Who You Gonna Believe The Undocumented E-Mail or Your Lying Eyes. By Chuck McGlawn

Distorting the effect of immigration on the US Economy is no difficult task. All it requires is an uninformed populace, (No shortage there.) a bump up in unemployment, (Even if the bump-up is localized.) and a shrinking press looking for a scandal to report, (Unemployed news writers are plentiful.) and up pops a Cottage Industry of forwarding e-mails, and You-Tube videos about some isolated stories about the horrors of immigration. You know this you have received them and you have become part of the transmission belt by forwarding them. 

Some of the stories you get are the truth, some are half-truths and some are outright fabrications. Many if not most are the effects observed in an isolated place by a single individual that may have an agenda and he may see things and report his observations in a way that supports that agenda. Let me invite you to look at a more complete picture. 

Giovanni Peri an associate professor at the University of California, Davis, and a visiting scholar at the Federal Reserve Bank of San Francisco has conducted comprehensive research on “The Effect of Immigrants on U.S. Employment and Productivity” His research covered the effects of immigration on the total output and income of the U.S. economy. 

This is accomplished by comparing output per worker and employment in states that have had large immigrant inflows with data from states that have few new foreign-born workers.

Statistical analysis of state-level data shows that:

Ø    Immigrants expand the economy's productive capacity.

Ø      Stimulate investment.

Ø      Promote specialization.

This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

Immigration in recent decades has significantly increased the presence of foreign-born workers in the United States. The impact of these immigrants on the U.S. economy is a mixed bag hotly debated.

Ø      Some stories in the popular press suggest that immigrants diminish the job opportunities of workers born in the United States.

Ø      Others portray immigrants as filling essential jobs that are shunned by other workers.

Economists who have analyzed local labor markets have mostly failed to find large effects of immigrants on employment and wages of U.S.-born workers (see Borjas 2006; Card 2001, 2007, 2009; and Card and Lewis 2007).

The information that follows summarizes recent research by Peri (2009) and Peri and Sparber (2009) examining the impact of immigrants on the broader U.S. economy.

Ø      These studies systematically analyze how immigrants affect total output.

Ø      Income per worker.

Ø      Employment in the short and long run.

Consistent with previous research, the analysis finds no significant effect of immigration on net job growth for U.S.-born workers in these time horizons. This suggests that the economy absorbs immigrants by expanding job opportunities rather than by displacing workers born in the United States.

 

At the state level, the presence of immigrants is associated with increased output per worker. This effect emerges in the medium to long run as businesses adjust their physical capital, that is, equipment and structures, to take advantage of the labor supplied by new immigrants. Finally, immigration is associated with an increase in average hours per worker and a reduction in skills per worker as measured by the share of college-educated workers in a state. These two effects have opposite and roughly equal effect on labor productivity.

Immigration effects on employment, income, and productivity vary by occupation, job, and industry. Nonetheless, it is possible to total these effects to get an aggregate economic impact. Here we attempt to quantify the aggregate gains and losses for the U.S. economy from immigration. If the average impact on employment and income per worker is positive, this implies an aggregate “surplus” from immigration. In other words, the total gains accruing to some U.S.-born workers are larger than the total losses suffered by others. (It is from “losses suffered by others” group that all the negative stories are generated.)

First, there is no evidence that immigrants crowd out U.S.-born workers in either the short or long run. Data on U.S.-born worker employment imply small effects, with estimates never statistically different from zero. The impact on hours per worker is similar. We observe insignificant effects in the short run and a small but significant positive effect in the long run. At the same time, immigration reduces somewhat the skill intensity of workers in the short and long run because immigrants have a slightly lower average education level than U.S.-born workers.

Second, the positive long-run effect on income per U.S.-born worker accrues over some time. In the short run, small insignificant effects are observed. Over the long run, however, a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007.

 

So please, stop with the stories of your next door neighbor’s Uncle’s School teacher’s brother in law lost his dry walling job to an immigrant. Because it is just as true or just as false, that my cousin’s exercise instructor’s room mate’s brother replaced an immigrant at a Hardware Store job.

The third result is that the long-run increase in income per worker associated with immigrants is mainly due to increases in the efficiency and productivity of state economies. This effect becomes apparent in the medium to long run. Such a gradual response of productivity is accompanied by a gradual response of capital intensity. While in the short run, physical capital per unit of output is decreased by net immigration, in the medium to long run, businesses expand their equipment and physical plant proportionally to their increase in production.

