Monday, September 27, 2010

Let's Stop Shooting Ourselves in the Foot

. Monday, September 27, 2010

Phenomenal from Ezra Klein:

I have a plan that will raise wages, lower prices, increase the nation's stock of scientists and engineers, and maybe even create the next Google. Better yet, this plan won't cost the government a dime. In fact, it'll save money. A lot of money. ...

Here's the plan: More immigration. A pathway to legal status for undocumented immigrants. And a recognition that immigration policy is economic policy and needs to be thought of as such.

The mistake we make when thinking about the effect immigrants have on our wages, says Giovanni Peri, an economist at the University of California at Davis who has studied the issue extensively, is that we imagine an economy where the number of jobs is fixed. Then, if one immigrant comes in, he takes one of those jobs or forces a worker to accept a lower wage. But that's not how our economy works.

With more labor - particularly more labor of different kinds - the economy grows larger. It produces more stuff. There are more workers buying things, creating demand. That increases the total number of jobs. We understand perfectly well that Europe is in trouble because its low birth rates mean fewer workers - and that means less economic growth. We ourselves worry that we're not graduating enough scientists and engineers. But the economy doesn't care if it gets workers through birth rates or green cards.

This hits me in all the right spots... I love it when my principles and pragmatism run together. Of course, the benefits from immigration are not symmetric. The immigrants themselves benefit the most, of course, and on normative grounds I believe there is a strong case to be made for much laxer immigration policy. In fact nearly everyone benefits (economically) from immigration... it's just that low-skilled workers benefit the least:

A study by Harvard economists George Borjas and Lawrence Katzj found that although immigrants raised native wages overall, they slightly hurt the 8 percent of workers without a high school education. A subsequent study by Peri found that even unskilled workers saw a benefit from immigrants - but it was much smaller than that of highly skilled workers.

So why don't we pursue a more liberal immigration policy? It could be because people don't understand the graph above (from the Hamilton Project via Klein); they focus on the valleys ("anchor babies") and not the peaks. It could be because people fear cultural or societal change that comes from changing demographics -- the Huntington hypothesis. It could be because they are part of the 8% of low-skilled, uneducated workers who could be hurt by facing new competition in labor markets.

I suspect all three play a role, but the second is the strongest. Which is a shame, because it prevents a rational policy.

I believe that labor mobility is the greatest civil rights issue of our time. Even if immigration didn't make almost everyone better off, it is still difficult to rationalize international segregation on ethical grounds. Thankfully, we're not faced with that conundrum. Liberalize immigration policy and our world becomes more just, more wealthy, and more balanced. What's not to like?


Let's Stop Shooting Ourselves in the Foot
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