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Home Publications Blogs Beat the Press Thoughts on Immigration Policy

Thoughts on Immigration Policy

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Thursday, 28 February 2013 17:49

Noah Smith of Noahpinion takes me to task (after some very nice comments) for being anti-immigration. I’m not sure I fit that description, but let me put together a few things that I have said in different places. 

First of all, there is the immediate issue of what we do with the undocumented workers who are already here. I don’t see much ambiguity on this one; they should be allowed to normalize their status and become citizens. These people are here as a matter of government policy even if they are working in violation of the law.

The government may often be less competent than we would like, but if the policy was to prevent foreigners without proper documents from working in the United States, then we would not have many millions of foreigners working without proper documents. We shouldn’t blame people who came here (like many of our parents or grandparents) to try to secure a better life for themselves and their children. If we want to punish someone for this violation of the law, we can always throw their employers behind bars.

The question is really how we structure immigration policy going forward. Noah argues the merits for having an open door for high-skilled immigrants. I am 100 percent for this policy, although I may draw the line in a somewhat different place than Noah. I absolutely want to see more foreign doctors, dentists, lawyers and other professionals in the United States.

Our highly educated professionals in general, and doctors in particular, are hugely overpaid in comparison to their counterparts in other wealthy countries. If we could bring in enough foreign doctors to lower the average doctor’s pay by $100,000 a year, that would still leave them well off relative to their counterparts and save us more $80 billion a year on our health care bill. (I know around 20 percent of our doctors are already foreign born. If you think this means anything, think harder before you waste anyone’s time by writing it down.)

Btw, we can structure this so the foreign countries benefit as well. It would be a relatively simple matter to impose a modest tax (e.g. 10 percent) on the earnings of foreign professionals for the first ten years or so they work in the U.S. This money could be repatriated to their home countries so that they could educate 2-3 doctors for every 1 that came to the United States. You don’t trust this to work? Well, the foreign countries get zero now for the doctors who are leaving, so we have a pretty low bar to beat.

Where Noah and I may part ways is that I would not like to see large numbers of middle skilled professionals come into the country. As it stands, employers are using H1-B visas to bring in nurses, teachers, and people with engineering and software skills. Ostensibly this is to deal with a shortage of qualified workers, but there is little evidence of rapidly rising wages or other signs of a labor shortage in these areas. It seems pretty clear that employers are simply taking advantage of the opportunity to get lower cost labor.

I wouldn’t zero out immigration in these areas, but I would want it limited. The proposal put forward by the AFL-CIO and the Chamber of Commerce to have a commission that would evaluate needs for labor in various markets sounds promising. I would also want any workers who did come into the country to be free to work for whoever they wanted for the time that they are here, as opposed to being tied to a specific employer, as is the case with H1-B visas.

As far as less-skilled immigration, I would want it sharply limited, except for family re-unification. The evidence is that this does lower wages, although most of the impact is on the wages of other immigrants because we have a highly segregated labor market. I don’t consider this to be a good thing. As I’ve written elsewhere, I don’t want policy to be structured to give professionals cheap help. I would be very happy with a world where no one could afford to hire nannies for their kids.

There are places in the world where jobs that are low-paying allow for a middle class standard of living. A retail clerk, custodian, or housekeeper can earn enough to support a family. We just need the right set of labor market conditions to make this possible.

On some more general points, Noah presents evidence that densely populated metropolitan areas have the highest productivity. I don’t have any quarrel with this or the economics of agglomeration that Noah cites, but there is a serious problem of untangling cause and effect. Certainly economically dynamic areas will attract lots of workers and workers are needed to sustain dynamism. But, do we really think the benefits of a larger population increase without limit?

Mexico City’s metropolitan area has a population of more than 20 million people. Do we think the people in the area would be poorer on average if the population was just 10 million? I find that hard to believe, especially if we take into account the pollution and congestion rather than just a straight per capita GDP measure.  

As far as the impact on Social Security’s finances, the fact that this is raised as a concern really speaks to the warped nature of our budget debates. We raised the payroll tax by 4.0 percentage points from 1970 to 1990 (6.1 percentage points on the self-employed). For some reason this is never raised as some sort of tax disaster. In fact, when I go around the country, I find few people even remember these increases. (That was true in the 1990s also, when I was asking about the recent past for people who lived through it.)

If workers get their share of productivity growth, wages will rise by more than 30 percent over the next two decades. Let’s take an extreme case and suppose we took back 10 percent of this increase in the form of higher Social Security taxes. People would not be happy about higher taxes, but a 27 percent increase in after-tax wages has to look a lot better than the near zero increase over the last two decades.