How can these patterns be explained? 

The effects identified above can be explained by adjustments businesses make over time that allow them to take full advantage of the new immigrant labor supply. These adjustments, including upgrading and expanding capital stock, provide businesses with opportunities to expand in response to hiring immigrants.

This process can be analyzed at the state level (see Peri and Sparber 2009). The analysis begins with the well-documented phenomenon that U.S.-born workers and immigrants tend to take different occupations. Among less-educated workers, those born in the United States tend to have jobs in manufacturing or mining, while immigrants tend to have jobs in personal services and agriculture. Second, within industries and specific businesses, immigrants and U.S.-born workers tend to specialize in different job tasks. Because those born in the United States have relatively better English language skills, they tend to specialize in communication tasks. Immigrants tend to specialize in other tasks, such as manual labor. Just as in the standard concept of comparative advantage, this results in specialization and improved production efficiency. 

Figure 1
Communication/manual skills among less-educated U.S.-born workers

Sorry the graph did not copy.

Note: The data on average communication/manual skills by state are from Peri and Sparber (2009), obtained from the manual and communication intensity of occupations, weighted according to the distributional occupation of U.S.-born workers.

If these patterns are driving the differences across states, then in states where immigration has been heavy, U.S.-born workers with less education should have shifted toward more communication-intensive jobs. Figure 1 shows exactly this. The share of immigrants among the less educated is strongly correlated with the extent of U.S.-born worker specialization in communication tasks. Each point in the graph represents a U.S. state in 2005. In states with a heavy concentration of less-educated immigrants, U.S.-born workers have migrated toward more communication-intensive occupations. Those jobs pay higher wages than manual jobs, so such a mechanism has stimulated the productivity of workers born in the United States and generated new employment opportunities.

To better understand this mechanism, it is useful to consider the following hypothetical illustration. As young immigrants with low schooling levels take manually intensive construction jobs, the construction companies that employ them have opportunities to expand. This increases the demand for construction supervisors, coordinators, designers, and so on. Those are occupations with greater communication intensity and are typically staffed by U.S.-born workers who have moved away from manual construction jobs. This complementary task specialization typically pushes U.S.-born workers toward better-paying jobs, enhances the efficiency of production, and creates jobs. This task specialization, however, may involve adoption of different techniques or managerial procedures and the renovation or replacement of capital equipment. Hence, it takes some years to be fully realized. 

Conclusions

The U.S. economy is dynamic, shedding and creating hundreds of thousands of jobs every month. Businesses are in a continuous state of flux. The most accurate way to gauge the net impact of immigration on such an economy is to analyze the effects dynamically over time. Data show that, on net, immigrants expand the U.S. economy’s productive capacity, stimulate investment, and promote specialization that in the long run boosts productivity. Consistent with previous research, there is no evidence that these effects take place at the expense of jobs for workers born in the United States.

References

Borjas, George J. 2006. “Native Internal Migration and the Labor Market Impact of Immigration.” Journal of Human Resources 41(2), pp. 221–258.

Card, David. 2001. “Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration.” Journal of Labor Economics 19(1), pp. 22–64.

Card, David. 2007. “How Immigration Affects U.S. Cities.” University College London, Centre for Research and Analysis of Migration Discussion Paper 11/07.

Card, David. 2009. “Immigration and Inequality.” American Economic Review, Papers and Proceedings 99(2), pp. 1–21.

Card, David, and Ethan Lewis. 2007. “The Diffusion of Mexican Immigrants during the 1990s: Explanations and Impacts.” In Mexican Immigration to the United States, ed. George J. Borjas. Chicago: The University of Chicago Press.

Peri, Giovanni, and Chad Sparber. 2009. “Task Specialization, Immigration, and Wages.” American Economic Journal: Applied Economics 1(3), pp. 135–169.

Peri, Giovanni. 2009. “The Effect of Immigration on Productivity: Evidence from U.S. States.” NBER Working Paper 15507.

Nine States & The Liberty ViewsLetter Backs Arizona on Immigration

BUT Michigan Attorney General Mike Cox Doesn’t Get It

By Chuck McGlawn 07/15/2010

Disclaimer: I personally think that Arizona and the other nine States have made a bad decision concerning immigration. Please read on.

In an article by Associated Press Jul 15 (see http://tinyurl.com/Liberty-ViewsLetter-285A) David Runk reports that Michigan Attorney General Mike Cox ( I do not think he gets it) said Wednesday in a legal brief on behalf of nine states that will be supporting Arizona's immigration law.

