or two, for example, and I don’t think that it will be possible for the city to build new highways or mass transit.
I guess another way to say this is that “China is good at handling crowds” and maybe England is too but the U.S. probably isn’t.
>My own take (based on real research and personal experience) is that because it’s pretty difficult to migrate we get the smartest and most hard-working people migrating. They look at the US as a place where they can get rewarded for these skills and not as a place for hand-outs at all.
There are a couple of problems with this. First of all, you have the issue of regression toward the mean – even if the first generation are indeed the smartest/ most hard working of their nationality (and not just those most desperate to leave/ with the least to lose), their children tend to regress to their national mean (and sometimes do even worse than their cousins back home because they are put in contact with toxic aspects of American culture that do not value hard work or study, etc.) Second, even if low skilled immigrants are hard workers (and in my experience, like yours, most are) their lack of language and other skills and education limit their earnings capacity. Meanwhile, they and their families consume close to American average levels of educational and healthcare resources, space on the highway and in mass transit, etc. that they can’t really afford to pay the full cost of because of their low earnings, so the rest of us end up subsidizing them (while their employers don’t, so they get a bargain).
American schools are not good at educating students and public school employees have particularly low expectations for immigrants (and use those expectations as an excuse for not having taught them very much)
Alternately, immigrants may be so determined that they overcome mediocre K – 12 public schooling and excel when they get to college. That certainly seems to be the story among Asian immigrants, for example.
According to the Finnish prime minister ( http://yle.fi/uutiset/stubb_in_cnbc_interview_the_iphone_killed_nokia_and_the_ipad_killed_the_finnish_paper_industry/7526429 ), children of immigrants in America have no trouble wrecking Finnish economy despite the vastly inferior educational system.
Phil: That sounds right, but I’m not convinced about the causation. Maybe England has an effective train system because there’s enough population density to make one worthwhile, rather than because it has a “good at handling crowds” property that the US will lack.
We’d need to imagine how the US with (gradually!) twice as many people in would actually behave, rather than assume we’d get twice as many people but retain today’s decision-making.
Chris,
But if you look at places in the US that are already crowded by any standard (e.g. the island of Manhattan) you’ll see that we can’t handle something simple like extending a subway line anymore. The 2nd Avenue subway has been under construction for 40 years at a cost of many billions of $ and it’s still not done.
Likewise the Boston to Washington rail corridor is as densely populated as most European corridors but we have no high speed rail system nor are we likely to get one in foreseeable future. Amtrak’s current plan, which is probably overly ambitious calls, for the NE Corridor to achieve high speed by 2040 at a cost of only $151 billion. If they achieve their goal (which is doubtful) it will be only 75 years after Japan began high speed service and the cost per mile to build (and the fares) will be 10 or 15x as much per mile as the cost in China. We are just not rich enough anymore to build many (if any) high speed rail corridors at $150 billion a pop.
Whenever we go up to New England we stop on the way at a seafood shack in New London that is directly adjacent to the Amtrak line. There must some kind of track defect or restriction in the area because whenever we are there, a Boston-Washington Amtrak train comes crawling thru at around 5 MPH. It never changes over the years so whatever the problem is is semi-permanent. I cry out to my son , “SHINKANSEN!” and it gets a laugh every time, but it is a bitter laugh. We have clearly, as a society, lost the thread and it’s clear to me that we are not getting it back any time soon.
Everyone except for Glen is missing the point. Why would do we care about per capita GDP if both current citizen and immigrants are better off? Low skilled worker that do not speak english drive up the wages from citizens that speak english or are high skilled. All of this IQ and education talk is missing the point that letting in people that are as different as possible to the typical american is the ideal from a competitive advantage point of view. Also, all we need to do is look at the huge increases in wages for immigrants that they are dramatically more productive simply based on moving to a first world free market economy. Also, Everyone ignored Cowen major point of increasing the percentage of the population that is working aged.
Izzie,
It is silly to point to Manhattan as proof that there not enough room in the USA from immigrants. Look at the recent housing bubble that caused many cities still have a glut of empty houses. Look at all the people fleeing from Detroit. What if Detroit let people immigrate there if they promised to live there and pay taxes for 5 years?