I can’t see spending a lot of time trying to save workers from paying some of this tax burden (which would almost certainly be much less than 3 percentage points). The more important point is to ensure that ordinary workers get the benefits of productivity growth. That means stopping, and ideally reversing, the upward redistribution of the last three decades. An immigration policy that is focused on lowering the pay of the most highly skilled workers can be a big step in the right direction.

As the rich understand very well, the income of everyone else is a cost to them. In this vein, the incomes of our doctors, dentists, lawyers, and economists, are costs to everyone who doesn’t occupy this top tier of the labor market. Until the bulk of the population eats, drinks, and sleeps with this basic fact, they will continue to lose the battle with the bad guys.

Comments (23)Add Comment
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Out of Sync
written by Xelcho, February 28, 2013 6:43
This sounds good and we have heard it from others...:
"The government may often be less competent than we would like, but if the policy was to prevent foreigners without proper documents from working in the United States, then we would not have many millions of foreigners working without proper documents. We shouldn’t blame people who came here (like many of our parents or grandparents) to try to secure a better life for themselves and their children. If we want to punish someone for this violation of the law we can always throw their employers behind bars."
... and I can get behind that. The only hurdle is that you are fighting a republic that is and is always going to over-represent the juridical people, aka companies. Good Luck!

X
You have a point, but...
written by Jim, February 28, 2013 6:43
I think there's a good deal of truth to your argument. I agree that immigrants from developing countries individually benefit from coming to the United States, given the higher wage rates and greater employment opportunities here than in their countries of origin. The effects of remittances I think are somewhat mixed; they tend to raise prices in their home countries without contributing much to improved employment. However I'd have no problem saying that, on balance, migration benefits labor-exporting countries, too.

However, there's an important element to Professor Baker's analysis that I think you're missing. I'm not an expert on the data and I know there are disagreements among the economics profession regarding the impact of immigration on wages, but there's at least a decent argument that it depresses wages, as asserted by Professor Baker. And if we were to truly open our borders to a far larger supply of immigrant labor, I cannot imagine that it wouldn't have a downward effect on wages for folks who are already here, including, as Professor Baker notes, those of other immigrants. In all likelihood, therefore, large scale immigration at the low end of the labor market benefits immigrants at the expense of people who are already poor and struggling.

I fully sympathize with your concern for the vast majority of the world who do not enjoy the same living standards as the US, declining as they are. However I would assert that in an ideal world, we could find much better policy solutions for improving the lives of people in the developing world that do not disproportionately burden the most marginalized people in our own society. If we are going to be redistributing income-something that I support explicitly and you support implicitly-we should be targeting the wealthiest in our society, rather than the poorest. Foreign aid/ reparations to former colonies of the US and Europe, funded through progressive taxation, is one possibility. Or if you'd prefer a more market friendly solution, we could eliminate patents and copyrights on intellectual property, a position regularly advocated for on this blog, which serve to redistribute income to the wealthiest individuals and firms in the world while deterring innovation. I'd prefer both of these policies over open borders to low skilled immigration.

Obviously we don't live in an ideal world. Of course the people who are already here deserve the opportunity to become citizens immediately and unconditionally. But we should recognize that when advocating for more low skilled immigration, we are effectively asking the poorest in our society to bear the burden of the poverty created by our elites.
Human Wellfare?
written by Xelcho, February 28, 2013 6:49
@ Brett
You're still neglecting the fact that it a huge boost for human welfare in allowing low-skilled migrants to immigrate, drastically raising their wages and usually the living standards of both them and their families back in the home country. Or you're putting pro-union solidarity above human welfare, which is more contemptible.


I appreciate your comment. What I do not appreciate is that is one based on convenience. I say this as those 3rd worlders who are close to our land border can make it in. Those who are in Asia, middle east or Africa do not get that option. Is it your opinion that tough crap for them as they can not get in? What makes those who can walk in more deserving of this "human welfare"?
My family is bigger than yours!
written by JP, February 28, 2013 7:01
While I applaud your "As far as less-skilled immigration, I would want it sharply limited, except for family re-unification." I am betting that my concept of "family" might be larger than what you have in mind.

When I hear the vari-coded term "family values" espoused by politicians to gather their herd of sheep, I suffer from an immediate gag reflex and the spitting out of an infamous expletive almost simultaneously. We have more than just an immigration policy to overhaul, including repatriation of families split because of our inability to live up to our professed values. We also have to address the unequal justice system which feeds the wealth of the prison industrial complex to the detriment of all with little or no power to resist or defeat. While I do not know the relative numbers, both victim groups are well represented.
The number of Hispanic and African-Americans in nursing is falling. Not good.
written by Rachel, February 28, 2013 8:23

In northern California, thanks to some powerful hospital chains, and a powerful nurses' union, the incomes of nurses are very high, averaging $120,000 a year in one city.

