THE FOREMOST IMMIGRATION ECONOMIST GEORGE BORJAS DEBUNKS THE IMMIGRATION NARRATIVE
November 13, 2016
If you’ve swallowed the conventional wisdom that immigration always benefits everyone, you will be surprised by We Wanted Workers by George J. Borjas. This short popularly written book challenges this hoary line with hard facts and is must reading for everyone concerned about the impact of immigration on Americans. Those who seek a more thorough and technically written review can check out the author’s longer work Immigration, which can also serve as a university level textbook.
The most remarkable thing about We Wanted Workers is that it was written by a Cuban immigrant who could serve as a poster boy of the poor immigrant achieving the American dream and could thus be expected to be an unreserved booster of immigration. Brought to the United States as a child by his widowed mother who had had everything stolen by the Communists in Cuba, Borjas rose to the pinnacle of academic success as a professor at Harvard University and the foremost U.S. expert in immigration economics. Borjas’s interesting life story is sprinkled throughout the book providing spice to the dryer economic arguments. It is what makes him uniquely qualified to pen this popular book.
Professor Borjas spent most of his career researching of the economics of immigration and acquiring a deep knowledge of the subject, which he clearly summarizes in the book (and in more detail in his textbook). This includes a careful and skeptical analysis of studies that have been widely accepted mainly because they told people what they wanted to hear about immigration. A case in point is the widely-cited study by David Card of the impact of the Mariel boatlift of over 100 thousand Cubans to Miami in 1980, which incredulously found no impact of this large increase in the local labor supply on local wages by pursuing a rather complex, but flawed methodology, which only a highly trained professional would be ingenuous enough to believe. In contrast, Borjas, focusing more on the market for high school dropouts who had to compete most directly with Marielitos, found that their already low weekly earnings fell by a hefty $100 per week.
More generally, Borjas also points out that the uncomfortable fact of the fall in the wages of the skill groups receiving the most immigrants lead again to implausible research most notably by Gianmarco Ottaviano and Giovanni Peri, who claimed that complementarities between low skilled immigrant labor and other types of labor led to wage increases for American workers. This study with its astonishing conclusions was touted by those seeking an economic justification for higher immigration and was even adopted by the Council of Economic Advisors and utilized for the same purpose in its annual report.
This counter intuitive study aroused Borjas suspicions. When he attempted to follow up and obtain the underlying data and calculations, his request was rejected, which further reinforced his suspicion of “politically motivated experts.” Borjas speculates that the research was embraced so wholeheartedly mainly because it fit the government’s narrative that immigration benefits everyone.
In contrast, Borjas contends that the real evidence indicates that immigration has relatively small overall benefits for the economy. In the short run, these benefits stem from the lower wages resulting from immigration due to the downward sloping demand curve for labor. This lowers prices and boosts profits raising real GDP. Borjas estimates that, assuming a 10 per cent increase in the labor supply from immigration lowers wages by 3 per cent moving down the demand curve, the immigration surplus from the 16 per cent of the workforce that is foreign born would be about $50 billion in 2015, or only 0.3 per cent of GDP. This results from the offsetting effects of a big $566 billion gain of native owned businesses (the winners) who pay lower wages and the almost as large $516 billion loss of native workers (the losers) who receive the reduced wages. And the biggest winners of all would, of course, be the immigrants themselves who would get $2,053.8 billion, which would be much higher than their wages in their home countries. GDP would be increased by the amount of the gain of the immigrants and the gain the native owned firms or $2,104.0 billion.
Borjas cautions that even the small $50 billion gain to the domestic economy (called the immigration surplus) could easily be dissipated by fiscal transfers to immigrants resulting from the ordinary functioning of the welfare state, which would have to be paid for by taxes on the domestic economy. In his book, Borjas reviews the evidence on fiscal transfers showing how likely this is.
While Borjas favorably discusses the gains that can stem from immigrant entrepreneurs and scientists and engineers, who create new businesses and innovations, he does not spend much, if any, time on the negative non-economic effects of immigration. Examples are: social tensions, congestion, environmental damage, and crime. To learn about these issues, readers must look elsewhere.
Borjas’s own views on immigration policy are presented in the final chapter of this book. He takes a very strong stand on the need for border security and in opposition to an amnesty for undocumented immigrants. And he explicitly recognizes the contradiction between large scale low-skill immigration and the welfare state, which is “here to stay.” Nevertheless, he has a surprisingly moderate and nuanced overall position for one labeled by his critics as an “immigration skeptic” or “anti-immigrant.” Even though he does emphasize that the economic benefits of immigration would be maximized by only admitting highly skilled workers capable of earning higher than average incomes, he is reluctant to go the next step and argue that immigration policy should only be motivated by economic considerations. Instead he comes out in favor of a balanced policy that makes some room for unskilled workers, family class and refugees. Moreover, given the findings of his research that economics suggests that immigration is “not good for everyone” and that immigration primarily hurts lower wage workers, he argues for a program based on the Trade Adjustment Assistance program to “assist workers employed in industries and localities that are targeted by immigrants.” This alone would be a very costly expansion of government spending. Borjas’s position on immigration cannot be considered conservative.
An economic researcher to the core, what Borjas is most against and exposes in this book is an “overreliance on economic modeling and statistical findings ….by those who would rather not reveal their own ideological preferences, but instead cherry-pick among the many competing claims in research studies to promote a policy goal that deep down was ideologically predetermined.” The non-ideological character of this little book in the highly charged area of the economics of immigration is what what sets it apart and makes it such a valuable read.