Anthony,
You completely miss my point. Chris said that if we were as crowded as Europe, we would learn to be as effective handling crowded conditions as Europe. I pointed out that the areas of the US that are already as crowded as Europe are NOT very effective in doing things like building new mass transit infrastructure. The only reason the NYC transit system and Amtrak work at all is because they inherited the infrastructure that our ancestors built without benefit of environmental impact statements and archeological digs, etc. etc. If they had to start fresh today, it would cost trillions (that we don’t have) and take many decades (or maybe never).
So if a 25 year old immigrant pays “taxes” in Detroit for 5 years (how much would they pay?) would it be OK for him and his children to then move to NY and be a burden on the taxpayers for the next 50 years or so? Would this “taxpayer” take a job away from an exist resident of Detroit, where jobs are already scarce? The average house in Detroit sells for $17,000 (that’s not a typo) and bears property taxes of around $500/yr, which entitles each of your children to a free public education that costs around $13,000. That Detroit has lost population is the SYMPTOM of its problems, not its cause and just adding more people wouldn’t treat that cause.
I have no problem with allowing in immigrants who would really truly be net contributors but you would have to do very rigorous math to calculate the cost vs. benefits. I don’t get the feeling that most of the immigrants that we have (10 million+ who had zero screening because they just walked into the country and 2/3 of the “legals” who came here based on “family reunification”) would really measure up, once you took into account the resources that they are consuming and not paying for directly. The numbers just don’t add up.
Izzie,
I understand your concern if we can build the needed infrastructure. But extending the infrastructure in a city as densely packed as New York is a whole different class of problem vs building up infrastructure in the places where immigrants would actually live. It hard to believe the typical immigrant will be able to afford to live in Manhattan. The US has proven to be able to build new housing and expand suburbs in pretty much every major city. If anything they have overextended in this area. It much more likely for immigrants to be living in the surrounding area of a city vs the expensive downtown.
If free public education is not worth more than the cost in terms of educating the immigrants children to be more productive tax paying members of the US, we can take away that benefit from immigrants. If this doesn’t make sense for immigrants children, I doubt it makes sense to offer it for anyone’s children. If you think they will not pay enough on in taxes charge these immigrants extra taxes. If immigrants are still willing to come while paying extra taxes and sending there kid to private school, there clearly a huge surplus to moving to the US that can allow everyone to end up better off. There better ways to handle every concern to prevent forcing someone to stay in Haiti.
Anthony,
With respect, I think you are living in a fantasy if you think there are many people from Haiti who could move to the US and make enough money to pay be able to pay extra taxes and private school tuition (and the cost of their health care and impact on crowding, etc. ). I would welcome such immigrants but I don’t think that they really exist in large numbers. The few Haitians who COULD afford to do this probably don’t want to emigrate in the first place. The actual immigrants we are getting from Haiti are mostly low skilled and take low paying jobs such as home health care aid where they can barely support themselves let alone pay extra taxes and school tuition. There is an enormous gap between your fantasy immigrant and the reality.
Izzie: Medicaid alone spends over $125 billion per year for home based heath care. How much do you think that would cost if we didn’t have Haitian immigrants to do the work cheaply?
Izzie,
I know many rich people who would want or have recently moved to the USA from 3rd world countries. Many are willing to trade being wealth and a target to being middle class or lower in the US. In addition, there are many people working as engineers in India and China that could make 5-10x as much just by moving to the US. We have a low cap on high skilled immigration that we don’t even hit most years.
Putting that aside, the median HOUSEHOLD income is 10k per year. 50% of the world makes less than that. A family moving to the US and making minimum wage could be going from 4k to 40k. Even with increased temporary tax burden, private schooling, and increase cost of living, they could still better off, ignoring the safety benefits and their children having dramatically better lives.
> 50% of the world makes less than that..
That’s the problem. There are 3.5 BILLION people who could increase their standard of living by moving to the US. Even if we let in only the top 10%, that would still double the population of the US.
So you agree there are tons of willing and able people we can pick the best from, instead of your earlier argument that there not enough people able to move to the the use if we increase and ask to pay for private schools.
We don’t need to let in everyone in at the same time but we can handle many times the number of immigrants we allow now. The original article that Phil was responding to saying to use immigration to insure stable population growth.