Wednesday, 1 March 2017

The immigration debate the US needs

By George Borjas, Published The Straits Times, 28 Feb 2017

The first month of the Trump administration has already changed the direction of the immigration debate. Changes in social policy do not make everyone better off, and immigration policy is no exception.

I am a refugee, having fled Cuba as a child in 1962. Not only do I have great sympathy for the immigrant's desire to build a better life, I am also proof that immigration policy can benefit some people enormously.

But I am also an economist, very much aware of the many trade-offs involved. There are winners and losers, and the improved lives of immigrants come at a price. How much of a price are the American people willing to pay, and exactly who will pay it?

Proponents of more immigration often claim that immigrants do jobs that native-born Americans don't want to do. But we know that the price of gas goes down when the supply of oil goes up. The laws of supply and demand do not evaporate when we talk about the price of labour. The well-documented abuses of the H-1B programme should have obliterated the notion that immigration does not harm competing native workers.

For the past 30 years, a large fraction of immigrants - nearly one-third - were high school dropouts, so that the incumbent low-skilled workforce, including many native-born African Americans and Hispanics, formed the core group of Americans who paid the price for the influx of millions of workers. Their wages fell by as much as 6 per cent.

That economic suffering generated economic gains; somebody's lower wage is somebody else's higher profit. The increase in the profitability of many employers enlarged the economic pie accruing to all natives by about US$50 billion (S$70.3 billion). So, as proponents of more immigration point out, immigration can increase our aggregate wealth. But they don't point out the trade-off involved: workers in jobs sought by immigrants lose out.

They also don't point out that low-skilled immigration has a side effect that reduces that US$50 billion increase. The National Academy of Sciences has estimated the impact of immigration on government budgets. On a year-to-year basis, immigrant families created an annual fiscal shortfall of US$43 billion to US$299 billion. Even the most conservative estimate of the shortfall wipes out much of the US$50 billion increase in native wealth. But the split of the pie changed, giving far less to workers and much more to employers.

We need to consider the freighted issue of immigrant assimilation. There has been a noticeable slowdown in the rate at which the economic status of immigrants improves over time. In the 1970s, immigrants could expect a substantial improvement relative to natives over their lifetimes. Today, the progress is much more stagnant. Part of that is related to the growth of ethnic enclaves. Immigrants who find few ethnic compatriots get value from acquiring skills that allow more social and economic exchanges, like learning English. But immigrants who find a large ethnic enclave have less need to acquire skills. Mass migration discourages assimilation.

The trade-offs become even more difficult when we think about the descendants of today's immigrants. Many assume that, like 20th-century America, the melting pot will work well and history will repeat itself. But the 20th-century melting pot operated in a particular economic, social and political context, and it is dead and gone. Now, in our country, employees at the University of California are advised to avoid saying "America is a melting pot" because it can lead to a micro-aggression - a suggestion that the recipient "assimilate to the dominant culture".

We will need to confront the trade-off between short-term economic gains and the long-term costs of a large, unassimilated minority. We need some general principles to design a sensible policy, combining common sense and compassion.

We must reduce illegal immigration. It has had a corrosive impact, paralysing discussion on reform. A border wall may be only partly effective because many unauthorised immigrants enter the country legally and overstay their visa. But a national electronic system mandating that employers certify new hires, with fines and criminal penalties for lawbreaking firms, might go a long way towards stemming the flow.

What about the more than 11 million unauthorised immigrants already here? Most have led peaceful lives, and sudden deportation is inconsistent with America's historic compassion towards immigrants. Perhaps it's time for some benign neglect. Many will eventually qualify for visas because they have married United States citizens or have native-born children. Rather than fight over a politically impossible amnesty, we could accelerate the granting of family-preference visas to that population.

We will also need to decide how many immigrants to admit. In the 1990s, congresswoman Barbara Jordan's immigration commission recommended an annual target of 550,000 immigrants. That would be a cut, but it may be preferable to the alternative, which could mean shutting off the flow altogether.

Finally, we need to choose between highly skilled and less skilled applicants. High-skilled immigrants are more profitable for us. But giving an opportunity to the huddled masses is part of what makes our country exceptional.

Regardless, employers should not walk away with all the gains and workers should not suffer all the losses. We need an equitable sharing of the gains and losses among the American people.

US President Donald Trump has already answered a fundamental question: "We are going to be considerate and compassionate to everyone," he said at the Republican National Convention. "We are going to have an immigration system that works, but one that works for the American people." Many in the academic and media elite recoil upon hearing that immigration should serve the interests of Americans. They immediately label such thinking as racist and xenophobic.

But that just avoids a discussion of the trade-offs. The debate would be more honest if we got a simple answer from those who disagree with "America First" proposals: Who are you rooting for?


The writer is a professor of economics and social policy at the Harvard Kennedy School and the author of, most recently, We Wanted Workers: Unraveling The Immigration Narrative.

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