This is not good for patients, adding substantially to medical bills (although, I suspect, not quite as substantially as drug costs).

Nor is it good for nurses looking for work, as hospitals try to lower costs by recruiting overseas. But to be very clear: this is not because there aren't enough nurses. It's because the hospitals would rather try to save money by recruiting elsewhere.

So here we have the H1-B visas directly contributing to a loss of jobs in minority communities especially. But the nurses union isn't helping. And the hospital chain isn't helping either.
protecting labor
written by Jennifer, February 28, 2013 8:35
I really appreciate you fleshing out some points here. What it really comes down to, and this dovetails with the recent cepr posts on FMLA, is protecting people's right to a job with avdecent wage and essential benefits. If we lived in a country where workers could not be exploited by their employers so easily, union or no union, there would not be such an underclass of migrant workers.
...
written by watermelonpunch, February 28, 2013 8:54
@ Xelcho +1

And anyone who thinks Dean Baker is anti-immigration obviously doesn't live in Pennsylvania's 11th Congressional District.
heh!
(I do.)

I see Dean Baker as merely laying out the practical matters.
And naturally they inform his opinions.

Accuse him of being somewhat pedantic, perhaps. He surely bluntly presents the evidence.

But isn't that what we want economists to do?

Just tell us the truth - so we can decide what to do about it???
changed my priors, sort of!
written by Ashok Rao, March 01, 2013 4:14
Hi Dean,

Been following the conversation between you and Noah, and finally got out and blogged about it. Would love to hear your thoughts!

http://ashokarao.com/2013/03/01/dean-baker-and-immigration/
More than just a general point
written by LSTB, March 01, 2013 7:10
On some more general points, Noah presents evidence that densely populated metropolitan areas have the highest productivity. I don’t have any quarrel with this or the economics of agglomeration that Noah cites, but there is a serious problem of untangling cause and effect. Certainly economically dynamic areas will attract lots of workers and workers are needed to sustain dynamism. But do we really think the benefits of a larger population increase without limit?


Agglomeration is the only one of Smith's argument I found meritorious. The problem is that it assumes the productivity benefit of population suffers no diminishing returns and wipes out all the externalities, e.g. crowding, strained water supplies & energy supplies, assimilation costs, ecological costs, and of course the untaxed subsidy immigration provides to current landowners.

As for professionals: If there are any shortages, it's because the professions lock out Americans who are able to do the work. Therefore, the solution would be to force licensing and accreditation authorities to ease their restrictions. Immigration is largely irrelevant.
...
written by liberal, March 01, 2013 7:37
jBrett wrote,
Or you're putting pro-union solidarity above human welfare, which is more contemptible.


No, it's because Dean unlike you understands the purpose of government.

While betterment of the lot of all humanity is certainly a reasonable purpose of government, it cannot be the main purpose. Government primarily exists to solve difficult collective action problems on the behalf of those resident here, who comprise the polity.

Along those lines, by far and away the main reason people in those other countries are in dire straights is because they lack good government. While we are partly responsible for that owing to much of our foreign policy, individual members of our polity are not, insofar as they have no say on the quality of governance in those foreign lands. Another way of saying that is that you'd assign them responsibility, in the form of lost wages due to immigration, without authority, in the form of ability to directly have a say in the governance of those other places. Breaking proper links between authority and responsibility is the source of much evil.
Attorney
written by james rytting, March 01, 2013 4:01
"There are places in the world where jobs that are low-paying jobs here allow for a middle class standard of living. A retail clerk, custodian, or housekeeper can earn enough to support a family. We just need the right set of labor market conditions to make this possible." What market condition, favelas, barrios, that make the working class appear like valhalla? Don't you mean NON-market conditions, like a high minimum wage and an extensive system of social goods? The idea of solving poverty with the market is about as good a trick as your recurrent scheme to lower medical costs by importing doctors and outsourcing medical services. The market is not how countries you keep citing with half our medical costs seem to have done it nor how those same countries allow working class people to lead a better life.
...
written by watermelonpunch, March 01, 2013 9:36
@ james rytting
The market is not how...


Why does it have to be a completely unregulated free market... or not "the market"?
Seems ridiculous to make that black & white assessment.