The Liberty ViewsLetter, along with all supporters of Liberty, could also support this approach to immigration. We have always said here that Immigration question is answerable only by individual States. The Thirteen original States insisted on having that power here at the time of Constitutional ratification.

Additionally, logic dictates that Washington DC could never know the population needs of all of the thirteen original States, or all of the 50 existing States.

The Constitution wisely denied the US Congress power over Immigration. Framers made it very clear in Article 1 Section 8 that Congress only had the power, “To establish an uniform Rule of Naturalization” not immigration. That is correct gentle reader the Constitution granted to Congress no power over immigration.

With that said, let me quickly say I think Arizona and the other nine States have made a bad decision. I think it is especially bad for Michigan. Michigan is going through a greater economic decline than most other States. Therefore, Michigan NEEDS CHEAP LABOR, more than any other State, even if that immigration happens to displaces Michigan workers, which studies show does not happen. The only exception is among high school dropouts.

The New Migrant Worker Policy This Could Spawn
If the ten States are successful in establishing State authority over Immigration, then it would also follow that the other States would have the same authority. In other words migrant workers could not work in any State that did not allow it, but could work in States that did allowed it. Just for the sake of discussion, let us say that the State Government of Alabama was the only State that passed a law that invited migrant workers. The State could put any kind of restrictions it wanted: the length of stay, what kind of jobs they could take, who they could bring along and the kinds of Social Services to which the migrants could apply. One mandate would be the migrant must secure round-trip passage to a the State and return passage to their Nation of origin. Upon entry to the State, the migrant would surrender the return passage to the Nation of origin. It would be understood that flagrant violations of the State imposed restrictions or State and or City Statutes could trigger a deportation hearing. The outcome of this hearing could lead to a sentence of a probation period or outright deportation. We believe these restrictions and limitations would lead to compliance to the restrictions and laws leading to the mutual benefit of both the State and the worker.

If it is, as I suspect, the State would experience a rise in the economic output. Even if the migrants were doing no other kind of work than standing outside of Home Depot and being picked up to do minor repair work for an unskilled homeowner. This activity would increase the sale of hammers, saws, lumber, nails, bricks, etc would start the economic growth process.

Some Handyman Services may experience a brief downturn. However, the smartest among them would begin going to the Home Depot for laborers. They would be able to reduce their bids for work that needs done. Lower bids would increase the demand for more work and thus the sale of more hammers, saws, lumber, nails, bricks, add to the list PVC pipe sprinkler heads, timing devices, cement, energy saving double pain windows, granite counter tops recessed lighting etc would accelerate the economic growth process.

This is just the first round. The second round would manifest itself in the hiring of more clerks at the Home Depot to accommodate increased sales. Those newly hired clerks will stop collecting unemployment compensation, reducing the State Budget. The newly hired clerks would be taking their paychecks and buying clothes, shoes, CDs, IPhones, movie tickets TVs, etc. be taking their wages and spending it.

The third round of the economic growth process occurs as property values begin to rise, pushing up property taxes that can be used to fund better schools or reduce the need for other taxes to pay for State Programs.

The forth round will come when a neighboring State decides to compete for some of that CHEAP LABOR and then we will see that economic growth process spread across State lines.

We have ignored the fact that the move that is taking place will allow the ten States to reject migration. While that alone is not a good thing, but creating a situation where other States, including the ten, will have the power to encourage immigration, well that is a good thing. And one thing that will die in this move are the fabricated or annectidoal stories about how migration is a net lose to any State that encourages migration, and at the same time discourage providing social services to migrants.

“States have the authority to enforce immigration laws and protect their borders,” said, Michigan Attorney General Mike Cox Wednesday in a legal brief filed on behalf of nine states supporting Arizona's immigration law. We believe that to be true, and the corollary is that States have the right to encourage migration.

However, in this instance one need only scratch the surface to learn what pushes Cox in this direction, he is one of five Republicans running for the office of Michigan governor. It is a sad day when a candidate for Governor of a major State is using racism to attract voters in this highly charged environment. And I hope he is successful. Because if the National Government’s lawsuit prevails, saying that in essence it is the responsibility of the National Government to set immigration Laws. This is truly a, lose lose situation. Either the National Government will usurp another power over the States or the States will have the power to use racism to limit liberty. The silver lining is that States will have the authority to decide.