Can't we have, like those other countries you mentioned, a WELL REGULATED MARKET?

Even banning child labour & slavery via government is a form of market regulation, after all.
Doesn't mean there isn't a market because forcing child slaves to work as prostitutes is illegal.
Talent stripping
written by Luke Lea, March 01, 2013 11:25
"I absolutely want to see more foreign doctors, dentists, lawyers and other professionals in the United States." Why? Does it matter if they come from poor countries in which such human capital is in short supply? Or is it all about US?
Human welfare matters most
written by anonlymoose, March 02, 2013 1:08
If keeping low skilled immigrants out of the USA is all-things-considered detrimental to human welfare, then it is immoral policy. And there is good reason to think it is, since immigrants benefit immensely from coming to the USA. Current levels of immigration have little effect on wages of comparable native workers, and the detriment to native workers would have to be severe to outweigh the boon to immigrants. To suggest, as "liberal" does, that policies harmful to foreigners are acceptable because the purpose of government is just to advance the interests of its own people is crude parochialism. It is obvious that governments have obligations to foreigners. When states close their boarders to refugees, that is obviously repugnant, because governments, like individuals and other groups, have a basic obligation to do what they can to advance to help others. "Jim" is more humane in suggesting that we should prefer a solution to helping poor foreigners at the expense of rich natives. But the basic question is whether closing boarders to low skill workers is better than opening them. If opening them is, on the whole, better for human welfare, then they should be opened. That course is compatible with making the rich bear the cost. At least in principle, any negative impact on native wages can be compensated for through policies that strengthen labor's bargaining position, or taxes that effectively redistribute from capital to labor.
...
written by liberal, March 02, 2013 8:52
anonlymoose wrote,

To suggest, as "liberal" does, that policies harmful to foreigners are acceptable because the purpose of government is just to advance the interests of its own people is crude parochialism.


It's not crude parochialism; it's a fact that we have no direct political control over the policies in other states, except to the extent that we have an offensive political economy.

As far as your claims being a simple deduction from welfare maximizing principles, how about we use the full machinery of the state to immediately seize all your and Brett's assets, and furthermore garnish all your future wages, and then send the proceeds to impoverished people in the third world? By your own calculus, it would be a net welfare win. Any resistence on your part would be sickening "crude parochialism," right?
...
written by liberal, March 02, 2013 8:57
Sorry, "offensive political economy" ==> "offensive/oppressive foreign policy."
...
written by Mike, March 02, 2013 10:16
Perhaps because economics doesn't do a good job of measuring intangible public goods such as quality of life (how much, for example, do people value open space uncluttered by human development?), discussions of immigration almost never talk about when the growth should end and how big the country should be. I find that discouraging. And we never seem to talk about the size of our national footprint in the global biosphere (Americans are very rich, we consume a lot of the world's resources, and we foul the planet with our waste), even though economics CAN measure those things.

I'm with Edward Abbey: Growth for growth's sake is the ideology of the cancer cell.
...
written by Ashok Rao, March 02, 2013 12:27
Hi Dean,

Not sure if you saw my reply to your comment, but I thought a bit about it and blogged a quick entry.

Would love to hear your thoughts.

http://ashokarao.com/2013/03/01/228/

reply to "liberal"
written by anonlymoose, March 02, 2013 1:11
I didn't mean to endorse a blanket welfare maximizing principle, though I see that I was not clear about that. Considerations of justice constrain welfare maximization. Coercing or deliberately harming others for the sake of the larger good is unjust. But there is no injustice that I can see in allowing poor people in other countries to compete for the same jobs as natives. Your point, as I understood it, was that even if opening boarders helps foreigners, that is no reason for government to adopt that policy, since the government's only obligation is to its own people. That is the crudely parochial, obviously false view that I was criticizing. It might not be your real view, but it's a reasonable interpretation of what you said in your comment.
Less Skilled Immigration
written by MerchantMan, March 02, 2013 2:17
I agree that "As far as less-skilled immigration... [it] does lower wages...I don’t consider this to be a good thing." I think that it may lower wages for everyone in the workforce, however, and not just other immigrants.

Merchant cash advance
...
written by liberal, March 03, 2013 3:40
anonlymoose wrote,
Your point, as I understood it, was that even if opening boarders helps foreigners, that is no reason for government to adopt that policy, since the government's only obligation is to its own people.


No, my point is that a government's obligation is primarily only to its own people, and that it has to be that way, because government is, at the end of the day, a contract amongst the governed.

I'm still waiting for your offer to send almost all your wealth and wages to the 3rd world, BTW.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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